Question

Dividends Per Share Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 15,000 shares of cumulative preferred 1% stock, $120 par, and 50,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $12,000; second year, $34,000; third year, $46,200; fourth year, $76,500. Compute 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". 1st Year 2nd Year 3rd Year 4th Year Preferred stock (dividend per share) $ $ $ $ Common stock (dividend per share) $ $ $ $

Answer 1

Particulars	Dividend per share
	1% cumulative preferred stock	Common stock
Number of shares	15,000	50,000
Par Value	$120	$15
Capital Amount	$1,800,000	$750,000
Statutory Obligation to pay Dividend	$18,000	NIL
Remarks	If for any year dividends are not paid it will cumulate and will liable to be paid next year	No such obligations.
Year 1:
Amount of dividend necessary to be paid	$18,000
Amount of Dividend paid ($12,000)	$12,000	$0
Dividend per share	$0.80	$0
Amount of dividend liable to be paid next year	$6,000	$0
Year 2:
Balance of previous year to be paid	$6,000	$0
Dividends liable to be paid for year 2	$18,000	$0
Total Amount of dividend necessary to be paid	$24,000	$0
Amount of Dividend paid ($34,000)	$24,000	$10,000
Dividend per share	$1.60	$0.2
Amount of dividend liable to be paid next year	$0	$0
Year 3:
Balance of previous year to be paid	$0	$0
Dividends liable to be paid for year 3	$18,000	$0
Total Amount of dividend necessary to be paid	$18,000	$0
Amount of Dividend paid ($46,200)	$18,000	$28,200
Dividend per share	$1.20	$0.564
Amount of dividend liable to be paid next year	$0	$0
Year 4:
Balance of previous year to be paid	$0	$0
Dividends liable to be paid for year 4	$18,000	$0
Total Amount of dividend necessary to be paid	$18,000	$0
Amount of Dividend paid ($76,500)	$18,000	$58,500
Dividend per share	$1.20	$1.17
Amount of dividend liable to be paid next year	$0	$0

Point to be remember:

Dividends on preferred stocks are paid first before paying dividend on the common stock.