Question

Chauncey Corporation began business on June 30, 2016. At that time, it issued 20,000 shares of $50 par value, six percent, cumulative preferred stock and 90,000 shares of $10 par value common stock. Through the end of 2018, there had been no change in the number of preferred and common shares outstanding.
Required:
a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018.
b. Assume that Chauncey declared dividends of $0 in 2016, $120,000 in 2017, and $186,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018.

Answer 1

Solution :

a).

Year     Preferred stock   Common stock   Preferred per share   Common

                                                                                                         per share

2016      $ 60,000           $ 9,000              $ 3 (60000/20000)   $0.1

                                       (69,000 - 60,000)                                    (9000/90000)

2017      $ 0                     $ 0                        $ 0

2018     $120,000           $ 342,000            $6 (120,000/90,000)  $ 3.8

                                       (354,000-120,000)                              (342,000/90000)

b).

Year   Preferred   Common stock      Preferred per share       Common  

           Stock                                                                             per share

2016     $ 0              $0                            $ 0                               $ 0

2017    $ 120,000    $ 0                           $ 6                               $ 0

                                                              (120,000/20,000)

2018    $ 60,000   $ 126,000                 $ 3                               $ 1.4

                              (186,000-60,000)   (60,000/20,000)   (126,000/90,000)