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Lightfoot Inc., a software development firm, has stock outstanding as follows: 15,000 shares of cumulative preferred...

Lightfoot Inc., a software development firm, has stock outstanding as follows: 15,000 shares of cumulative preferred 4% stock, $20 par, and 19,000 shares of $75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $4,500; second year, $7,500; third year, $41,480; fourth year, $71,470. Calculate 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".

Preferred stock (dividend per share)

Common stock (dividend per share)

Solutions

Expert Solution

Preferred stock (dividend per share)

Year -1 = $0.30 per share

Year -2 = $0.50 per share

Year -3 = $1.60 per share

Year -4 = $0.80 per share

Common stock (dividend per share)

Year -1 = $0.00 per share

Year -2 = $0.00 per share

Year -3 = $0.92 per share

Year -4 = $3.13 per share

WORKINGS

Preferred Dividend payable = 12,000 x $20.00 x 4.00%

= $12,000

Year-1

To preferred shareholders = $4,500

To Common shareholders = $0

Preferred Dividend arrear = $7,500

Preferred dividend per share = $0.30 per share [$4,500 / 15,000 shares]

Common dividend per share = $0.00

Year-2

To preferred shareholders = $7,500

To Common shareholders = $0

Preferred Dividend arrear = $4,500

Preferred dividend per share = $0.50 per share [$7,500 / 15,000 shares]

Common dividend per share = $0.00

Year-3

To preferred shareholders = $24,000 [$12,000 + $7,500 + $4,500]

To Common shareholders = $17,480 [$41,480 - $24,000]

Preferred dividend per share = $1.60 per share [$24,000 / 15,000 shares]

Common dividend per share = $0.92 per share [$17,480 / 19,000 shares]

Year-4

To preferred shareholders = $12,000

To Common shareholders = $59,470 [$71,470 - $12,000]

Preferred dividend per share = $0.80 per share [$12,000 / 15,000 shares]

Common dividend per share = $3.13 per share [$59,470 / 19,000 shares]

ekkarill92 answered 1 year ago

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