Question

# Lightfoot Inc., a software development firm, has stock outstanding as follows: 30,000 shares of cumulative preferred...

Lightfoot Inc., a software development firm, has stock outstanding as follows: 30,000 shares of cumulative preferred 4% stock, \$25 par, and 38,000 shares of \$75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, \$11,400; second year, \$18,900; third year, \$93,140; fourth year, \$143,620.

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) \$ \$ \$ \$

Dividend per year for preferred stock=30000*(4%*25)=\$30,000

Since dividend is cumulative ;dividend on preferred stock not paid for in one year would be carried over to the next period.(Any balance remaining is then paid to common stockholders).

 1st year 2nd year 3rd year 4th year Preferred dividend 11400 18900 59700 30000 Common dividend 0 0 33440 113620 Preferred stock(Dividend per share) (11400/30000)= \$0.38 (18900/ 30000)=  \$0.63 (59700/30000)=\$1.99 (30000/30000)=\$1 Common stock(dividend per share) 0 0 (33440/38000)=\$0.88 (113620/38000)= \$2.99

Dividend in arrears for preferred stock in :

Year 1=(30000-11400)=\$18600

Year 2=(30000-18900)+18600=\$29700

Hence payment for preferred stock in year 3=(29700+30000)=\$59700.

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