Question

Lightfoot Inc., a software development firm, has stock outstanding as follows: 10,000 shares of cumulative preferred 2% stock, $20 par, and 13,000 shares of $100 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $1,500; second year, $2,500; third year, $18,400; fourth year, $39,360.

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividend per share)	$	$	$	$
Common stock (dividend per share)	$	$	$	$

Answer 1

	Par value per preferred share	Dividend rate	Dividend per preferred share	Number of preferred shares	Preferred dividend
Annual preferred dividend	$20	2%	20 x 2% = 0.4	10,000	10,000 x 0.4 = $4,000
	Total cash dividend paid	Paid to preferred	Paid to common	Dividend in arrears at year end
Year 1	1,500	1,500	0	2,500
Year 2	2,500	2,500	0	4,000
Year 3	18,400	8,000	10,400	0
Year 4	39,360	4,000	35,360	0

	Preferred stock (Dividend per share)	Common stock (Dividend per share)
First year	1,500/10,000 = $0.15	0
Second year	2,500/10,000 = $0.25	0
Third year	8,000/10,000 = $0.80	10,400/13,000 = $0.8
Fourth year	4,000/10,000 = $0.40	35,360/13,000 = $2.72