A company has issued 10 000 non- cumulative preference shares for $50 each, paying 10% annual dividends. It has also issued 20 000 ordinary shares. At the end of the current year, the company declares a dividend of $120 000. What is the dividend per share for preference shares and for ordinary shares?
A)The dividend per share is $50.00 to preference shares and $1.00 to ordinary shares.
B)The dividend per share is $1.00 to preference shares and $6.75 to ordinary shares.
C)The dividend per share is $5.00 to preference shares and $3.50 to ordinary shares.
D)The dividend per share is $6.67 to preference shares and $1.50 to ordinary shares.

Question

Quizplus · Accepted Answer

Preference shares receive a fixed dividend of 10% of $50, which is $5.00 per share. Total preference dividends are $50,000 (10,000 shares x $5). The remaining $70,000 ($120,000 - $50,000) is distributed among 20,000 ordinary shares, resulting in $3.50 per ordinary share.

A Company Has Issued 10 000 Non- Cumulative Preference Shares