Question

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.

	Total Dividends 2018 2019 2020 2021 Total Preferred $0 Common $0 Total 0 $0 $0 $0

Answer 1

	2018	2019	2020	2021	Total
Preferred	0	575000	1066600	547200	2188800
Common	0	0	111400	27800	139200
Total	0	575000	1178000	575000	2328000

WORKINGS:

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