Dividends Per Share Sandpiper Company has 30,000 shares of cumulative preferred

Question

Dividends Per Share Sandpiper Company has 30,000 shares of cumulative preferred 3% stock, s 100 par and 50,000 shares of $10 par common stock. The following amounts were distributed as dividends Year 1 Year 2 Year 3 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 $180,000 45,000 270,000 o. Preferred Stock Common Stock (dividends per share) (dividends per share) Year 1 Year 2 Year 3 180,000 X 90,000x 0

Explanation / Answer

Year 1:

Dividend distributed = 180000

Preferred dividend in Year 1 = Number of shares*Par value*Dividend rate

= 30000*100*3% = 90000

Preferred stock dividend per share = 90000/30000 = 3

Common stock dividend = 180000-90000 = 90000

Common stock dividend per share = 90000/50000 = 1.8

Year 2:

Divided distributed = 45000

Preferred dividend in Year 2 = 45000 (Preferred dividend amount is 90000 but it will be limited to 45000 only because total dividend is 45000 only)

Preferred dividend per share = 45000/30000 = 1.5

Common stock dividend = 0

Common stock dividend per share = 0

Year 3:

Dividend distributed = 270000

Preferred stock dividend in Year 3 = 30000*100*3% = 90000

Preferred stock dividend pending in Year 2 = 45000

Total preferred stock dividend in Year 3 = 90000+45000 = 135000

Preferred stock dividend per share = 135000/30000 = 4.5

Common stock dividend = 270000-135000 = 135000

Common stock dividend per share = 135000/50000 = 2.7

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