Dividends Per Share Fairmount Inc., a developer of radiology equipment, has stoc
ID: 2580541 • Letter: D
Question
Dividends Per Share
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 11,000 shares of cumulative preferred 1% stock, $140 par, and 37,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $10,340; second year, $14,300; third year, $46,350; fourth year, $84,220.
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 dividends are paid before common dividends. With cummulative preferred dividends, if there are any dividends in arrear, they must be paid before common shareholders receive dividends.
1st year 2nd year 3rd year 4th year Preferred stock (dividend per share) 0.94 1.3 1.5 1.4 Common stock (dividend per share) 0 0 0.81 1.86 *CALCULATION: Annual dividends due to preferred shareholders = 11000 * 1% * 140 15400 Calculation for first year: First year 10340 Preferred: 10340 Total dividends 10340 / 11000 0.94 per share Common 0 There are 15400 - 10340 = 5060 preferred dividends in arrears Second Year: 14300 Preferred 14300 Total dividends 14300 / 11000 1.3 per share Common 0 There are 15400 - 14300 = 1100 preferred dividends in arrears. Third Year: 46350 Preferred 15400 + 1100 = 16500 Total dividends 16500 / 11000 1.5 dividend per share Common : 46350 - 16500 = 29850 29850 / 37000 0.81 dividend per share No preference dividends in arrears. Fourth Year 84220 Preferred 15400 Total dividends 15400 / 11000 1.4 dividend per share Common 84220 - 15400 = 68820 Total dividends 68820 / 37000 1.86 dividend per share