Question

Dividends Per Share Windborn Company has 25,000 shares of cumulative preferred 3% stock, $50 par and 50,000 shares of $15 par common stock. The following amounts were distributed as dividends:
Y1 $75,000
Y2 15,000
Y3 112,500
Determine the dividends per share for preferred and common stock for each year. The stock outstanding when a corporation has issued only one class of stock.common stock for each year.
Preferred Stock Common Stock
(dividend per share) (dividend per share)
Year 1 $ $
Year 2 $ $
Year 3 $ $

Answer 1

Answer:

                          Preferred Stock              Common Stock

                     (dividend per share)        (dividend per share)

Year 1                        $1.50                                    $0.75

Year 2                       $0.60                                   $0.00

Year 3                       $2.40                                    $1.05

Explanation:

For Year 1:

Total dividend distributed = $75,000

Preferred shareholders' dividend = $50 * 25,000 * 3% = $37,500

Preferred shareholders' dividend per share = $37,500 / 25,000 = $1.50

Common stockholders' dividend = Total dividend distributed - Preferred shareholders' dividend = $75,000 - $37,500 = $37,500

Common stockholders' dividend per share = $37,500 / 50,000 = $0.75

For Year 2:

Total dividend distributed = $15,000

Dividend payable to preferred shareholders = $50 * 25,000 * 3% = $37,500

Dividend paid to preferred shareholders = $15,000

Preferred shareholders' dividend per share = $15,000 / 25,000 = $0.60

Preferred shareholders' dividend carried forward = Dividend payable to preferred shareholders - Total dividend distributed = $37,500 - $15,000 = $22,500

Common stockholders' dividend = $0

Common stockholders' dividend per share = $0

For Year 3:

Total dividend distributed = $112,500

Total dividend paid to preferred shareholders = $37,500 + Preferred shareholders' dividend carried down from Year 2 = $37,500 + $22,500 = $60,000

Preferred shareholders' dividend per share = $60,000 / 25,000 = $2.40

Common stockholders' dividend = Total dividend distributed - Total dividend paid to preferred shareholders = $112,500 - $60,000 = $52,500

Common stockholders' dividend per share = $52,500 / 50,000 = $1.05