Question

Dividends Per Share Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 3% stock, $20 par and 410,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $34,000; second year, $76,000; third year, $80,000; fourth year, $100,000. Determine the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0.00". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividends per share) $ 0.57 $ 0.63 $ 0.6 $ 0.6 Common stock (dividends per share) 0.00 0.09

Answer 1

Answer and Step-by-step explanation:

The computation of dividends per share on each class of stock for each of the four years is shown below:-

Particulars 1st year 2nd-year 3rd-year 4th year

Preferred dividend

paid a $34,000 $38,000 $36,000 $36,000

Number of preferred

stock b 60,000 60,000 60,000 60,000

Dividend per share

(a ÷ b) $0.57 $0.63 $0.60 $0.60

Dividend paid to common

stockholders c $0 $38,000 $44,000 $64,000

Number of common stock

shares d 410,000 410,000 410,000 410,000

Dividend per share

on common stock $0 $0.093 $0.11 $0.16

(c ÷ d)

Working note:

Preferred dividend = Number of preferred stock shares × Par value per share × Percentage of dividend

= 60,000 × $20 × 3%

= $36,000

Preferred stock

For 1st year

= $34,000

For 2nd-year

Dividend in year 2+ Dividend balance in year 1

= $36,000 + ($36,000 - $34,000)

= $38,000

For 3rd-year

= $36,000

For 4th year

= $36,000

Common stock dividend

Particulars 1 year 2 year 3 year 4 year

Total dividend paid $34,000 $76,000 $80,000 $100,000

Less:

Preferred stock

dividend $34,000 $38,000 $36,000 $36,000

Dividend paid to common

stockholders $0 $38,000 $44,000 $64,000