Michelangelo Inc., a software development firm, has stock outstanding as follows
ID: 2473790 • Letter: M
Question
Michelangelo Inc., a software development firm, has stock outstanding as follows: 10,000 shares of cumulative 1%, preferred stock of $20 par, and 13,000 shares of $75 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $800; second year, $1,100; third year, $13,720; fourth year, $34,760. 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)Explanation / Answer
Preferred share dividend: 10000 shares * @20 per shares * 1% = $2000
In the first year $800 has been distributed this is less than the dividend calculated above, hence all of this amount shall be distributed to preferred stockholders. Dividend per share = $800/ 10000 = $.08. Arrears = $1200 to be paid next year.
Dividend for common stock would be zero
In the second year $1100 has been distributed this is less than the dividend calculated above, hence all of this amount shall be arrears distributed to preferred stockholders. Dividend per share = $1100/ 10000 = $.11. Arrears would be $100 + $2000 = $2100
Dividend for common stock would be zero
In the third year $13720 has been distributed as dividend. Out of this $4100 is dividend on preferred stock and $9620 on common stock.
Dividend per share on preferred stock = $4100/10000 = .41 per share
Dividend per share on common stock = $9620/13000 = .74 per share
In the third year $34760 has been distributed as dividend. Out of this $2000 is dividend on preferred stock and $32760 on common stock.
Dividend per share on preferred stock = $2000/10000 = .2 per share
Dividend per share on common stock = $32760/13000 = 2.52 per share
Amount in $ 1st year 2nd year 3rd year 4th year Preferred stock (dividend per share) .08 .11 .41 .20 Common stock (dividend per share) 0 0 .74 2.52