Question

Dividends on Preferred and Common Stock

Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $48,000; 20Y2, $96,000; 20Y3, $216,000; 20Y4, $276,000; 20Y5, $336,000; and 20Y6, $432,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 30,000 shares of cumulative, preferred 4% stock, $100 par, and 100,000 shares of common stock, $10 par.

Required:

1. Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears at the beginning of 20Y1. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".

  Preferred DividendsCommon Dividends

Year Total
Dividends
Total
Per Share
Total
Per Share

20Y1 $   48,000   $   $   $   $   

20Y2 96,000               

20Y3 216,000               

20Y4 276,000               

20Y5 336,000               

20Y6 432,000               

       $       $

Answer 1

Solution:

Annual Preferred dividend = 30000* $100* 4% = $120,000

		Preferred Dividends	Common Dividends
Year	Total Dividends	Total	Per Share	Total Arrears at year end	Total	Per Share
Year 1	$48,000	$48,000	$2.40	$72,000	$0	$0.00
Year 2	$96,000	$96,000	$4.80	$96,000	$0	$0.00
Year 3	$2,16,000	$2,16,000	$10.80	$0	$0	$0.00
Year 4	$2,76,000	$1,20,000	$6.00	$0	$1,56,000	$1.56
Year 5	$3,36,000	$1,20,000	$6.00	$0	$2,16,000	$2.16
Year 6	$4,32,000	$1,20,000	$6.00	$0	$3,12,000	$3.12
Total		$7,20,000			$6,84,000