Answer:
See the explanation below.
Explanation:
1. Calculation of total dividend for six years (2011 to 2016)
Total dividend = 2011 dividend + 2012 dividend + 2013 dividend + 2014 dividend + 2015 dividend + 2016 dividend
Total dividend = $20,000 + $36,000 + $70,000 + $90,000 + $102,000 + $150,000
Total dividend = $468,000
2. Calculation of per-share dividends declared on each class of stock for each of the six years
Note that preferred stock holders are entitled to dividend first before the common stock holders. It is what remains after paying the preferred shareholders that the common shareholders get. Therefore, the calculation is done as follows:
2011:
Preferred dividend per share = Preferred dividend rate × Preferred stock price
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Expected total preferred dividend = $0.30 × 100,000 = $30,000
Actual dividend declared = $20,000
Preferred dividend declared per share = $20,000 ÷ 100,000 = $0.20
Preferred dividend arrears (Cumulative) = $30,000 - $20,000 = $10,000
Preferred dividend per share arrears (Cumulative) = $10,000 ÷ 100,000 = $0.10
Since preferred stock holders are entitled to dividend first before the common stock holders and the dividend declared is lower than the dividend payable to the preferred shareholders, the common stockholders will receive zero dividend in 2011.
Also, since it is stated in the question that the preferred 1% stock is cumulative
2012:
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Expected total preferred dividend = $0.30 × 100,000 = $30,000
Total dividend declared = $36,000
Preferred dividend declared per share = $30,000 ÷ 100,000 = $0.30
To pay preferred dividend in arrears = $36,000 - $30,000 = $6,000
Preferred dividend arrears per share paid = $6,000 ÷ 100,000 = $0.06
Balance of preferred dividend arrears = $10,000 - $6,000 = $4,000
Balance of preferred dividend per share arrears = $4,000 ÷ 100,000 = $0.04.
Total preferred dividend paid in 2012 = $36,000
Preferred dividend per share paid in 2012 = $36,000 ÷ 100,000 = 0.36
Again for the same reason as stated above, the common stockholders will also receive zero dividend in 2012.
2013:
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Expected total preferred dividend = $0.30 × 100,000 = $30,000
Total dividend declared = $70,000
Preferred dividend declared per share = $30,000 ÷ 100,000 = $0.30
To pay preferred dividend arrears = $4,000
Preferred dividend arrears per share paid = $4,000 ÷ 100,000 = $0.04
Common stock dividend = $70,000 - $34,000 = $36,000
Common stock dividend per share = $36,000 ÷ 400,000 = $0.09.
2014:
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Actual total preferred dividend = $0.30 × 100,000 = $30,000
Preferred dividend declared per share = $30,000 ÷ 100,000 = $0.30
Total dividend declared = $90,000
Common stock dividend = $90,000 - $30,000 = $60,000
Common stock dividend per share = $60,000 ÷ 400,000 = $0.15.
2014:
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Actual total preferred dividend = $0.30 × 100,000 = $30,000
Preferred dividend declared per share = $30,000 ÷ 100,000 = $0.30
Total dividend declared = $102,000
Common stock dividend = $102,000 - $30,000 = $72,000
Common stock dividend per share = $72,000 ÷ 400,000 = $0.18.
2015:
Expected preferred dividend per share = 1% × $30 = 0.30 per share
Expected total preferred dividend = Expected preferred dividend per share × Number proffered share
Actual total preferred dividend = $0.30 × 100,000 = $30,000
Preferred dividend declared per share = $30,000 ÷ 100,000 = $0.30
Total dividend declared = $150,000
Common stock dividend = $150,000 - $30,000 = $130,000
Common stock dividend per share = $130,000 ÷ 400,000 = $0.33.
