Question: How do you calculate dividends declared for common stock?
I have been trying to figure the LAST QUESTION out for a while now. I must have missed an instruction somewhere because I really can't figure this out.
The year-end balance sheet of Smithfield Products includes the following stockholders' equity section
(with certain details omitted):
Stockholders' equity:
71/2% cumulative preferred stock, $100 par value, 100,000 shares authorized $ 2,900,000
common stock, $2 par value, 900,000 shares authorized 900,000
Additional paid-in capital: Common stock 8,800,000
Retained earnings 2,595,000
Total stockholders' equity $ 15,195,000
From this information, compute answers to the following questions:
a.
How many shares of preferred stock have been issued?
Number of shares of preferred stock 29000
b.
What is the total amount of the annual dividends paid to preferred stockholders?
Annual preferred stock dividend $ 217500
c.
How many shares of common stock are outstanding?
Number of shares of common stock 450000
d.
What was the average issuance price per share of common stock?
Average issuance price $ 21.56
e.
What is the amount of legal capital?
Legal capital $ 3800000
f.
What is the total amount of paid-in capital?
Paid in capital $ 12600000
g.
What is the book value per share of common stock? (There are no dividends in arrears.)
Book value per share $ 27.32
h.
*****Assume that retained earnings at the beginning of the year amounted to $717,500 and that net income for the year was $3,970,000. What was the dividend declared during the year on each share of common stock? (Hint: Net income increases retained earnings, whereas dividends decrease retained earnings.) (Round your intermediate and final answers)
***Dividend per share of common stock = ??
Answer:
Assuming that all your previous calculations are correct (I did not double check it), and assuming that ALL earnings are paid out in dividends (since it is not otherwise specified), then the answer for the last question is:
Total earnings available for distribution: $717,500 + 3,970,000 = $4,687,500
Dividends on preferred stock: $217,500
Available for common stock: $4,687,500 - 217,500 = $4,470,000
Dividend per common share: $4,470,000/450,000 = $9.93/share