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Internal Insights Inc., a developer of radiology equipment, has stock outstanding as follows: 25,000 shares of cumulative preferred 10/0 stock, $150 par, and 83,000 shares of $25 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $25,250; second year, $59,750; third year, $90,430; fourth year, $143,740.
Compute the dividend per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, leave it blank.
Computation of Dividend per Share on Each Class of Stock for Each of the Four Years:
For First year:
Dividend distributed in first year = $25,250
Dividend due on preferred stock (25,000 shares*$150*1%) = $37,500
Hence, entire $25,250 distributed to preferred stockholder.
Dividend per share on preferred stock = $25,250/25,000 = $1.01
Dividend on common stock = Nil
For Second Year:
Arrear of dividend on preferred share = $37,500 - $25,250 = $12,250
This years dividend due = $37,500
Total dividend due on cumulative preferred shares = $37,500+$12,250 = $49,750
Actual dividend paid during the year=$59,750
Dividend paid to preferred shareholders=$49,750
Dividend paid to common shareholders=$59,750 - $49,750 = $10,000
Dividend per share paid to preferred shareholder=$49,750/25,000 = $1.99
Dividend per share paid to common shareholder=$10,000/83,000=$0.12
For Third Year:
Dividend due for preferred shareholders=$37,500
Dividend distributed =$90,430
Dividend paid to common shareholders=(90,430 - 37,500)=$52,930
Dividend per share paid to preferred shareholder=$37,500/25,000=$1.5
Dividend per share paid to common shareholder=$52,930/83,000=$0.64
For Fourth Year:
Dividend due for preferred shareholders=$37,500
Dividend distributed =$143,740
Dividend paid to common shareholders=(143,740 - 37,500)=$106,240
Dividend per share paid to preferred shareholder=37,500/25,000 = $1.5
Dividend per share paid to common shareholder=$106,240/83,000 = $1.28