Question

The shareholders' equity of Crystal Company includes the items shown below. The board of directors of Crystal declared cash dividends of $2.2 million, $6.0 million, and $46.8 million in each of its first three years of operation: 2016, 2017, and 2018, respectively.

Common stock, $1 par, 50,000,000 shares outstanding

Preferred stock, 6%, $100 par, 1,000,000 shares outstanding

Required: Determine the amount of dividends per share on preferred and common stock for each of the three years. The preferred stock is cumulative and nonparticipating. (Round final answers to 2 decimal places.)

Year	Preferred	Common
2016
2017
2018

Explain please

Answer 1

Cumulative preference shares are paid dividends first including any arrear dividends before any dividend is paid to Common Shareholders.
Annual preferred dividends = 1000000*100*6%= $6000000
2016
Preferred	2.2	=2200000/1000000
Common	0
2017
Preferred	6	=6000000/1000000
Common	0
2018
Arrear preferred dividends = (6000000*2)-2200000-6000000=$3800000
Preferred	9.8	=(6000000+3800000)/1000000
Common	0.74	=(46800000-9800000)/50000000