Question

Seacrest Company has Company has 10,000 shares of cumulative preferred 2% stock, $100 par and 50,000 shares of $25 par common stock.

The following amounts were distributed as dividends:
Year 1: $40,000
Year 2: 8,000
Year 3: 60,000

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'.
Preferred Stock (dividend per share) Common Stock (dividend per share)

Year 1 ____________________ __________________________
Year 2 _____________________ __________________________
Year 3 _____________________ ___________________________

Answer 1

See Explanation

Step-by-step explanation:

For dividend calculations lets first calculate the preferred liability,

Preferred liability payable each year = (10,000 * 100) * 0.02 = $20,000

So dividend paid are as follows each year,

Year 1

Preferred paid = $20,000 = 20,000/10,000 = $2 per share

Ordinary paid = $20,000 = 20,000/50,000 = $0.4 per share

Year 2

Preferred paid = $8000 = 8000/10000 = $0.8/share ($12,000 carried forward)

Ordinary paid = $0

Year 3

Preferred paid=$20,000 + $12,000 = $32,000 = 32000/10000 = $3.2/share

Ordinary Paid = (60,000-32,000) = $28,000 =28000/50000 = $0.56/share

We carry the 2nd year payment for preferred share as they are cumulative.

Hope that helps.