Question

Pecan Theatre Inc. owns and operates movie theaters throughout Florida and Georgia. Pecan Theatre has declared the following annual dividends over a six-year period: 20Y1, $64,000; 20Y2, $128,000; 20Y3, $288,000; 20Y4, $368,000; 20Y5, $448,000; and 20Y6, $576,000. During the entire period ended December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, preferred 4% stock, $100 par, and 100,000 shares of common stock, $10 par.

Required:
Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years.

Answer 1

Pecan Theatre Inc.

Annual Dividends:

Year Amount Cumulative Common Stock

Declared Arrears

20Y1, $64,000 $64,000 $96,000 $0

Per share dividends $1.60 $0

20Y2, $128,000 $128,000 $128,000 $0

Per share dividends $3.20 $0

20Y3, $288,000 $288,000 $0 $0

per share dividends $7.20 $0

20Y4, $368,000 $160,000 $0 $208,000

Per share dividends $4.00 $2.08

20Y5, $448,000 $160,000 $0 $288,000

Per share dividends $4.00 $2.88

20Y6, $576,000 $160,000 $0 $416,000

Per share dividends $4.00 $4.16

Step-by-step explanation:

a) Data and Calculations:

Outstanding common stock = 100,000 shares at $10 par

Outstanding 4% cumulative preferred stock = 40,000 at $10 par

Annual preferred stock dividend = 4% * 40,000 * $100

= $160,000

Annual Dividends:

Year Amount Cumulative Common Stock

Declared Arrears

20Y1, $64,000 $64,000 $96,000 $0

Per share dividends $1.60 ($64,000/40,000) $0

20Y2, $128,000 $128,000 $128,000 $0

Per share dividends $3.20 ($128,000/40,000) $0

20Y3, $288,000 $288,000 $0 $0

per share dividends $7.20 ($288,000/40,000) $0

20Y4, $368,000 $160,000 $0 $208,000

Per share dividends $4.00 ($160,000/40,000) $2.08 ($208,000/100,000)

20Y5, $448,000 $160,000 $0 $288,000

Per share dividends $4.00 ($160,000/40,000) $2.88 ($288,000/100,000)

20Y6, $576,000 $160,000 $0 $416,000

Per share dividends $4.00 ($160,000/40,000) $4.16 ($416,000/100,000)