Determine the dividends per share for preferred and common stock for each year.

Determine the dividends per share for preferred and common stock for each year.

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April 25, 2022
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Dividends per share

Lasers4U Company has 10,000 shares of 2% cumulative preferred stock of $50 par and 25,000 shares of $100 par common stock. The following amounts were distributed as dividends:

Year 1 $18,000

Year 2 7,500

Year 3 35,000

Determine the dividends per share for preferred and common stock for each year.

Answer and ExplanationSolution by a verified expert

Explanation
Year 1

Preference shares: 10,000 @ $50= 500,000 * 2%= $10,000

Common shares: $18,000-$10,000= $8,000

Year 2

Preference shares: 10,000 @ $50= 500,000 * 2%= $10,000

But since the company only distributed $7,500, all of this will go to the preference shares and the remaining $2,500 will be considered as dividends in arrears.

Common shares: $0

Year 3

Preference shares: 10,000 @ $50= 500,000 * 2%= $10,000 + $2,500 (dividends in arrears) = $12,500

Common shares: $35,000-$12,500= $22,500

Answer
Preferred stock Common stock
Year 1 $10,000 $8,000
Year 2 $7,500 -
Year 3 $12,500 $22,500

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