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A corporation has 10000 shares of 10%, par cumulative preferred stock outstanding and 39000 shares of...

A corporation has 10000 shares of 10%, par cumulative preferred stock outstanding and 39000 shares of no-par common stock outstanding. Dividends of $18500 are in arrears. At the end of the current year, the corporation declares a dividend of $240000. What is the dividend per share for preferred stock and for common stock?
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Answer #1

Dividend in arrears = $18500
Dividend on preferred shares of this year = 10000 shares * $80 * 10% = $80,000

Dividend declared in current year = $240,000
From this amount, first payment is made to dividend in arrears and then current year preferred dividend and then the balance is for common stock holders.
Dividend for Preferred stock = Dividend in arrears + Current year dividend
= $18500 + $80000 = $98,500
Dividend for common stock = Dividend declared - Dividend for preferred stock
= $240,000 - $98,500 = $141,500

Dividend per share of preferred stock = $98,500 / 10000 shares = $9.85 per share
Dividend per share of common stock = $141,500 / 39000 shares = $3.63 per share

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