Question

Calculator Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: Year 2: Year 3: $10,000 45,000 90,000 Determine the dividends per share for preferred and common stock for the first year O$0.00 and $0.10 O$0.50 and $0.00 O $0.50 and $0.10 O$2.00 and $0.00 Previous Next Check My Work more Check my work uses remaining 10 AM A 400 1126/2019 0 0 e 0

Answer 1

Annual preferred dividend = Number of preferred shares x Par value of 1 preferred share x Dividend rate

= 20,000 x 100 x 2%

= $40,000

Hence, in year 1, dividend Paid of $10,000 belongs to preferred stockholders only. No dividend will be given to common stockholders in year 1 out of $10,000 dividend paid.

Dividend per share for preferred stock = Total dividend paid/Number of preferred share

= 10,000/20,000

= $0.50

Dividend per share for common stock = $0

Second option is the correct option.

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