Question

Oceanic Company has 25,000 shares of cumulative preferred 1% stock, $100 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends: Year 1 - $50,000, Year 2 - $12,500, Year 3 - $75,000. Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

Answer 1

Answer:

Annual Preferred Dividend = No. of Shares * Value per share * Preferred Dividend Rate
Annual Preferred Dividend = 25,000 * $100 * 1%
Annual Preferred Dividend = $25,000

Year 1:

Total Dividend Distributed = $50,000

Preferred Dividend = $25,000

Preferred Dividend per share = Preferred Dividend / No. of Shares
Preferred Dividend per share = $25,000 / 25,000
Preferred Dividend per share = $1

Common Dividend = Total Dividend Distributed – Preferred Dividend
Common Dividend = $50,000 - $25,000
Common Dividend = $25,000

Common Dividend Per share = Common Dividend / No. of Shares
Common Dividend Per Share = $25,000 / 50,000
Common Dividend Per share = $0.5

For Year 2:

Total Dividend Distributed = $12,500

Preferred Dividend = $12,500

Preferred Dividend per share = Preferred Dividend / No. of Shares
Preferred Dividend per share = $12,500 / 25,000
Preferred Dividend per share = $0.5

Common Dividend = 0

Common Dividend per share = $0

For Year 3:

Total Dividend Distributed = $75,000

Preferred Dividend = $25,000 + $12,500
Preferred Dividend = $37,500

Preferred Dividend per share = Preferred Dividend / No. of Shares
Preferred Dividend per share = $37,500 / 25,000
Preferred Dividend per share = $1.5

Common Dividend = Total Dividend Distributed – Preferred Dividend
Common Dividend = $75,000 - $37,500
Common Dividend = $37,500

Common Dividend Per share = Common Dividend / No. of Shares
Common Dividend Per Share = $37,500 / 50,000
Common Dividend Per share = $0.75