A portion of the stockholders’ equity section from the balance sheet of Walland

Question

A portion of the stockholders’ equity section from the balance sheet of Walland Corporation appears as follows.

Assume that all the stock was issued on January 1, Year 1 and that no dividends were paid during the first two years of operation. During the third year, Walland Corporation paid total cash dividends of $736,000.

a. Compute the amount of cash dividends paid during the third year to each of the three classes of stock.

b. Compute the dividends paid per share during the third year for each of the three classes of stock. (Round your answers to 2 decimal places.)

c. What was the average issue price of each type of preferred stock?

Stockholders' equity: Preferred stock, 9% cumulative, $50 par, 35,000 shares authorized, issued, and
outstanding $ 1,750,000 Preferred stock, 12% noncumulative, $100 par, 5,300 shares authorized, issued, and
outstanding 530,000 Common stock, $5 par, 460,000 shares authorized, issued, and outstanding 2,300,000 Total paid-in capital $ 4,580,000

Explanation / Answer

a. Compute the amount of cash dividends paid during the third year to each of the three classes of stock.

Preferred cumulative = 35000*50*9%*3 = $472500

Preferred non cumulative = 5300*100*12% = $63600

Common Stock = 736000-472500-63600 = $199900

b. Compute the dividends paid per share during the third year for each of the three classes of stock. (Round your answers to 2 decimal places.)

Preferred cumulative = 472500/35000 = 13.50 per share

Preferred noncumulative = 63600/5300 = 12 per share

Common Stock = 199900/460000 = 0.43 per share

c. What was the average issue price of each type of preferred stock?

Preferred cumulaative = 1750000/35000 = 50 per share

Preferred non cumulative = 530000/5300 = 100 per share

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