Question

Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $64,000; 20Y2, $128,000; 20Y3, $288,000; 20Y4, $368,000; 20Y5, $448,000; and 20Y6, $576,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, preferred 4% stock, $100 par, and 100,000 shares of common stock, $10 par.
Required:
Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years.

Answer 1

Answer:

Pecan Theatre Inc.

Annual Dividends:

Year       Amount                   Cumulative               Common Stock

                                   Declared             Arrears

20Y1,      $64,000     $64,000              $96,000      $0

Per share dividends    $1.60                                      $0

20Y2,   $128,000      $128,000           $128,000      $0

Per share dividends   $3.20                                      $0

20Y3,  $288,000      $288,000          $0                  $0

per share dividends   $7.20                                      $0

20Y4,  $368,000     $160,000           $0                   $208,000

Per share dividends  $4.00                                        $2.08

           

20Y5,  $448,000    $160,000           $0                    $288,000

Per share dividends   $4.00                                      $2.88

20Y6, $576,000   $160,000            $0                     $416,000

Per share dividends   $4.00                                      $4.16

Explanation:

a) Data and Calculations:

Outstanding common stock = 100,000 shares at $10 par

Outstanding 4% cumulative preferred stock  = 40,000 at $10 par

Annual preferred stock dividend = 4% * 40,000 * $100

= $160,000

Annual Dividends:

Year       Amount                   Cumulative               Common Stock

                                   Declared             Arrears

20Y1,      $64,000     $64,000              $96,000      $0

Per share dividends    $1.60 ($64,000/40,000)       $0

20Y2,   $128,000      $128,000           $128,000      $0

Per share dividends   $3.20 ($128,000/40,000)     $0

20Y3,  $288,000      $288,000          $0                  $0

per share dividends   $7.20 ($288,000/40,000)     $0

20Y4,  $368,000     $160,000           $0                   $208,000

Per share dividends  $4.00 ($160,000/40,000)       $2.08 ($208,000/100,000)

           

20Y5,  $448,000    $160,000           $0                    $288,000

Per share dividends   $4.00 ($160,000/40,000)      $2.88 ($288,000/100,000)

20Y6, $576,000   $160,000            $0                     $416,000

Per share dividends   $4.00 ($160,000/40,000)      $4.16 ($416,000/100,000)