Final answer:
Dividends per share were calculated for preferred and common stock across three years. In 20y1, preferred shareholders received $1.90, and common shareholders received $0.21 per share. In 20y2, preferred shareholders received $0.40, with common shareholders getting nothing. In 20y3, after catching up on missed preferred dividends, common shareholders received $1.01 per share.
Step-by-step explanation:
To calculate the dividends per share for preferred and common stock for each year, we need to acknowledge the cumulative nature of the preferred stock and divide the total dividends distributed accordingly between preferred and common shareholders. For a cumulative preferred stock, dividends must be paid out for past years in which dividends were not distributed before any dividends can be paid to common shareholders.
In 20y1, the company distributed $28,500 in dividends. The preferred stock is 1% stock with a $50 par, so each share gets $0.50 (1% of $50). With 15,000 shares, the total preferred dividends are $7,500 (15,000 x $0.50). Since $28,500 is more than $7,500, all preferred dividends are paid, and the excess $21,000 ($28,500 - $7,500) goes to the common shareholders. The common stock dividends per share for 20y1 are $21,000 / 100,000 = $0.21.
In 20y2, only $6,000 was distributed. This amount does not cover the preferred dividend requirement of $7,500, so all of it goes to preferred shareholders and nothing is left for common shareholders. Thus, the preferred dividends are $6,000 / 15,000 = $0.40 and common shareholders receive $0.
In 20y3, the company distributed a significant $110,000. The preferred shareholders receive their $7,500 plus the remaining $1,500 from the previous year, totaling $9,000 due. Now, $110,000 - $9,000 leaves $101,000 for common shareholders, which results in a dividend per share of $101,000 / 100,000 = $1.01 for common stock.