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7 December, 12:02

Sanchez Company has 48,000 shares of 7% preferred stock of $100 par and 92,000 shares of $50 par common stock issued and outstanding. The following amounts were distributed as dividends: Year 1 $497,000 Year 2 $490,000 Year 3 $524,000 Determine the dividends per share for preferred and common stock for each year. Round the dividends per share to the nearest cent.

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  1. 7 December, 12:55
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    Check Explanation.

    Explanation:

    The following parameters are given for dividends of three years;

    Year 1 = $497,000, Year 2 = $490,000 Year 3 = $524,000.

    The number of shares = 48,000 of 7%, preferred stock = $100 par and 92,000 shares of $50 par common stock issued and outstanding.

    Therefore,

    Year one:

    => Amount Distributed = $497,000.

    => Preferred dividend = 48,000 * 7% * $100 = 336,000.

    => Common dividend = 497,000 - 336,000 = 161,000.

    => Preferred divided per share = 336,000 / 48,000 = $ 7.

    => Common dividend = Common dividend / 92,000 shares = 161,000 / 92,000 shares = $ 1.75.

    Year Two:

    => Amount Distributed = $490,000.

    => Preferred dividend = 48,000 * 7% * $100 = 336,000.

    => Common dividend = 490,000 - 336,000 = 113,000.

    => Preferred divided per share = 336,000 / 48,000 = $ 7.

    => Common dividend = Common dividend / 92,000 shares = 113,000 / 92,000 shares = $1.23.

    Year Three:

    => Amount Distributed = $524,000.

    => Preferred dividend = 48,000 * 7% * $100 = 336,000.

    => Common dividend = $524,000 - 336,000 = 188,000.

    => Preferred divided per share = 336,000 / 48,000 = $7.

    => Common dividend = Common dividend / 92,000 shares = 188,000 / 92,000 shares = $2.04
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