Question

Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 14,000 shares of cumulative preferred 4% stock, $160 par, and 47,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $60,060; second year, $83,300; third year, $151,290; fourth year, $161,510.

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

1st Year 2nd Year 3rd Year 4th Year

Preferred stock (dividend per share) $ $ $ $

Common stock (dividend per share) $ $ $ $

Answer 1

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividend per share)	$4.29	$5.95	$8.96	$6.40
Common stock (dividend per share)	0	0	$0.55	$1.53

Workings

Preferred Dividend Payable each year = 14,000 x $160 x 4% = $89,600

1st year

Paid = $60,060

Preferred

$60060 / 14000 = $4.29 ($89600 – 60060 = $29540 dividends in arrears. )

Common:

0 Dividends paid

2nd year

Paid = $83300

Preferred:

$83300 / 14000 = $5.95 per share. ($89600 + 29540 - 83300 = $35840 dividends in arrears.)

Common:

0 Dividends paid

3rd year

Paid = $151290

Preferred:

$89600 + $35840 = $125440 Paid

$125440 / 14000 = $8.96 per share

Common:

$151290 - $125440 = $25850 paid

$25850 / 47000 = $0.55 per share

4th year

Paid = $161510

Preferred:

$89600/ 14000 = $6.40 per share

Common:

$161510 – 89600 = $71910

$71910 / 47000 =$1.53 per share