13-01 Dividends Per Share Windborn Company has 15,000 shares of cumulative prefe

Question

13-01

Dividends Per Share

Windborn Company has 15,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $10 par common stock. The following amounts were distributed as dividends:

Year 1

$112,500

Year 2   

36,000

Year 3

135,000

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

Year 1

Year 2

Year 3

Preferred stock (Dividends per share)

$

$

$

Common stock (Dividends per share)

$

$

$

Year 1

$112,500

Year 2   

36,000

Year 3

135,000

Explanation / Answer

Solution :

Year 1

Preferred dividends = 15,000 x $150 x 2% = $45,000

Common stock dividends = $112,500 - $45,000 =$67,500

Hence, preferred dividends per share = $45,000/ 15,000

= $3

Common stock dividends per share = $67,500/ 50,000

= $1.35

Year 2

Preferred dividends = $36,000

Common stock dividends = 0

( Note : remaining preferred dividends of $9,000 will be paid in next year)

Hence, preferred dividends per share = $36,000/ 15,000

= $2.40

Common stock dividends per share = $0

Year 3

Preferred dividends = $45,000 + $9,000 = $54,000

Common stock dividends = $135,000 - $54,000 =$81,000

Hence, preferred dividends per share = $54,000/ 15,000

= $3.6

Common stock dividends per share = $81,000/ 50,000

= $1.62

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