Question

Windborn Company has 15,000 shares of cumulative preferred 1% stock, $150 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends: Year 1 $56,300 Year 2 9,000 Year 3 67,500 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'

Answer 1

Dividends per year for preferred stock=15000*150*1%=$22500

Since preferred stock dividends are cumulative;preferred stock dividend not paid for in one year would be carried over and paid for in the next years.

Any balance left over would be paid to common stockholders.

Hence preferred stock dividends in arrears for :

Year 1=0

Year 2=(22500-9000)=$13500

Year 3=0

Year	preferred stock dividend	Common dividend
1	22500	(56300-22500)=$33800
2	9000	0
3	(13500+22500)=$36000	(67500-36000)=$31500

Year	Preferred dividend/share	Common dividend/share
1	(22500/15000)=$1.5	(33800/50000)=$0.68(Approx)
2	(9000/15000)=$0.6	0
3	(36000/15000)=$2.4	(31500/50000)=$0.63