Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Uta

Question

Love Theatre Inc. owns and operates movie theaters throughout New Mexico and Utah. Love Theatre has declared the following annual dividends over a six-year period: 2011, $32,000; 2012, $96,000; 2013, $152,000; 2014, $184,000; 2015, $224,000; and 2016, $280,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 40,000 shares of cumulative, 2% preferred stock, $100 par, and 100,000 shares of common stock, $20 par.

Required: 1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2011. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter "0".

Explanation / Answer

Preferred dividend = No. of shares * Price per share *2% = 40,000*100*0.02 = $80,000

For year 2011, total dividend = $32,000 So, all will be paid as preferred dividend and nothing to common share holders.

The remaining dividend due to preferred shareholders of $80,000 - $32,000 = $48,000 will be paid next year along with $80,000 of next year due as the shares are cumulative.

So, in 2012, dividend payable to preferred stock = 48000+80000 = $128,000

Below is the table shown:

2% Preferredstock Common stock Year Total Dividend Total Per share Total Per share 2011 32,000 32,000 0.80 0 0.00 2012 96,000 96,000 2.40 0 0.00 2013 152,000 112,000 2.80 40,000 0.40 2014 184,000 80,000 2.00 104,000 1.04 2015 224,000 80,000 2.00 144,000 1.44 2016 280,000 80,000 2.00 200,000 2.00

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