Question

Dividends Per Share

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 10,000 shares of cumulative preferred 3% stock, $120 par, and 33,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $24,100; second year, $57,900; third year, $69,540; fourth year, $89,130.

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)	2.41	4.79	3.6	3.6
Common stock (dividend per share)	0	0.30	1.02	1.61

Workings

Year 1
Preference Dividend Payable=10000*120*3%	36000
Less Dividend Distributed	24100
Preference Dividend Arrear	11900
Preferred stock (dividend per share) =24100/10000	2.41
Common stock (dividend per share) =0	0
Year 2
Preference Dividend Payable=10000*120*3%	36000
Preference Dividend Arrear Previous year	11900
Total Dividend paid to Preferred stock	47900
Preferred stock (dividend per share) =47900/10000	4.79
Dividend Distributed	57900
Less Dividend paid to Preferred stock	47900
Dividend available to common stock	10000
Common stock (dividend per share) =10000/33000	0.30
Year 3
Preference Dividend Payable=10000*120*3%	36000
Preference Dividend Arrear Previous year	0
Total Dividend paid to Preferred stock	36000
Preferred stock (dividend per share) =36000/10000	3.6
0
Dividend Distributed	69540
Less Dividend paid to Preferred stock	36000
Dividend available to common stock	33540
Common stock (dividend per share) =33540/33000	1.02
Year 3
Preference Dividend Payable=10000*120*3%	36000
Preference Dividend Arrear Previous year	0
Total Dividend paid to Preferred stock	36000
Preferred stock (dividend per share) =36000/10000	3.6
0
Dividend Distributed	89130
Less Dividend paid to Preferred stock	36000
Dividend available to common stock	53130
Common stock (dividend per share) =35130/33000	1.61