Answer:
Case A: We have:
Total preferred stock dividend = $12,000
Preferred stock dividend per share = $1.50 per share
Total common stock dividend = $19,000
Common stock dividend per share = $0.54 per share
Case B: We have:
Total preferred stock dividend = $36,000
Preferred stock dividend per share = $4.50 per share
Total common stock dividend = $0
Common stock dividend per share = $0 per share
Case C: We have:
Total preferred stock dividend = $36,000
Preferred stock dividend per share = $4.50 per share
Total common stock dividend = $54,000
Common stock dividend per share = $1.54 per share
Explanation:
Cumulative preferred stock is a type of preferred stock that gives the holder the opportunity to be paid any missed dividends whenever dividends are declared.
Noncumulative preferred stock is a type of preferred stock that does NOT give the holder the opportunity to be paid any missed dividends whenever dividends are declared.
Given the above explanation, we can now proceed as follows:
Case A: The preferred stock is noncumulative; the total amount of all dividends is $31,000.
Total preferred stock dividend = Preferred stock annual dividend = Dividend rate * Preferred stock value = 10% * $120,000 = $12,000
Preferred stock dividend per share = Total preferred stock dividend / Number of preferred stock outstanding = $12,000 / 8,000 = $1.50 per share
Total common stock dividend = Total amount of all dividends - Total preferred stock dividend = $31,000 - $12,000 = $19,000
Common stock dividend per share = Total common stock dividend / Number of common stock outstanding = $19,000 / 35,000 = $0.54 per share
Case B: The preferred stock is cumulative; the total amount of all dividends is $36,000.
Note: Since no dividends were declared during the previous two years, this implies cumulative preferred stock dividends have to be paid for the two previous and the current year making it three years.
Therefore, we have:
Preferred stock annual dividend = Dividend rate * Preferred stock value = 10% * $120,000 = $12,000
Total preferred stock dividend = Preferred stock annual dividend * 3 = $12,000 * 3 = $36,000
Preferred stock dividend per share = Total preferred stock dividend / Number of preferred stock outstanding = $36,000 / 8,000 = $4.50 per share
Total common stock dividend = Total amount of all dividends - Total preferred stock dividend = $36,000 - $36,000 = $0
Common stock dividend per share = Total common stock dividend / Number of common stock outstanding = $0 / 35,000 = $0 per share
Case C: The preferred stock is cumulative; the total amount of all dividends is $90,000.
Note: Since no dividends were declared during the previous two years, this implies cumulative preferred stock dividends have to be paid for the two previous and the current year making it three years.
Therefore, we have:
Preferred stock annual dividend = Dividend rate * Preferred stock value = 10% * $120,000 = $12,000
Total preferred stock dividend = Preferred stock annual dividend * 3 = $12,000 * 3 = $36,000
Preferred stock dividend per share = Total preferred stock dividend / Number of preferred stock outstanding = $36,000 / 8,000 = $4.50 per share
Total common stock dividend = Total amount of all dividends - Total preferred stock dividend = $90,000 - $36,000 = $54,000
Common stock dividend per share = Total common stock dividend / Number of common stock outstanding = $54,000 / 35,000 = $1.54 per share
