Anders, Inc has 10,000 shares of 5%, €100 par value, cumulative preference shares and 20,000 ordinary shares with a $1 par value outstanding at December 31, 2017. There were no dividends declared in 2015. The board of directors declares and pays a €90,000 dividend in 2016 and in 2017. What is the amount of dividends received by the ordinary shareholders in 2017?
A)€30,000
B)€50,000
C)€90,000
D)€0

Question

Quizplus · Accepted Answer

In 2017, the preference shareholders must first receive their cumulative dividends for 2015, 2016, and 2017. This amounts to 3 years of dividends: 10,000 shares * €100 * 5% * 3 = €150,000. In 2016, they received €50,000 (€90,000 - €40,000 for 2015), leaving €100,000 due. In 2017, they receive €50,000, leaving €50,000 unpaid. Thus, ordinary shareholders receive €90,000 - €50,000 = €40,000 in 2017.

Anders, Inc Has 10,000 Shares of 5%, €100 Par Value