[ttran016]

The following annual dividends over a six-year period: 2007, $16,000; 2008, $48,000; 2009, $65,000; 2010, $90,000; 2011, $115,000; and 2012, $140,000. During the entire period ending December 31 of each year, the outstanding stock of the company was composed of 25,000 shares of cumulative, 2% preferred stock, $80 par, and 100,000 shares of common stock, $4 par.

What is the preferred and common dividends; and earning per share for each year?

[ttran016]

Well I got the dividend rate, 40,000. 25,000*80*02=40,000. What do I with the rate now?

[ArcSine]

Correct. The preferreds get paid first each year. The "cumulative" part just means that if, in any given year, the total dividend payout isn't enough to completely satisfy what the preferreds are owed, the unpaid balance carries over to the next year.

This'll get you started: In 2007, all of the 16,000 went to the preferreds. That left 'em 24,000 short of what they're due. So the preferreds come into 2008 being owed 40,000 + 24,000 = 64,000.

The commons will get some dividend only in a year in which the total dividend payout for the year completely covers what the preferreds are due that year (including any carryover balances they come into the year with). The commons would then receive all of the excess.

Back to you.