Mendez Corporation has 10,000 shares of its $100 par value, 7 percent cumulative preferred stock outstanding and 50,000 shares of its $1 par value common stock outstanding. In Mendez’s first four years of operation, its board of directors paid the following cash dividends: 2011, none; 2012, $120,000; 2013, $140,000; 2014, $140,000. Determine the dividends per share and total cash dividends paid to the preferred and common stockholders during each of the four years. Solution The dividends per year on preferred stock = 10,000 x $ 100 x 7 % = $ 10,000 x $ 100 x 0.07 = $ 70,000 Dividend distribution: Year Total Dividend Amount Preferred Common 2011 - - - 2012 $120,000 $120,000 $0 2013 $140,000 $90,000 $50,000 2014 $140,000 $70,000 $70,000 Explanation: First dividend is paid to Preferred stock and then excess amount goes to common share holder. For cumulative preferred stock, any deficiency in dividend, not paid carries over to subsequent years and is added to that year\'s dividend. Preferred Dividends unpaid in 2011 = $70,000 Preferred Dividends on 2012 = $70,000 + $ 70,000 = $ 140,000 Preferred Dividends paid in 2012 = $ 120,000 Preferred Dividends shortage on 2012 = $ 20,000 As the Dividend was insufficient for preferred stocks, common stocks holder was not paid any dividend during 2011 & 2012. Preferred Dividends paid in 2013 = $ 70,000 + $ 20,000 = $ 90,000 Common Dividends paid in 2013 = $ 140,000 - $ 90,000 = $ 50,000 Preferred Dividends paid in 2014 = $ 70,000 Common Dividends paid in 2014 = $ 140,000 - $ 70,000 = $ 70,000 Computation of Dividends per share: 2011 2012 2013 2014 Preferred Stock (Dividends per share) $0 $12.00 $9.00 $7.00 Common Stock (Dividends per share) $0 $0 $1.00 $1.40 Explanation: Dividends per share = Dividend paid/No. of shares Year 2012: Dividends per share for Preferred Stock = $120,000/10,000 = $ 12 Dividend per share for Common Stock = $ 0 Year 2013: Dividends per share for Preferred Stock = $90,000/10,000 = $ 9 Dividends per share for Common Stock = $ 50,000/50,000 = $ 1 Year 2014: Dividends per share for Preferred Stock = $70,000 /10,000 = $ 7 Dividends per share for Common Stock = $ 70,000/50,000 = $ 1.40 Year Total Dividend Amount Preferred Common 2011 - - - 2012 $120,000 $120,000 $0 2013 $140,000 $90,000 $50,000 2014 $140,000 $70,000 $70,000.

1. Mendez Corporation has 10,000 shares of its $100 par value, 7 percent cumulative
preferred stock outstanding and 50,000 shares of its $1 par value common stock outstanding.
In Mendez’s first four years of operation, its board of directors paid the following
cash dividends: 2011, none; 2012, $120,000; 2013, $140,000; 2014, $140,000.
Determine the dividends per share and total cash dividends paid to the preferred and
common stockholders during each of the four years.
Solution
The dividends per year on preferred stock = 10,000 x $ 100 x 7 %
= $ 10,000 x $ 100 x 0.07 = $ 70,000
Dividend distribution:
Year
Total Dividend Amount
Preferred
Common
2011
-
-
-
2012
$120,000
$120,000
$0
2013
$140,000
$90,000
$50,000
2014
$140,000
$70,000
$70,000
Explanation:
First dividend is paid to Preferred stock and then excess amount goes to common share holder.
For cumulative preferred stock, any deficiency in dividend, not paid carries over to subsequent

2. years and is added to that year's dividend.
Preferred Dividends unpaid in 2011 = $70,000
Preferred Dividends on 2012 = $70,000 + $ 70,000 = $ 140,000
Preferred Dividends paid in 2012 = $ 120,000
Preferred Dividends shortage on 2012 = $ 20,000
As the Dividend was insufficient for preferred stocks, common stocks holder was not paid any
dividend during 2011 & 2012.
Preferred Dividends paid in 2013 = $ 70,000 + $ 20,000 = $ 90,000
Common Dividends paid in 2013 = $ 140,000 - $ 90,000 = $ 50,000
Preferred Dividends paid in 2014 = $ 70,000
Common Dividends paid in 2014 = $ 140,000 - $ 70,000 = $ 70,000
Computation of Dividends per share:
2011
2012
2013
2014
Preferred Stock (Dividends per share)
$0
$12.00
$9.00
$7.00
Common Stock (Dividends per share)
$0
$0
$1.00
$1.40
Explanation:
Dividends per share = Dividend paid/No. of shares
Year 2012:
Dividends per share for Preferred Stock = $120,000/10,000 = $ 12
Dividend per share for Common Stock = $ 0
Year 2013:
Dividends per share for Preferred Stock = $90,000/10,000 = $ 9
Dividends per share for Common Stock = $ 50,000/50,000 = $ 1
Year 2014:
Dividends per share for Preferred Stock = $70,000 /10,000 = $ 7

3. Dividends per share for Common Stock = $ 70,000/50,000 = $ 1.40
Year
Total Dividend Amount
Preferred
Common
2011
-
-
-
2012
$120,000
$120,000
$0
2013
$140,000
$90,000
$50,000
2014
$140,000
$70,000
$70,000