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Financial Accounting

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

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 1PEB
Textbook Problem
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Dividends per share

Zero Calories Company has 16,000 shares of cumulative preferred 1% stock, $40 par, and 80,000 shares of $150 par common stock. The following amounts were distributed as dividends:

Chapter 13, Problem 1PEB, Dividends per share Zero Calories Company has 16,000 shares of cumulative preferred 1% stock, 40

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.

ParticularsYear 1Year 2Year 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)$0.19None$1

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Chapter 13 Solutions

Financial Accounting
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