A company had stock outstanding as follows during each of its first three years of operations: 2,500 shares of 10 %, $100 par, preferred stock and 50,000 shares of $10 par common stock. The amounts distributed as dividends are presented below. Determine the total and per share dividends for each class of stock for each year by completing the schedule.
Year 1 has $30,000 dividends; Year 2 has $25,000 dividends, and Year 3 has $60,000 dividends.
Ii have to find the total and per share for each year for Preferred and Common
In the question there are so many numbers that I'm not sure how to even find the how many total or how much per share. Also what the difference between preferred and common. Mainly I'm not sure what to use to find any of these answers. Do I use a specific formula for the total and per share for both preferred and common?
To determine the total and per share dividends for each class of stock for each year, you need to follow these steps:
1. Understand the terms:
- Preferred Stock: This is a type of stock that typically pays a fixed dividend and has certain priority over common stock in terms of receiving dividends and assets in the event of liquidation.
- Common Stock: This is a type of stock that usually does not have a fixed dividend and represents ownership in a company.
2. Calculate the preferred stock dividends:
- Multiply the number of preferred shares (2,500) by the preferred stock dividend rate (10%) to find the preferred dividends for each year.
3. Calculate the common stock dividends:
- Subtract the preferred stock dividends from the total dividends for each year to find the common stock dividends.
4. Calculate the per share dividends:
- Divide the preferred stock dividends by the number of preferred shares to find the per share dividends for preferred stock.
- Divide the common stock dividends by the number of common shares (50,000) to find the per share dividends for common stock.
Here's a step-by-step breakdown for each year:
Year 1:
- Preferred Stock Dividends = 2,500 shares x 10% = 250 shares x $100 par value = $25,000
- Common Stock Dividends = $30,000 - $25,000 (preferred stock dividends) = $5,000
- Per Share Dividends for Preferred Stock = $25,000 / 2,500 shares = $10 per share
- Per Share Dividends for Common Stock = $5,000 / 50,000 shares = $0.10 per share
Year 2:
- Preferred Stock Dividends = 2,500 shares x 10% = 250 shares x $100 par value = $25,000
- Common Stock Dividends = $25,000 - $25,000 (preferred stock dividends) = $0
- Per Share Dividends for Preferred Stock = $25,000 / 2,500 shares = $10 per share
- Per Share Dividends for Common Stock = $0 / 50,000 shares = $0 per share
Year 3:
- Preferred Stock Dividends = 2,500 shares x 10% = 250 shares x $100 par value = $25,000
- Common Stock Dividends = $60,000 - $25,000 (preferred stock dividends) = $35,000
- Per Share Dividends for Preferred Stock = $25,000 / 2,500 shares = $10 per share
- Per Share Dividends for Common Stock = $35,000 / 50,000 shares = $0.70 per share
So, the total and per share dividends for each class of stock for each year are as follows:
Year 1:
- Preferred Stock Dividends: $25,000
- Per Share Dividends for Preferred Stock: $10 per share
- Common Stock Dividends: $5,000
- Per Share Dividends for Common Stock: $0.10 per share
Year 2:
- Preferred Stock Dividends: $25,000
- Per Share Dividends for Preferred Stock: $10 per share
- Common Stock Dividends: $0
- Per Share Dividends for Common Stock: $0 per share
Year 3:
- Preferred Stock Dividends: $25,000
- Per Share Dividends for Preferred Stock: $10 per share
- Common Stock Dividends: $35,000
- Per Share Dividends for Common Stock: $0.70 per share