Question

Required information [The following information applies to the questions displayed below.] York's outstanding stock consists of 75,000 shares of noncumulative 6.0% preferred stock with a $5 par value and also 240,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends. Year 1 total cash dividends Year 2 total cash dividends Year 3 total cash dividends Year 4 total cash dividends $ 12,100 20,500 220,000 370,000 Determine the amount of dividends paid each year to each of the two classes of stockholders: preferred and common. (Round your "Dividend per Preferred Share" answer to 3 decimal places.) Dividend Rate Par Value per Preferred Share $ 5.00 Dividend per Number of Preferred Preferred Share Shares $ 0.300 75,000 Preferred Dividend Annual Preferred Dividend: 6.0% $ 22,500 Paid to Dividends in Total Cash Dividend Paid $ Year 1 Year 2 Year 3 Year 4 Total: 12,100 20,500 220,000 370,000 622,600 Paid to Preferred $ 12,100 20,500 22,500 22,500 $ 77,600 Common $ 0 0 197,500 347,500 $ 545,000 Arrears at year-end $ 12,100 20,500 220,000 370,000 $

Answer 1

Answer

• When Preferred Stock is Non-Cumulative

	Par Value per Preferred Share	Dividend rate	Dividend per Preferred Share	No. of Preferred Shares	Preferred Dividend
Annual Preferred Dividend:	$                             5	6.00%	$                   0.300	75,000	$            22,500.00
	Total Cash Dividend paid	Paid to Preferred	Paid to Common	Dividends in Arrears at Year end
Year 1	$            12,100.00	$           12,100.00	$                          -	$          10,400.00 or $ 0
Year 2	$            20,500.00	$           20,500.00	$                          -	$          12,400.00 or $ 0
Year 3	$          220,000.00	$           22,500.00	$        197,500.00	$                          -
Year 4	$          370,000.00	$           22,500.00	$        347,500.00	$                          -
TOTAL	$          622,600.00	$           77,600.00	$        545,000.00	$                          -

• When Preferred Stock is Cumulative

	Par Value per Preferred Share	Dividend rate	Dividend per Preferred Share	No. of Preferred Shares	Preferred Dividend
Annual Preferred Dividend:	$                             5	6.00%	$                   0.300	75,000	$            22,500.00
	Total Cash Dividend paid	Paid to Preferred	Paid to Common	Dividends in Arrears at Year end
Year 1	$            12,100.00	$           12,100.00	$                          -	$          10,400.00
Year 2	$            20,500.00	$           20,500.00	$                          -	$          12,400.00
Year 3	$          220,000.00	$           34,900.00	$        185,100.00	$                          -
Year 4	$          370,000.00	$           22,500.00	$        347,500.00	$                          -
TOTAL	$          622,600.00	$           90,000.00	$        532,600.00	$                          -