Question

Dividends Per Share

Windborn Company has 30,000 shares of cumulative preferred 3% stock, $50 par and 50,000 shares of $20 par common stock. The following amounts were distributed as dividends:

Year 1	$67,500
Year 2	36,000
Year 3	135,000

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

	Preferred Stock (dividends per share)	Common Stock (dividends per share)
Year 1	$	$
Year 2	$	$
Year 3	$	$

Answer 1

Cumulative preferred shares are those shares which has right to receive dividend if it is not paid in past.
Suppose preferred dividend is payable as 100 and in one year total dividend paid is 40, then in future years remaning unpaid dividend of 60
is first of all paid, after that dividend of 100 of that year is also paid and after that remaining dividend is paid to common stockholders.
Dividend payable to preferred stockholders					=	Number of preferred stockholders x Par Value x Preferred dividend
					=	30,000	x	$          50	x	3%
					=	$                45,000
	Preferred Stock (dividends per share)	Common Stock (dividends per share)
Year 1	$                      1.50	$                       0.45
Year 2	$                      1.20	0
Year 3	$                      1.80	$                       1.62
Working:
	a.
		Total Dividends	Dividend in arrear of last Year	Preferred dividend	Dividend in arrear of current Year	Dividend to common stockholders
	Year 1	67,500	0	$               45,000	0	22,500
	Year 2	36,000	0	36,000	$                   9,000	0
	Year 3	1,35,000	$                     9,000	$               45,000	0	81,000
	b.		Preferred Stock			Common Stock
			Last Year	Current Year	Total of the Year		Total of the Year
		Year 1	0	$               45,000	45,000	22,500	22,500
		Year 2	0	36,000	36,000	0	0
		Year 3	$                     9,000	$               45,000	54,000	81,000	81,000
	c.		Dividend to Preferred stock	Number of Preferred Stock	Dividend Per Share
		Year 1	$                   45,000	30,000	$                     1.50
		Year 2	$                   36,000	30,000	$                     1.20
		Year 3	$                   54,000	30,000	$                     1.80
	d.
			Dividend to Common stock	Number of Common Stock	Dividend Per Share
		Year 1	$                   22,500	50,000	$                     0.45
		Year 2	0	50,000	0
		Year 3	$                   81,000	50,000	$                     1.62