1.
outstanding stock consists of 80.000 shares of noncumulative 7.5% preferred stock with a $5 par
value and also 200,000 shares of common stock with a $1 par value. During its first four years of
operation, the corporation declared and paid the following total cash dividends: 2013 $ 20.000
2014 28,000 2015 200,000 2016 350.000 Determine the amount of dividends paid each year to
each of the two classes of stockholders: preferred and common. Also compute the total dividends
paid to each class for the four years combined.
Solution
Dividends needed to be paid to the preference shareholders = 80000*5*7.5%
=$30000
2013:
Dividends paid to the preference shareholders = $20000
Dividends paid to the common shareholders = $0
2014:
Dividends paid to the preference shareholders = $28000
Dividends paid to the common shareholders = $0
2015:
Dividends paid to the preference shareholders = current year dividends + arrears of last year
=$(30000+2000+10000)
= $42000
Dividends paid to the common shareholders = $(200000-42000)
=$158000

2.
2016:
Dividends paid to the preference shareholders = $30000
Dividends paid to the common shareholders = $(350000-30000)
=$320000