Dividends Per Share Sandpiper Company has 10,000 shares of cumulative preferred
ID: 2492587 • Letter: D
Question
Dividends Per Share Sandpiper Company has 10,000 shares of cumulative preferred 2% stock, $100 par and 50,000 shares of $25 par common stock.
The following amounts were distributed as dividends:
Year 1: $40,000
Year 2: 8,000
Year 3: 60,000
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'.
Preferred Stock (dividend per share) Common Stock (dividend per share)
Year 1 ____________________ __________________________
Year 2 _____________________ __________________________
Year 3 _____________________ ___________________________
Explanation / Answer
Calculate total dividends to each class for each year, then divide each class by the number of shares in the class to get the dividends per share paid to each class.
Sandpiper Company has 10,000 shares of 2% cumulative preferred stock of $100 par and 50,000 shares of $25 par common stock.
Dividend due on preferred stock = $100 * 10,000 * 0.02 = 20,000 each year. If not paid in full each year, the unpaid amount carries over and is added to the amount due the following year BEFORE the common shareholders receive any dividends. This is the nature of CUMULATIVE preferred shares.
Year 1 $40,000 ..20,000 to Preferred "P", Per share dividend on preference share capital=20,000/10,000=$2 per share
20,000 to common "C" , Per share dividend on common share capital=20,000/50,000=$0.4 per share
Year 2 $8,000 ...8,000 to P, carry forward (20,000 – 8,000) = 12,000, Per share dividend on preference share capital=8,000/10,000=$0.8 per share
$0 paid to C ,
Year 3 $60,000....due to P: 12,000+20,000 =32,000 , Per share dividend on preference share capital=32,000/10,000=$3.2 per share
leaving (60,000 – 32,000) = 28,000 for C , Per share dividend on common share capital=28,000/50,000=$0.56 per share