Imaging Inc., a developer of radiology equipment, has stock outstanding as follo

Question

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 15,000 shares of cumulative preferred 3% stock, $150 par, and 50,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $45,300; second year, $99,700; third year, $121,850; fourth year, $144,000.

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) $ $ $ $

Explanation / Answer

Preferred dividend/year=(15000*150)*3%=$67500

Since Preferred dividend is cumulative;Preferred dividend not paid for in one year is carried over and paid for in the coming years.

Hence arrears in Preferred dividend for :

Year 1=(67500-45300)=$22200

Year 2=(67500+22200)-99700=$0

Year 3=0

Year 4=0

Any balance left over is paid to common stockholders.

(45300/15000)

=$3.02

=5.98

=$4.50

=$4.50

($10000/50000)=

$0.20

($54350/50000)

=$1.09(Approx)

($76500/50000)=

$1.53

1st year 2nd year 3rd year 4th year Total Preferred dividend 45300 89700 67500 67500 Total Common dividend 0 (99700-89700)=$10000 (121850-67500)=$54350 (144000-67500)=$76500

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