Question

Oceanic Company has 15,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $15 par common stock. The following amounts were distributed as dividends: 20Y1 $67,500 20Y2 22,500 20Y3 135,000 Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

Answer 1

Answer and Explanation:

The computation of the dividends per share for preferred and common stock is shown below:-

Annual preferred Dividend = 15000 × $100× 2% = $30,000

                                       Oceanic Company

                                             2011            2012          2013

Net income (A)                   $67,500   $22,500   $135,000

Less: Total Preferred Dividend paid    

Preferred Dividend             $30,000   $22,500   $37,500  

                                                           ($30,000 + ($30,000 - $22,500)

Available common stock     $37,500    $0            $97,500

Preferred Stock holder

outstanding                         $15,000     $15,000     $15,000

Common stock shares

outstanding                           50,000     50,000      50,000

Dividend per share

Preferred                                $2.00      $1.50       $2.50

For computing the dividend per share we simply divide preferred dividend by Preferred Stock holder outstanding

Common stock                      $0.75        $0.00      $1.95

In the same manner for computing the Dividend per share common stock we simply divide the available common stock by common stock shares outstanding.