Question

National Furniture Company has 25,000 shares of cumulative preferred 2% stock, $75 par and 200,000 shares of $10 par common stock. The following amounts were distributed as dividends: Year 1 $25,000 Year 2 88,000 Year 3 95,500 Determine the dividends per share for preferred and common stock for each year. If an answer is zero, enter '0'. Round all answers to two decimal places.

Answer 1

Answer:

Year 1

Preferred Dividend = $25,000

Common Stock Dividend  = $0

Year 2

Preferred Dividend = $37,500

Common Stock Dividend  = $50,500

Year 3

Preferred Dividend = $25,000

Common Stock Dividend  = $70,500

Explanation:

The dividends per share for preferred and common stock for each year.

Preferred Dividend

Is a fixed charge. When it is cumulative, all dividends in arrears are accumulated an paid in future when funds become sufficient before other dividends are paid.

Preferred Dividend = 25,000 x $75 x 2 % = $37,500

Common Stock Dividend

Holders of Common Stock receive their dividends after the Preferred Stock holders have received their dividends.

Calculations

Year 1

Preferred Dividend = $25,000 (owing $12,500)

Common Stock Dividend  = $0

Year 2

Preferred Dividend = $25,000 + $12,500 (owing ) = $37,500

Common Stock Dividend  = $88,000 - $37,500 = $50,500

Year 3

Preferred Dividend = $25,000

Common Stock Dividend  = $95,500 - $25,000 = $70,500