Wings Inc., a software development firm, has stock outstanding as follows: 25,000 shares of cumulative 1%, preferred stock of $40 par, and 50,000 shares of $120 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $7,500; second year, $10,500; third year, $25,000; fourth year, $60,000.
Calculate the dividends per share on each class of stock for each of the four years. Round all answers to the nearest whole cent. If no dividends are paid in a given year, ent
To calculate the dividends per share on each class of stock for each of the four years, you will need to follow these steps:
1. Calculate the dividends for the preferred stock:
- First, determine the cumulative dividend rate. In this case, it is 1% of the par value ($40).
- Multiply the cumulative dividend rate by the preferred stock's par value to find the dividend per share.
- Divide the total amount of dividends distributed for the year by the dividend per share to determine the number of preferred shares.
2. Calculate the dividends for the common stock:
- Divide the total amount of dividends distributed for the year by the number of common shares outstanding.
Let's go through the calculations for each year:
Year 1:
- Preferred Stock:
- Cumulative dividend rate: 1% of $40 = $0.40
- Dividend per share: $0.40
- Dividends distributed: $7,500
- Number of preferred shares: $7,500 / $0.40 = 18,750 shares
- Common Stock:
- Dividends distributed: $7,500 / 50,000 shares = $0.15 per share
Year 2:
- Preferred Stock:
- Dividend per share: $0.40
- Dividends distributed: $10,500
- Number of preferred shares: $10,500 / $0.40 = 26,250 shares
- Common Stock:
- Dividends distributed: $10,500 / 50,000 shares = $0.21 per share
Year 3:
- Preferred Stock:
- Dividend per share: $0.40
- Dividends distributed: $25,000
- Number of preferred shares: $25,000 / $0.40 = 62,500 shares
- Common Stock:
- Dividends distributed: $25,000 / 50,000 shares = $0.50 per share
Year 4:
- Preferred Stock:
- Dividend per share: $0.40
- Dividends distributed: $60,000
- Number of preferred shares: $60,000 / $0.40 = 150,000 shares
- Common Stock:
- Dividends distributed: $60,000 / 50,000 shares = $1.20 per share
Therefore, the dividends per share on each class of stock for each of the four years are as follows:
Year 1:
- Preferred Stock: $0.40 per share
- Common Stock: $0.15 per share
Year 2:
- Preferred Stock: $0.40 per share
- Common Stock: $0.21 per share
Year 3:
- Preferred Stock: $0.40 per share
- Common Stock: $0.50 per share
Year 4:
- Preferred Stock: $0.40 per share
- Common Stock: $1.20 per share