Allison Company has 40,000 shares of $320 par value, 5% cumulative preferred stock and 140,000 shares of $80 par value common stock. Allison declares and pays cash dividends amounting to $900,000. If no arrearage on the preferred stock exists, how much in dividends per share (use two decimal places) is paid to the common stockholders

$1.86

Explanation:

Preference shares get first preference when dividends are being paid. So, out of the dividend declared, we first payoff Preference dividends then the remainder goes to Common Stock holders.

Cash Dividend = $900,000

Preference Dividends

Preference Stockholders receive a fixed dividend calculated as :

Dividend = 40,000 shares x $320 x 5 % = $640,000

Dividend per share = $640,000 / 40,000 = $16.00

Common Stockholders Dividends

Remainder = $900,000 - $640,000 = $260,000

Dividend per share = $260,000 / 140,000 = $1.86

Conclusion :

Dividends per share paid to the common stockholders is $1.86

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough