Question

Dividends Per Share

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 70,000 shares of cumulative preferred 3% stock, $20 par and 400,000 shares of $25 par common.

During its first four years of operations, the following amounts were distributed as dividends: first year, $33,000; second year, $76,000; third year, $90,000; fourth year, $110,000.

Determine 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 "0.00".

	1st Year	2nd Year	3rd Year	4th Year
Preferred stock (dividends per share)	$	$	$	$
Common stock (dividends per share)

Answer 1

Dividends per share : => [ Amount of dividend / Number of Stock ]

PARTICULARS	1st year	2nd year	3rd year	4th year
Preferred stock	$0.47	$0.72	$0.60	$0.60
Common stock	$0.00	$0.06	$0.12	$0.17

Working Notes :

**Preferred dividend => [ 70,000 * $20.00 * 3% ]

  => 42,000

Preferred stock :

1st year => $33,000 / 70,000 = 0.47

2nd year => $51,000 / 70,000 = 0.72   { Add arrears 9,000 i.e (42,000 - 33,000) to the preferred dividend 42,000 }

3rd year => $42,000 / 70,000 = 0.60

4th year => $42,000 / 70,000 = 0.60

Common stock :

1st year => $0.00

2nd year => $25,000 / 4,00,000 = $0.06 { $76,000 - 51,000 = $25,000 }

3rd year => $48,000 / 4,00,000 = $0.12 { $90,000 - 42,000 = $48,000 }

4th year => $68,000 / 4,00,000 = $0.17 { $1,10,000 - 42,000 = $68,000}

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