Question

Dividends Per Share

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 20,000 shares of cumulative preferred 4% stock, $130 par, and 67,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $69,600; second year, $148,400; third year, $174,410; fourth year, $184,400.

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

Answer:

	1st Year	2nd Years	3rd Year	4th Year
Preferred Stock (dividend per share)	5.2	5.2	5.2	5.2
	(104000/20000)	(104000/20000)	(104000/20000)	(104000/20000)
Common Stock (dividend per share)	0.51	0.66	1.05	1.2
	(34400/67000)	(44400/67000)	(70410/67000)	(80400/67000)

Working Notes:

Preferred stock = 20000 shares x $130 x 4%
= $104000 Preferred dividend

Note: Preferred stock comes first and must get $104000 of dividends each year.
If there is excess it goes to the common stock holders. If there isn't enough dividends then the difference comes out of the next year.

Year 1	Preferred Stock	104000	Preferred Dividend
	Common Stock	69600-104000	34400	Common dividend
Year 2	Preferred Stock	104000	Preferred Dividend
	Common Stock	148400-104000	44400	Common dividend
Year 3	Preferred Stock	104000	Preferred Dividend
	Common Stock	174410-104000	70410	Common dividend
Year 4	Preferred Stock	104000	Preferred Dividend
	Common Stock	184400-104000	80400	Common dividend