Question

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,000 shares of cumulative preferred 3% stock, $20 par and 405,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $32,000; second year, $75,000; third year, $80,000; fourth year, $110,000. Determine the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places.

Answer 1

Answer:

Year 1  

$ 32,000  Total Dividends

$ 32,000 Preferred Stockholers

                Common Stockholers

$ 0,40         Dividends / Preferred Stock

0               Dividends / Common Stock

Year 2  

$ 75,000 Total Dividends

$ 64,000  Preferred Stockholers

$ 11,000   Common Stockholers

$ 0,80      Dividends / Preferred Stock

$ 0,03      Dividends / Common Stock

Year 3  

$ 80,000  

$ 48,000 Preferred Stockholers

$ 32,000 Common Stockholers

$ 0,60      Dividends / Preferred Stock

$ 0,08      Dividends / Common Stock

Year 4  

$ 110,000  

$ 48,000 Preferred Stockholers

$ 62,000 Common Stockholers

$ 0,60    Dividends / Preferred Stock

$ 0,15      Dividends / Common Stock

Explanation:

Cash Dividends: The amount of cash that the company paid to its shareholders as a return of the investing made by the investors.

Common Stock: Ordinary shares that a company issued to the investors hoping to raise funds to the operation of the company.

As return, the investors receive a share of profit that are paid as dividends to each of them, if the company issued preferred share, then the shareholders of common stocks are not guaranteed and are paid after the  

payment made to the preferred stock.

Preferred Stock: The stock gives to the investors a fixed amount of return, which is called, dividend, to its stockholder before paying dividends to common sotckholders.