Question

Anders, Inc., has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding on December 31, 2018. There were no dividends declared in 2016. The board of directors declares and pays dividends of $90,000 each in 2017 and in 2018. What is the dividends per share received by the common stockholders in 2018?

Group of answer choices

$1.00

$1.25

$0.75

$1.75

Answer 1

Number of preferred share = 10,000

Par value of 1 preferred share = $100

Preferred dividend rate = 5%

Annual preferred dividends = Number of preferred share x Par value of 1 preferred share x Preferred dividend rate

= 10,000 x 100 x 5%

= $50,000

Year	Total dividends	Preferred stockholders	Dividend in arrears	Common stockholders
2,016	-	-	50,000	-
2,017	90,000	90,000	10,000	-
2,018	90,000	60,000	-	30,000
	180,000	150,000		30,000

Number of common share = 40,000

dividends per share received by the common stockholders in 2018 =Dividend to common stockholders /  Number of common share

= 30,000/40,000

= $0.75

Third option is correct