Green Corporation has the following stock outstanding:4% cumulative preferred stock, $20 stated value$ 400,000Common stock, $12 par 2,400,000No dividends were paid in Year 1 or Year 2. During Year 3, Green paid $100,000 in dividends. Required:a) Compute the total amounts of dividends that were paid in Year 3 to: 1) Preferred stockholders 2) Common stockholdersb) Compute the amounts of dividends per share for: 1) Preferred stock 2) Common stock

Question

What will be an ideal response?

Answer 1

a) (1) $48,000
a) (2) $52,000
b) (1) $2.40 per share
b) (2) $0.26 per share

a) (1) 
Amount of preferred dividend = Par value of $400,000 × 4% = $16,000
Dividend paid to preferred shareholders = Dividends in arrears of $32,000 (or $16,000 per year × 2 years) + Current year's dividends of $16,000 = $48,000
a) (2)
Dividend paid to common shareholders = Total dividend of $100,000 ? Dividends paid to Preferred stockholders of $48,000 = $52,000
b) (1)
Number of shares of preferred stock = Preferred stock account balance of $400,000 ÷ Stated value of $20 per share = 20,000 
Preferred dividend per share = Preferred dividends of $48,000 ÷ 20,000 shares = $2.40 per share
b) (2)
Number of shares of common stock = Common stock account balance of $2,400,000 ÷ Par value of $12 per share = 200,000 
Common dividend per share = Common dividend of $52,000 ÷ 200,000 shares = $0.26 per share