Question

Dividends Per Share

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 2% stock, $60 par and 300,000 shares of $20 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $51,000; second year, $105,000; third year, $81,000; fourth year, $120,000.

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

Answer 1

Seventy-Two Inc.

Dividends Per Share:

Dividend per share Year 1 Year 2 Year 3 Year 4

Cumulative preferred $1.20 $1.20 $1.20 $1.20

Common stock $0 $0.04 $0.03 $0.16

Step-by-step explanation:

a) Data and Calculations:

Outstanding stocks:

Cumulative Preferred 2% stock = 60,000

Cumulative Preferred par value = $60

Total value of cumulative preferred stock = $3,600,000

Cumulative preferred dividend (annual) = $72,000 ($3,600,000 * 2%)

Dividends payout Year 1 Year 2 Year 3 Year 4

Dividends distributed:

Cumulative preferred $72,000 $72,000 $72,000 $72,000

Dividends paid 51,000 93,000 72,000 72,000

Outstanding dividends 21,000 0 0

Common stock $0 $12,000 $9,000 $48,000

Total dividend distributed $51,000 $105,000 $81,000 $120,000

Cumulative preferred stock Common stock

Year 1: $1.20 ($72,000/60,000) $0 ($0/300,000)

Year 2: $1.20 ($72,000/60,000) $0.04 ($12,000/300,000)

Year 3: $1.20 ($72,000/60,000) $0.03 ($9,000/300,000)

Year 4: $1.20 ($72,000/60,000) $0.16 ($48,000/300,000)

Dividend per share = Dividend/No. of outstanding shares (each class)