York\'s outstanding stock consists of 80,000 shares of cumulative 7.5 percent pr

Question

York's outstanding stock consists of 80,000 shares of cumulative 7.5 percent preferred stock with a dollar 5 per value and also 200,000 shares of common stock with a dollar 1 par value. During its first four years of operation, the corporation declared and paid the following total each dividends: Determine the amount of dividends paid each year to each of the two classes of stockholders: assuming the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years contained. (Round your "Dividend per Preferred Share" answers to 3 decimal places.)

Explanation / Answer

Preferred share holders have the first right over dividend. After paying preferred shares, the common is paid. Also, since the preferred share holders dividend is cumulative, any unpaid dividend during the year is carried forward to next year.

Annual preferred dividend Total Cash dividend paid Paid to preferred 2013                                       20,000                       20,000 2014                                       28,000                       28,000 2015                                    200,000                       42,000 2016                                    350,000                       30,000                                    598,000                     120,000 Preferred shares 80000 @ 5 par value = 400,000 Dividend rate 7.50% Annual dividend                                       30,000 80000*5*7.5% Year 2013 Dividend paid                                       20,000 Dividend payable to preferred shares                                       30,000 Dividend in arrears                                       10,000 Year 2014 Dividend paid                                       28,000 Dividend payable to preferred shares                                       30,000 Dividend in arrears payable                                       10,000 Total dividend to preferred                                       40,000 30000+10000 Dividend in arrears                                       12,000 40000-28000 Year 2015 Dividend paid                                    200,000 Dividend payable to preferred shares                                       30,000 Dividend in arrears payable                                       12,000 Total dividend to preferred                                       42,000 30000+12000 Balance after payment to preferred                                    158,000 200000-42000 Payment to common                                    158,000 Year 2016 Dividend paid                                    350,000 Dividend payable to preferred shares                                       30,000 Dividend in arrears payable                                                -   Total dividend to preferred                                       30,000 30000+0 Balance after payment to preferred                                    320,000 350000-30000 Payment to common                                    320,000

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