BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 13, Problem 13.1BPE
Textbook Problem

Dividends per share

Zero Calories Company has 16,000 shares of cumulative preferred 1% stock, $40 par, and 80,000 shares of 5150 par common stock. The following amounts were distributed as dividends:

Year 1 $21,600
Year 2 4,000
Year 3 100,800

Determine the dividends per share for preferred and common stock for each year.

Expert Solution
To determine

Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation. The dividend payments are not guaranteed and are paid after the payment made to the preferred stockholders.

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.

A preferred stock may be cumulative and non-cumulative. A cumulative preferred stock implies that a preferred stockholder is entitled to receive dividends for the current year plus any unpaid dividends of the previous years, before the dividends paid to the common stockholders.

Dividend per share:

Dividend per share represents the amount of dividend paid to each shareholders of the business.

To determine: The dividends per share for preferred and common stock for each year.

Explanation of Solution

Determine the dividends per share for preferred and common stock for each year.

Particulars Year 1 Year 2 Year 3
Amount distributed $21,600 $4,000 $100,800
Preferred dividend $6,400 $4,000 $8,800
Common dividend $15,200 $0 $92,000
Dividend per share:
    Preferred stock (Preferred dividend16,000 preference shares) $0.40 $0.25 $0.55
    Common stock (Common dividend80,000 common shares) $0.19 None $1.15

Table (1)

Working note:

Calculate the amount to be paid as preferred dividend each year

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Chapter 13 Solutions

Accounting
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