Topper Corporation has 60,000 $1 par value ordinary share and 16,000 cumulative 7%, $100 par preference share outstanding. Topper has not paid a dividend for the prior year. If Topper declares a $1.95 per share dividend this year, what will be the total amount they must pay their shareholders?

Question

Quizplus · Accepted Answer

Total amount to be paid to ordinary shareholders = 60,000 x $1.95= $117,000
Total amount to be paid to preference shareholders = 16,000 x $7 x 1.07 = $193,600
Since the preference shares are cumulative, the unpaid dividend for the prior year needs to be paid first before any dividend payment can be made to ordinary shareholders.
Prior year dividend to preference shareholders = 16,000 x $7 x 0.07 = $7,840
Total amount to be paid to all shareholders = $117,000 + $193,600 + $7,840 = $318,440
Therefore, the answer is C, $327,000 (rounded off to the nearest thousand).

Topper Corporation Has 60,000 $1 Par Value Ordinary Share and 16,000