Question

Seacrest Company has 20,000 shares of cumulative preferred 3% stock, $150 par and 50,000 shares of $10 par common stock. The following amounts were distributed as dividends: Year 1 $225,000 Year 2 72,000 Year 3 270,000 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'. Preferred Stock (dividends per share) Common Stock (dividends per share)

Year 1 $ $

Year 2 $ $

Year 3 $ $

Answer 1

Solution:

Year 1

Dividend per preference share = 3% x $150 = $4.5

Total preference dividend = $4.5 x 20,000

= $90,000

Common share dividend = Total dividend - total preference dividend

= $225,000 - $90,000 = $135,000

Dividend per common Stock = $135,000 / 50,000 = $2.7

Year 2

Dividend per preference share = $72,000 / 20,000 = $3.6

Common share dividend = Total dividend - total preference dividend

= $72,000 - $72,000 = $0

Dividend per common Stock = $0 / 50,000 = $0

Year 3

Dividend per preference share = $4.5

Common share dividend = Total dividend - total preference dividend

= $270,000 - $90,000 = $180,000

Dividend per common Stock = $180,000 / 50,000 = $3.6