Question

Chauncey Corporation began business on June 30, 2016. At that time, it issued 20,000 shares of $50 par value, six percent, cumulative preferred stock and 90,000 shares of $10 par value common stock. Through the end of 2018, there had been no change in the number of preferred and common shares outstanding.

Required:
a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018.
b. Assume that Chauncey declared dividends of $0 in 2016, $120,000 in 2017, and $186,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018.

Answer 1

a).

Year Preferred stock Common stock Preferred per share Common

per share

2016 $ 60,000 $ 9,000 $ 3 (60000/20000) $0.1

(69,000 - 60,000) (9000/90000)

2017 $ 0 $ 0 $ 0

2018 $120,000 $ 342,000 $6 (120,000/90,000) $ 3.8

(354,000-120,000) (342,000/90000)

b).

Year Preferred Common stock Preferred per share Common

Stock per share

2016 $ 0 $0 $ 0 $ 0

2017 $ 120,000 $ 0 $ 6 $ 0

(120,000/20,000)

2018 $ 60,000 $ 126,000 $ 3 $ 1.4

(186,000-60,000) (60,000/20,000) (126,000/90,000)