# Dividends per share Reinhardt Furniture Company has 40,000 shares of cumulative preferred 2% stock, $150par, and 100,000 shares of$5 par common stock. The following amounts were distributedas dividends: Determine the dividends per share for preferred and common stock for each year.

### 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 1PEA
Textbook Problem
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## Dividends per shareReinhardt Furniture Company has 40,000 shares of cumulative preferred 2% stock, $150par, and 100,000 shares of$5 par common stock. The following amounts were distributedas dividends:Determine the dividends per share for preferred and common stock for each year.

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 Amount distributed $70,000$200,000 $320,000 Preferred dividend$70,000 $170,000$120,000 Common dividend $0$30,000 $200,000 Dividend per share: Â Â Â Preferred stock (PreferredÂ dividend40,000Â preferenceÂ shares)$1.75 $4.25$3.00 Â Â Â  Common stock (CommonÂ dividend100,000Â commonÂ shares) None \$0

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