Question

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)	$	$	$	$

Answer 1

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.