Question

The shareholders' equity of Crystal Company includes the items shown below. The board of directors of Crystal declared cash dividends of $2.2 million, $6.0 million, and $46.8 million in each of its first three years of operation: 2016, 2017, and 2018, respectively. Common stock, $1 par, 50,000,000 shares outstanding Preferred stock, 6%, $100 par, 1,000,000 shares outstanding Required: Determine the amount of dividends per share on preferred and common stock for each of the three years. The preferred stock is cumulative and nonparticipating. (Round final answers to 2 decimal places.)

Year	Preferred	Common
2016
2017
2018

Explain your numbers please

Answer 1

	Calculate Shareholders' Equity
	Preferred stock(1000000*100)	100000000
	Common stock (50,000,000*1)	50000000
	Dividend has to to be distributed to preferred shareholders (100000000*6%)	6000000
	Dividend Balance left after preferred stock is attributable to Common stcok
Year	Preferred	Common	Total
2016	2,200,000		2,200,000
2017	6000000		6,000,000
2018	9,800,000	37000000	46,800,000
Explanation
2016	Cash dividend is 2.2 millions , which is not enough to cover the preferred dividend, hence only paid to preferred stock and as the preferred shares are cumulative,balance is paid in subsequent years .
2017	Cash dividend is 6 millions, which is just enough to cover the preferred stock dividend and there is no surplus to cover the previous year shortage, hence only paid the current preferred stock dividend.
2018	Cash dividend is 46.8 millions, which is enough to cover the current year preferred dividend along with the shortage in the year 2016, that is 6 millions and 3.8 millions and balance 37 millions is paid to the common stock