In: Accounting
The outstanding share capital of Sheng Inc. includes 57,000
shares of $9.60 cumulative preferred and 92,000 common shares, all
issued during the first year of operations. During its first four
years of operations, the corporation declared and paid the
following amounts in dividends:
Year | Total Dividends Declared |
||
2018 | $ | 0 | |
2019 | 575,000 | ||
2020 | 1,178,000 | ||
2021 | 575,000 | ||
Required:
Determine the total dividends paid in each year to each class of
shareholders. Also determine the total dividends paid to each class
over the four years.
Year 1: Dividend paid = 0
Preferred dividend payable (since it is cumulative it will have to be paid in year 2) = 9.60 * 57000 = 547200
Year 2: Total Preferred Dividends to be paid = 547200 * 2 = 1094400
Preferred dividend paid in Year 2 = 575000
Preferred dividend paid per share = 575000 / 57000 = $10.09
Preferred dividend still remaining to be paid = 1094400 - 575000 = 519400
Common stock dividend paid = 0 (since the preferred dividends are yet to be paid)
YEAR 3:
Preferred dividend payable = 519400 + 547200 = 1066600
Preferred dividend paid = 1066600
Preferred dividend paid per share = 1066600 / 57000 = 18.71 per share
Dividend remaining distributed among common stokcholders = 1178000 - 1066600 = 111400
Common stock dividend per share = 111400 / 92000 = 1.21
YEAR 4:
Preferred dividend paid = 547200
Preferred dividend per share = 547200 / 57000 = 9.60
Remaining dividend distributed to common stockholder = 575000 - 547200 = 27800
Common stock dividend per share = 27800 / 92000 = 0.30