Dividends Per Share Michelangelo Inc., a software development firm, has stock ou
ID: 2423184 • Letter: D
Question
Dividends Per Share
Michelangelo Inc., a software development firm, has stock outstanding as follows: 25,000 shares of cumulative 4%, preferred stock of $20 par, and 31,000 shares of $75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $7,500; second year, $10,500; third year, $69,280; fourth year, $112,690.
Calculate 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)
$
$
$
$
1st Year
2nd Year
3rd Year
4th Year
Preferred stock (dividend per share)
$
$
$
$
Common stock (dividend per share)
$
$
$
$
Explanation / Answer
Preferred has to get paid first and since cumulative paid up 20000 x 25 x .01 = 5000 for preferred dividends or 0.25/share Year 1 Year 2 Year 3 Year 4 Preferred 0.15 0.20 0.40 0.25 Common 0 0 1.28 3 Year 1 Cumulative preferred stock will be eligible for dividends first ( $ 3000/20000 shares), hence common stock holders dividends will be NIL Year 2 Cumulative preferred stock will be eligible for dividends first ( $ 4000/20000 shares), hence common stock holders dividends will be NIL Year 3 Cumulative preferred stock will be eligible for dividends first for current year( $ 3000/20000 shares), then for previous year unpaid , balance to common stock holders (Year 1 = 0.10( since 0.15 already paid), year 2 =.05, Year 3= 0.25, Common stock =1.28 or 32000/25000 share ) Year 4 Preference = 0.25, Common stock = 75000/25000= 3.00