Chauncey Corporation began business on June 30, 2016. At that time, it issued 20,000 shares of $50 par value, six percent, cumulative preferred stock and 90,000 shares of $10 par value common stock. Through the end of 2018, there had been no change in the number of preferred and common shares outstanding. Required a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places. Year Preferred Stock Common Stock Preferred per share Common per share 2016 Answer Answer Answer Answer 2017 Answer Answer Answer Answer 2018 Answer Answer Answer Answer b. Assume that Chauncey declared dividends of $0 in 2016, $120,000 in 2017, and $186,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.

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Explanation:

a. Assume that Chauncey declared dividends of $69,000 in 2016, $0 in 2017, and $354,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.

a1. Dividend payment of $69,000 in 2016

Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000

Cumulative preferred dividend per share = $50 * 6% = $3.00 per share

Total common stock dividend = $69,000 - $60,000 = $9,000

Common stock dividend per share = $9,000/90,000 = $0.10 per share

a2. Dividend payment of $0 in 2017

Since $0 dividend is declared, it means no dividend is paid to each class of stock in 2017.

However, cumulative preferred dividend to be carried forward to when next the dividend is paid are as follows:

Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000

Cumulative preferred dividend per share = $50 * 6% = $3.00 per share

a3. Dividend payment of $354,000 in 2018

Note that the last year cumulative preferred stock dividend will be paid together with their this year's dividend before the common stock dividends are paid as follows:

Total cumulative preferred dividend for two years (2017 and 2018) = (20,000 * $50 * 6%) × 2 = $120,000

Cumulative preferred dividend per share for 2018 alone = $50 * 6% = $3.00 per share

Cumulative preferred dividend per share for 2017 and 2018 = ($50 * 6%) × 2 = $6.00 per share

Total common stock dividend = $354,000 - $120,000 = $234,000

Common stock dividend per share = $234,000/90,000 = $2.60 per share

b. Assume that Chauncey declared dividends of $0 in 2016, $120,000 in 2017, and $186,000 in 2018. Calculate the total dividends and the dividends per share paid to each class of stock in 2016, 2017, and 2018. Round to two decimal places.

b1. Dividend payment of $0 in 2016

Since $0 dividend is declared, it means no dividend is paid to each class of stock in 2016.

However, cumulative preferred dividend to be carried forward to when next the dividend is paid are as follows:

Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000

Cumulative preferred dividend per share = $50 * 6% = $3.00 per share

b2. Dividend payment of $120 in 2017

Note that the last year cumulative preferred stock dividend will be paid together with their this year's dividend before the common stock dividends are paid as follows:

Total cumulative preferred dividend for two years (2017 and 2018) = (20,000 * $50 * 6%) × 2 = $120,000

Cumulative preferred dividend per share for 2018 alone = $50 * 6% = $3.00 per share

Cumulative preferred dividend per share for 2017 and 2018 = ($50 * 6%) × 2 = $6.00 per share

Since proffered stock has exhausted the dividend paid, no or $0 dividend will be paid to the common stock holder.

b3. Dividend payment of $186,000 in 2018

Total cumulative preferred dividend = 20,000 * $50 * 6% = $60,000

Cumulative preferred dividend per share = $50 * 6% = $3.00 per share

Total common stock dividend = $186,000 - $60,000 = $96,000

Common stock dividend per share = $96,000/90,000 = $1.07 per share.

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