Question

The company has 21,000 shares of $10 par common stock outstanding and 31,000 shares of $100 par, 5% noncumulative, nonparticipating preferred stock outstanding. No dividends were declared or paid for the past two years. In the current year, a $315,000 dividend will be paid. What are the dividends per share for preferred and common, respectively?

• $5.0; $5.2.

• $10.2; $0.0.

• $5.0; $7.6

• None of these answer choices are correct.

Answer 1

Answer:

Calculation of dividend per share for preferred and common stockholders as follows:

Dividend per share for preferred stock = Preferred dividend / Number of preferred stock

= (31,000 shares x $100 x 5%)} / 31,000

= $155,000 / 31,000

  = $5.0 per share

Dividend per share for common stock = {Total dividend - (Preferred dividend)} / Number of common stock

   = {$315,000 - (31,000 share x $100 x 5%)} / 21,000

= $160,000 / 21,000

= $7.6

Therefore, option (c) i.e. $5.0 and $7.6 is the correct answer.