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Sandpiper Company has 25,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of...

Sandpiper Company has 25,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $25 par common stock. The following amounts were distributed as dividends: 20Y1 $150,000 20Y2 30,000 20Y3 225,000 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'.

Expert Solution

Dividend entitled for Cumulative preference shareholders=25000*$150*2%
=$75000

The common stockholders are entitled to dividend only after paying to preference shareholders. In case of cumulative preference shareholders, if any dividends for previous years were missed, the same would be paid in the subsequent years before paying any dividend to common stockholders.

In 20Y1

Prefence shareholders' dividend = $75000

per share = $75000/25000 = $3 per share

Common shareholders' dividend = $150000-$75000

=$75000

per share = $75000/50000 = $1.5 per share

In 20Y2

Prefence shareholders' dividend = $30000

per share = $30000/25000 = $1.2 per share

Common shareholders' dividend= NIL

In 20Y3

Preference shareholders' dividend= $75000 + ($75000-$30000)

= $120000

per share = $120000/25000 = $4.8 per share

Common stockholders, dividend=$225000-$120000

= $105000

per share = $105000/50000 = $2.1 per share

ekkarill92 answered 2 years ago

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