# Dividends per share Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 40,000 shares of cumulative preferred 2% stock, $75 par, and 100,000 shares of$50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $36,000; second year,$90,000; third year, $115,000; fourth year,$140,000. Compute the dividends per share on each class of stock for each of the four years.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 1E
Textbook Problem
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## Dividends per shareImaging Inc., a developer of radiology equipment, has stock outstanding as follows: 40,000 shares of cumulative preferred 2% stock, $75 par, and 100,000 shares of$50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $36,000; second year,$90,000; third year, $115,000; fourth year,$140,000. Compute the dividends per share on each class of stock for each of the four years.

To determine

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

### Explanation of Solution

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.

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

 Particulars Year 1 Year 2 Year 3 Year 4 Total dividends declared (a) $36,000$90,000 $115,000$140,000 Preferred dividend (For current year) (b) $36,000$60,000 $60,000$60,000 Preferred dividend in arrears (c) $0$24,000 $0$0 Total preferred dividends (d) = (b)+(c) $36,000$84,000 $60,000$60,000 Common dividend (e) = (a)−(d) $0$6,000 $55,000$80,000 Dividend per share: Preferred stock   (Total preferred dividend(d)40,000 preference shares) $0.90$2.10 $1.50$1.50 Common stock  (Common dividend(e)100,000 common shares) $0$0

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