York\'s outstanding stock consists of 80,000 shares of cumulative 7.5 percentage

Question

York's outstanding stock consists of 80,000 shares of cumulative 7.5 percentage preferred stock with a dollar 5 par value and also 200,000 shares of common stock with a dollar 1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends: Determine the amount of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also determine the total dividends paid to each class for the four years combined. (Round your "Dividend per Preferred Share" answers to 3 decimal places.)

Explanation / Answer

Solution:

Determination of the amount of dividends paid each year to each of the two classes of shares:

Working Note:

Note: The holders of the cumulative preferred stock are entitled to no more than 30,000 of dividends declared in any year (7.5% × $5 × 80,000 shares) plus any dividends skipped in prior years.

Par value per
Preferred Share Dividend
Rate Dividend per
Preferred share Number of
Preferred shares Preferred
Dividend Annual Preferred Dividend 5 7.50% 0.375                      80,000       30,000

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