Question

Permabilt Corp. was incorporated on January 1, 2019, and issued the following stock for cash: 2,000,000 shares of no-par common stock were authorized; 750,000 shares were issued on January 1, 2019, at $35 per share. 800,000 shares of $100 par value, 7.5% cumulative, preferred stock were authorized; 540,000 shares were issued on January 1, 2019, at $105 per share. No dividends were declared or paid during 2019 or 2020. However, on December 22, 2021, the board of directors of Permabilt Corp. declared dividends of $15,000,000, payable on February 12, 2022, to holders of record as of January 8, 2022. c. Calculate the common stock dividends per share declared during 2021. (Round your answer to 2 decimal places.)

Answer 1

• Requirement asked: requirement ‘C’
• Workings
• Annual Preferred stock dividend required to be paid (or accumulated) = 540000 preferred shares x $ 100 par x 7.5% = $ 4,050,000
• Preferred stock in arrear for 2019 and 2020 = 4050000 + 4050000 = $ 8,100,000
• Dividend received by preferred stockholder will include:
  Arrear dividend accumulated of 2019 and 2020, and
  Dividend for 2021
  
  = $ 8100000 + $ 540000 for 2021
  = $ 8,640,000
• Dividend received by Preferred shareholders = $ 8,640,000
• Dividend received by Common Shareholder = $ 15000000 – 8640000 = $ 6,360,000
• Answer
  Common stock dividend per share = $ 6360000 / 750000 shares issued
  = $ 8.48