Michelangelo Inc., a software development firm, has stock outstanding as follows
ID: 2465305 • Letter: M
Question
Michelangelo Inc., a software development firm, has stock outstanding as follows: 15,000 shares of cumulative 2%, preferred stock of $20 par, and 19,000 shares of $100 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $2,250; second year, $3,150; third year, $28,180; fourth year, $59,010.
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".
Preferred stock (dividend per share)
Common stock (dividend per share)
Explanation / Answer
Par value of Preferred stock = $15000*$20 = $300000
Dividend on Preferred stock per year = 2% of $300000 = $6000
Since preferred stock are cumulative therefore, if full dividend of $6000 is not paid in any year then the amount not paid will be carried forward to next year and will continue to be carry forwaded until it is paid
Calculations of dividend per share on each class of stock for each of the four years
Year 1
Total dividend = $2250 these whole amount of dividend will be given to preferred stockholders and balance of there dividend unpaid (6000-2250 = 3750) will be carry forwaded
THerefore, dividend per share on preferred stock = $2250/15000 shares = $0.15 per share
Dividend per share on common stock = $0 per share
Year 2
Total dividend paid = $3150
These whole will be paid to preferred stockholders since they have previous year balance of $3750 plus current year balance of $6000 therefore there balance dividend unpaid after 2nd year dividend is paid = (6000+3750-3150 = 6600)
Therefore, dividend per share to preferred stockholders = $3150/15000 shares = $0.21 per share
Dividend per share to common stockholders = $0 per share
Year 3
Total dividend paid = $28180
Out of the above previous years dividend unpaid of preferred stockholders of $6600 will be paid and then there currrent year dividend of $6000 will be paid and then the remaining balance will be paid to common stockholders = (28180-6600-6000 = $15580)
Therefore, dividend per share to preferred stock holders = $12600/15000 shares = $0.84 per share
Dividend per share to common stockholders = $15580/19000 shares = $0.82 per share
Year 4
Total dividend paid = $59010
Out of the above preferred stockholder will get $6000 and remaining will be given to common stockholders
THerefore, dividend per share to preferred stockholders = $6000/15000 shares = $0.4 per share
Dividend per share to common stockholders = ($59010-$6000)/19000 shares = $2.79 per share
Table
Year 1 Year 2 Year 3 Year 4 Preferred stock $0.15 $0.21 $0.84 $0.4 Common stock $0 $0 $0.82 $2.79