Question

Lightfoot Inc., a software development firm, has stock outstanding as follows: 15,000 shares of cumulative preferred 3% stock, $20 par, and 19,000 shares of $125 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $3,450; second year, $5,700; third year, $34,190; four th year, $64,480.

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".

Answer 1

		Preferred	Common
Year	Dividends	Total	Per Share	Total	Per Share
1	$3450	$3450	$0.23	$0	$0
2	5700	$5700	$0.38	$0	$0
3	34190	$17850	$1.19	$16340	$0.86
4	64480	$9000	$0.6	$55480	$2.92

Working:

1. Annual Preferred dividend = No. of shares*face value per share*dividend %

= 15000*20*3% = $9,000

2. Balance dividend for preferred stock in year 1 = Annual Preferred dividend - Total dividend paid

= 9000-3450 = $5550

3. Balance dividend for preferred stock in year 2 = Annual Preferred dividend - Total dividend paid

= 9000-5700 = $3300

3. Dividend paid to preferrd stockholders in year 4 = Annual Preferred dividend + Balance dividend for preferred stock in year 1 and year 2

= $9000+5550+3300

= $17850

4. Dividend paid to common stockholders in Year 3 = Total dividend paid - Dividend paid to preferrd stockholders in year 3

= $34190-17850

= $16340