Survey of Accounting chapter 8 problem 5

Yukon Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Canada, Montana, Idaho, Oregon, and Washington. Yukon Bike Corp. has declared the following annual dividends over a six-year period ending December 31 of each year: Year 1, $28,000; Year 2, $44,000; Year 3, $48,000; Year 4, $60,000; Year 5, $76,000; and Year 6, $140,000. During the entire period, the outstanding stock of the company was composed of 40,000 shares of 2% preferred stock, $65 par, and 50,000 shares of common stock, $1 par.

Determine the total dividends and the per-share dividends declared on each class of stock for each of the six years. Summarize the data in tabular form, using the following column headings:

Year Total Dividends Preferred Dividends Common Dividends

Year 1 28,000 Total Per Share Total Per Share

Year 2 44,000

Year 3 48,000

Year 4 60,000

Year 5 76,000

Year 6 140,000

2. Calculate the average annual dividend per share for each class of stock for the six-year period.

3. Assuming that the preferred stock was sold at $57.50 and common stock was sold at $5.00 at the beginning of the six-year period, calculate the average annual percentage return on initial shareholders investment, based on the average annual dividend per share (a) for preferred stock and (b) for common stock.