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25 April, 17:16

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 60,000 shares of cumulative preferred 2% stock, $60 par and 300,000 shares of $20 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $51,000; second year, $105,000; third year, $81,000; fourth year, $120,000. Determine the dividends per share on each class of stock for each of the four years. Round your answers to two decimal places. If no dividends are paid in a given year, enter "0".

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  1. 25 April, 20:21
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    Year 1: Dividend paid to cumulative preferred stock = $51,000; Dividend paid to common stock = 0.

    Year 2: Dividend paid to cumulative preferred stock = $93,000; Dividend paid to common stock = $12,000.

    Year 3: Dividend paid to cumulative preferred stock = $72,000; Dividend paid common stock = $9,000.

    Year 4: Dividend paid to cumulative preferred stock = $72,000; Dividend paid common stock = $48,000.

    Explanation:

    Year 1

    Dividend distributed = $51,000

    Cumulative preferred stock dividend payable = 60,000 * $60 * 2% = $72,000

    Dividend paid to cumulative preferred stock = $51,000

    Carried forward cumulative preferred stock dividend = $72,000 - $51,000 = $21,000

    Dividend paid to common stock = 0

    Year 2

    Dividend distributed = $105,000

    Year 2 cumulative preferred stock dividend due = 60,000 * $60 * 2% = $72,000

    Cumulative preferred stock dividend payable = Due in year 2 + Carried down from year 1 = $72,000 + $21,000 = $93,000

    Dividend paid to cumulative preferred stock = $93,000

    Dividend paid to common stock = $105,000 - $93,000 = $12,000

    Year 3

    Dividend distributed = $81,000

    Cumulative preferred stock dividend payable = 60,000 * $60 * 2% = $72,000

    Dividend paid to cumulative preferred stock = $72,000

    Dividend paid common stock = $81,000 - $72,000 = $9,000

    Year 4

    Dividend distributed = $120,000

    Cumulative preferred stock dividend payable = 60,000 * $60 * 2% = $72,000

    Dividend paid to cumulative preferred stock = $72,000

    Dividend paid common stock = $120,000 - $72,000 = $48,000
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