Question

13-01

Dividends Per Share

Windborn Company has 15,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $10 par common stock. The following amounts were distributed as dividends:

Year 1	$112,500
Year 2	36,000
Year 3	135,000

Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

	Year 1	Year 2	Year 3
Preferred stock (Dividends per share)	$	$	$
Common stock (Dividends per share)	$	$	$

Answer 1

Solution :

Year 1

Preferred dividends = 15,000 x $150 x 2% = $45,000

Common stock dividends = $112,500 - $45,000 =$67,500

Hence, preferred dividends per share = $45,000/ 15,000

= $3

Common stock dividends per share = $67,500/ 50,000

= $1.35

Year 2

Preferred dividends = $36,000

Common stock dividends = 0

( Note : remaining preferred dividends of $9,000 will be paid in next year)

Hence, preferred dividends per share = $36,000/ 15,000

= $2.40

Common stock dividends per share = $0

Year 3

Preferred dividends = $45,000 + $9,000 = $54,000

Common stock dividends = $135,000 - $54,000 =$81,000

Hence, preferred dividends per share = $54,000/ 15,000

= $3.6

Common stock dividends per share = $81,000/ 50,000

= $1.62