Scan Tech Inc., a developer of radiology equipment has stock outstanding as foll
ID: 2549376 • Letter: S
Question
Scan Tech Inc., a developer of radiology equipment has stock outstanding as follows: 24,000 shares of 2% preferred stock of $75 par, and 100,000 shares of $8 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $19,200; second year, $30,000; third year, $75,000; fourth year, $120,000. Calculate the dividends per share on each class of stock for each of the four years.
1st Year 2nd Year 3rd Year 4th Year $19,200 $ 30,000 $ 75,000 $120,000 $19,200 $ 30,000 $ 36,000 $ 36,000 24000 24.000 1.50 $1.50 24.000 240061 Preferred shares outstanding... Preferred dividend per share Dividend for common share - $ 39,000 $ 84,000 -100,000 100,000 $0.39 $0.84 Common shares outstanding Common dividend per shareExplanation / Answer
We see that dividend on preferred shares is 24000*75*2%= 36000 But in year 1 & 2 the declared dividend is less than $36,000 . that preferred shares will be given perference in paying dividends . thus they will be paid to the extent of the dividend declared hence in both year 1 & 2 being excess not available all will be paid to the extent of declared dividend