Question

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 24,000 shares of cumulative preferred 4% stock, $150 par, and 80,000 shares of $10 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $96,480; second year, $201,520; third year, $252,000; fourth year, $284,000.

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

	1st year	2nd year	3rd year	4th year
preferred stock (dividend per share)	$4.02	$7.98	$6	$6
common stock (dividend per share)	$0	$0.13	$1.35	$1.75

working note:

preferred dividend to be paid every year before common stock holders are paid = 24,000 * 4% * 150 =>$144,000.

	1 year	2 nd year	3rd year	4th year
preferred dividend to be paid	144,000	144,000	144,000	144,000
total dividend paid	96,480	201,520	252,000	284,000
current year deficit in paying preferred dividend	47,520	nil	nil	nil
carried forward deficit from previous years	nil	47,520	nil	nil
Total defict	47,520	47,520	nil	nil
amount paid to preferred stock holders	96,480	(144,000+47,520)=>191,520	144,000	144,000
amount paid per share of preferred stock	(96,480/24,000) =>$4.02	(191,520/24,000)=>$7.98	144,000/24,000=>$6	144,000/24,000=>$6
amount paid to commonstock holders (total dividend paid - amount to be paid to preferred stock holders - current year deficit in paying preferred dividend - carried forward deficit ) (zero if answer is negative)	nil	10,000	108,000	140,000
dividend per share of common stock	nil	(10,000/80,000)=>$0.13	(108,000/80,000)=>$1.35	(140,000/80,000)=>$1.75