Question

Dividends Per Share

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 22,000 shares of cumulative preferred 4% stock, $160 par, and 73,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $94,380; second year, $197,220; third year, $229,240; fourth year, $229,860.

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

	1st Year	2nd Year	3rd Year	4th Year
Preferred Stock (Dividend per share)	$ 4.29	$ 8.51	$ 6.40	$ 6.40
Common Stock (Dividend per share)	$ 0.00	$ 0.14	$ 1.21	$ 1.22

Explanation:

Annual total preferred dividend = Par value x dividend rate x number of shares

                                               = $ 160 x 0.04 x 22,000 = $ 140,800

	1st Year	2nd Year	3rd Year	4th Year
Total dividend declared (a)	$94,380	$197,220	$229,240	$229,860
Preferred dividend (b)	$94,380	$140,800	$140,800	$140,800
Arrears preferred dividend (c)	0	$46,420*	0	0
Total preferred dividend d = b + c	$94,380	$187,220	$140,800	$140,800
÷ Number of preferred shares	22,000	22,000	22,000	22,000
Dividend per preferred shares	$4.29	$8.51	$6.40	$6.40
Common dividend (a - d)	0	$10,000	$88,440	$89,060
÷ Number of common shares	73,000	73,000	73,000	73,000
Dividend per common shares	$0.00	$0.14	$1.21	$1.22

Arrears preferred dividend in year 2 = Annual total preferred dividend – Dividend paid

                                                             = $140,800 - $94,380 = $46,420*