Tissues and Co has elected to issue preference shares to the value of $220,000.Prior to the share issue the company has assets of $780,000,liabilities of $370,000 and equity recorded at $410,000.The terms of the share issue state that these shares are non-redeemable but a guaranteed cumulative dividend of 8 per cent of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue:
A) Before - 47.4 per cent; after - 47.4 per cent
B) Before - 47.4 per cent; after - 37 per cent
C) Before - 52.6 per cent; after - 63 per cent
D) Before - 52.6 per cent; after - 59 per cent
E) Before - 47.4 per cent; after - 59 per cent

Question

Quizplus · Accepted Answer

The Answer of Tissues and Co has elected to issue preference shares to the value of $220,000.Prior to the share issue the company has assets of $780,000,liabilities of $370,000 and equity recorded at $410,000.The terms of the share issue state that these shares are non-redeemable but a guaranteed cumulative dividend of 8 per cent of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue:
A) Before - 47.4 per cent; after - 47.4 per cent
B) Before - 47.4 per cent; after - 37 per cent
C) Before - 52.6 per cent; after - 63 per cent
D) Before - 52.6 per cent; after - 59 per cent
E) Before - 47.4 per cent; after - 59 per cent

Tissues and Co Has Elected to Issue Preference Shares to the Value