Pug Corporation has 10,000 shares of $10 par common stock outstanding and 20,000 shares of $100 par, 6% noncumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $150,000 dividend will be paid. What are the dividends per share for preferred and common, respectively?
B) $6; $3
6 3
To find the dividends per share for preferred and common stock, we need to follow several steps:
1. Calculate the total preferred stock dividend:
Preferred stock dividend = Number of preferred shares * Par value * Dividend rate
Preferred stock dividend = 20,000 shares * $100 par value * 6% dividend rate
Preferred stock dividend = $20,000,000 * 0.06
Preferred stock dividend = $1,200,000
2. Determine the total common stock dividend:
Total common stock dividend = Total dividend - Preferred stock dividend
Total common stock dividend = $150,000 - $1,200,000
Since the total common stock dividend is negative, it means that there will be no dividend paid to common stockholders.
3. Calculate the dividends per share for preferred and common stock:
Dividends per share for preferred stock = Preferred stock dividend / Number of preferred shares
Dividends per share for preferred stock = $1,200,000 / 20,000 shares
Dividends per share for preferred stock = $60 per share
Dividends per share for common stock = Total common stock dividend / Number of common shares
However, since there is no dividend for common stock, the dividends per share for common stock is $0 per share.
Therefore, the dividends per share for preferred and common stock are $60 and $0, respectively.