Question

York’s outstanding stock consists of 60,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 170,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends. Year 1 total cash dividends $ 10,700 Year 2 total cash dividends 20,500 Year 3 total cash dividends 290,000 Year 4 total cash dividends 440,000 Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. (Round your "Dividend per Preferred Share" answer to 3 decimal places.) Use the data in Exercise 13-10 to determine the amount of dividends paid each year to each of the two classes of stock assuming that the preferred stock is cumulative. (Round your "Dividend per Preferred Share" answer to 3 decimal places.)

Answer 1

The amount of dividends paid each year to each of the two classes of stock assuming that the preferred stock is cumulative is as follows:

Annual dividend on prefrence shares is calculated as follows

Annual dividend on prefrence shares = 60,000 shares * $5 par value * 7.5%

                                                      = $22,500

Years	Total Dividend Paid	Dividend Paid to preferred stock	Dividend Paid to common stock
Year 1	$10,700	$10,700	-
Year 2	$20,500	$20,500	-
Year 2	$ 290,000	$22,500	$267,500
Year 4	$ 440,000	$22,500	$417,500
Total	$761,200	$76,200	$685,000