Accounting Problem need to know have to work the problem.?

Question:

Fiji Inc., a developer of radiology equipment, has stock outstanding as follows: 25,000 shares of 1% nonparticipating, cumulative preferred stock of $100 par and 250,000 shares of $50 par common. During its first five years of operations, the following amount were distributed as dividends: first year none; second year, $40,000; third year $80,000; fourth year $120,000; fifth year $140,000. Calculate the dividends per share on each class of stock for each of the five years.

Answer:
Preferred stock is paid a dividend prior to any distribution to common stockholders. Preferred stock is frequently cumulative; if the annual dividend requirement cannot be satisfied, it will become a dividend in arrears, and all dividends in arrears must be paid before any dividends can be paid to common shareholders (in contrast to "noncumulative" where a missed dividend is not required to be made up in the future).

Cumulative preferred stock dividends per share:
Y1 : $0 (dividends in arrears $1 each)
Y2 : $1.60 (dividends in arrears $0.40 each. Since they're cumulative, you must make good last yr's missed dividends of $1 and you're short $0.40 for this yr, since you can afford to pay only $40,000)
Y3 : $1.40 ($1 for current yr and making good shortfall of $0.40 for Y2)
Y4 : $1
Y5 : $1

Common stock dividends per share:
Y1 : $0
Y2 : $0 (all $40k were for preferred stock, hence none for common stockholders)
Y3 : $0.18 ($80k less $35k = $45,000 divided by 250,000 common shares. The $35k were paid to preferred stockholders i.e. $1.40 x 25,000, see above)
Y4 : $0.38 ($120,000 less paid to preferred stockholders $25,000 divided by 250,000 common shares)
Y5 : $0.46 ($140,000 less paid to preferred stockholders $25,000 divided by 250,000 common shares)

go to an accountant

Preferred dividends, if paid, will be 1% of par or (1%*$100) $1.

Year1 = $0 (no dividends were paid to ANY stockholder)
Year2 = $1
Year3 = $1
Year4 = $1
Year5 = $1

Thus TOTAL preferred dividends are:

Year1 = $0 (no dividends were paid to ANY stockholder)
Year2 = $25,000
Year3 = $25,000
Year4 = $25,000
Year5 = $25,000

Subtract the above numbers you get TOTAL common dividends:

Year1 = $0 (no dividends were paid to ANY stockholder)
Year2 = $15,000
Year3 = $55,000
Year4 = $95,000
Year5 = $115,000

To get dividends per common share, divide by 250,000:

Year1 = $0 (no dividends were paid to ANY stockholder)
Year2 = $0.06
Year3 = $0.22
Year4 = $0.38
Year5 = $0.46

Accounting Problem need to know have to work the problem.?

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