TASK 2:

Sandpiper Company has 20,000 shares of 1% cumulative preferred stock of $100 par and
100,000 shares of $50 par common stock. The following amount were distributed as
dividends:

Year 1 $10,000
Year 2 45,000
Year 3 80,000

Determine the dividends per share for preferred and common stock each year.

Solution:

Year 1 Year 2 Year 3

Amount distributed $10,000 $45,000 $80,000
Preferred Dividend(20,000shs) 10,000 30,000 20,000
Common Dividend(100,000shs) $ 0 $ 15,000 $60,000
Preferred Stock $ 0.5 $ 1.5 $ 1.00
Common Stock 0 $ 0.15 $ 0.60

1% (20,000shs*$100par) = $ 20,000 preferred dividends each year

Dividend in arrear (year 1) $10,000
Year 2 20,000
Total Preferred dividends Year 2 $ 30,000

Preferred Common
Year 1:$10,000/20,000shs= $ 0.5 None
Year 2: $30,000/20,000shs= $ 1.5 $15,000/100,000shs= $ 0.15
Year 3: $20,000/20,000shs= $ 1 $ 60,000/100,000shs= $ 0.60