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Accounting Problems

Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years.

Calculate the average annual dividend per share for each class of stock for the six-year period.

Assuming that the preferred stock was sold at par and common stock was sold at $8 at the beginning of the six-year period, calculate the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

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PROBLEM 12-1A

Lemonds Corp. manufactures mountain bikes and distributes them through retail outlets in Oregon and Washington. Lemonds Corp. has declared the following annual dividends over a six-year period:
2002 $40,000
2003 $18,000
2004 $24,000
2005 $27,000
2006 $65,000
2007 $54,000

During the entire period, the outstanding stock of the company was composed of
25,000 shares of cumulative, non-participating, 6% preferred stock, $20 par, and
40,000 shares of common stock, $1 par.

Instructions

1. Calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2002. Summarize the data in tabular form, using the following column headings:

Dividend paid for preferred stock should be paid out first. If not enough, the remaining amount will be cumulated to pay in the next period.
$20 x 6% = $1.20 per share x 25,000 shares = $30,000

Preferred Stock Common Stock
Year Dividends Total Per Share Total Per ...

Solution Summary

This solution is comprised of a detailed explanation to calculate the total dividends and the per-share dividends declared on each class of stock for each of the six years and the average annual dividend per share for each class of stock for the six-year period, and assuming that the preferred stock was sold at par and common stock was sold at $8 at the beginning of the six-year period, calculate the average annual percentage return on initial shareholders' investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.

$2.19