Question

g has 25,000 shares of $10 par common stock outstanding and 12,500 shares of $100 par, 6.00% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $350,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively

Answer 1

Preferred stock dividend in arrears = (12500 shares * $100 par * 6%) * 2 years

Preferred stock dividend in arrears = $150,000

Dividend paid this year = $350,000.

Dividend paid to Preferred stockholders = $150,000 in arrears + $75,000 current period = $225,000.

Dividend paid to Common Stockholders = $350,000 - $225,000 = $125,000.

Dividend per share of preferred stock = $225,000 / 12500 shares

Dividend per share of preferred stock = $18

Dividend per share of common stock = $125,000 / 25000 shares

Dividend per share of common stock = $5