Question

Dividends Per Share

Oceanic Company has 25,000 shares of cumulative preferred 3% stock, $150 par and 50,000 shares of $20 par common stock. The following amounts were distributed as dividends:

Year 1	$168,800
Year 2	45,000
Year 3	337,500

Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

	Year 1	Year 2	Year 3
Preferred stock (Dividends per share)	$	$	$
Common stock (Dividends per share)	$	$	$

Answer 1

Year 1

Cumulative preferred 3%, 25000 shares at $150 par equivalent to 25000*150 = 3750000
The stock is entitled to dividend amounting 3750000*3% to preferred shareholders = 112500

So in first year dividend paid to common shareholders = 168800-112500 = 56300

Preferred stock (Dividends per share) = 112500/25000 = 4.5
Common stock (Dividends per share) = 56300/50000 = 1.126

Year 2

Total dividend payout is 45000 which will entirely go to preferred shareholders

Preferred stock (Dividends per share) = 45000/25000 = 1.8
Common stock (Dividends per share) = 0

Year 3

As dividend payout is cumulative, dividend not paid in year 2 will be paid in year 3 to preferred shareholders

Dividend not paid in year 2 = 112500-45000 = 67500 which will be paid in year 3

So in year 3 dividend payout to preferred shareholders = 112500+67500 = 180000

So dividend payout to common shareholders = 337500-180000 = 157500

Preferred stock (Dividends per share) = 180000/25000 = 7.2
Common stock (Dividends per share) = 157500/50000 = 3.15