Answer:
Dividend Payment per unit
Year Common Dividend Preferred Dividend
1. 0 $0.3
2. 0 $0.5
3. $0.79 $1.6
4. $2.69 $0.8
Explanation:
Dividend distributed to preferred share is based on the predetermined rate associated with these share. When the dividend is declared preferred share dividend is paid first. The remainder is distributed between the common stockholders.
Value of Preferred share = 15,000 shares x $20 par value = $300,000
Dividend on Preferred share = $300,000 x 4% = $12,000 per year = $12,000 / 15,000 = $0.8 per share
Dividend Payment
Year Dividend Declared Common Dividend Preferred Dividend
1. $4,500 0 $4,500
2. $7,500 0 $7,500
3. $39,010 $15,010 $24,000
4. $63,110 $51,110 $12,000
Dividend Payment per unit
Year Common Dividend Preferred Dividend
1. 0 $4,500 / 15,000=$0.3
2. 0 $7,500 / 15,000=$0.5
3. $15,010/19,000 = $0.79 $24,000 / 15,000=$1.6
4. $51,110/19,000 = $2.69 $12,000 / 15,000=$0.8
Working
Year Dividend Declared Common Dividend Preferred Dividend Balance
1. $4,500 0 ( 4,500 - 12,000) = ( 7,500)
2. $7,500 0 (-7,500+7,500-12,000) = (12,000)
3. $39,010 $15,010 (-12,000+39,010-12,000) = 0
4. $63,110 $51,110 (63,110-12,000) = 0
