The shareholders\' equity of Crystal Company includes the items shown below. The

Question

The shareholders' equity of Crystal Company includes the items shown below. The board of directors of Crystal declared cash dividends of $2.2 million, $6.0 million, and $46.8 million in each of its first three years of operation: 2016, 2017, and 2018, respectively. Common stock, $1 par, 50,000,000 shares outstanding Preferred stock, 6%, $100 par, 1,000,000 shares outstanding Required: Determine the amount of dividends per share on preferred and common stock for each of the three years. The preferred stock is cumulative and nonparticipating. (Round final answers to 2 decimal places.)

Explain your numbers please

Explanation / Answer

Calculate Shareholders' Equity Preferred stock(1000000*100) 100000000 Common stock (50,000,000*1) 50000000 Dividend has to to be distributed to preferred shareholders (100000000*6%) 6000000 Dividend Balance left after preferred stock is attributable to Common stcok Year Preferred Common Total 2016 2,200,000 2,200,000 2017 6000000 6,000,000 2018 9,800,000 37000000 46,800,000 Explanation 2016 Cash dividend is 2.2 millions , which is not enough to cover the preferred dividend, hence only paid to preferred stock and as the preferred shares are cumulative,balance is paid in subsequent years . 2017 Cash dividend is 6 millions, which is just enough to cover the preferred stock dividend and there is no surplus to cover the previous year shortage, hence only paid the current preferred stock dividend. 2018 Cash dividend is 46.8 millions, which is enough to cover the current year preferred dividend along with the shortage in the year 2016, that is 6 millions and 3.8 millions and balance 37 millions is paid to the common stock

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