Fairmount Inc., a developer of radiology equipment, has stock outstanding as fol
ID: 2527974 • Letter: F
Question
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 14,000 shares of cumulative preferred 4% stock, $160 par, and 47,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $60,060; second year, $83,300; third year, $151,290; fourth year, $161,510.
Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".
1st Year 2nd Year 3rd Year 4th Year
Preferred stock (dividend per share) $ $ $ $
Common stock (dividend per share) $ $ $ $
Explanation / Answer
1st Year
2nd Year
3rd Year
4th Year
Preferred stock (dividend per share)
$4.29
$5.95
$8.96
$6.40
Common stock (dividend per share)
0
0
$0.55
$1.53
Workings
Preferred Dividend Payable each year = 14,000 x $160 x 4% = $89,600
1st year
Paid = $60,060
Preferred
$60060 / 14000 = $4.29 ($89600 – 60060 = $29540 dividends in arrears. )
Common:
0 Dividends paid
2nd year
Paid = $83300
Preferred:
$83300 / 14000 = $5.95 per share. ($89600 + 29540 - 83300 = $35840 dividends in arrears.)
Common:
0 Dividends paid
3rd year
Paid = $151290
Preferred:
$89600 + $35840 = $125440 Paid
$125440 / 14000 = $8.96 per share
Common:
$151290 - $125440 = $25850 paid
$25850 / 47000 = $0.55 per share
4th year
Paid = $161510
Preferred:
$89600/ 14000 = $6.40 per share
Common:
$161510 – 89600 = $71910
$71910 / 47000 =$1.53 per share
1st Year
2nd Year
3rd Year
4th Year
Preferred stock (dividend per share)
$4.29
$5.95
$8.96
$6.40
Common stock (dividend per share)
0
0
$0.55
$1.53
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