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