Archer, Inc has 10,000 shares of 5%, $100 par value, noncumulative preference shares and 40,000 ordinary shares with a $1 par value outstanding at December 31, 2014. There were no dividends declared in 2013. The board of directors declares and pays a $140,000 dividend in 2014. What is the amount of dividends received by the ordinary shareholders in 2014?

Question

Quizplus · Accepted Answer

The preference shareholders receive 5% of $100 par value per share, which is $50,000 (10,000 shares x $5). Since the preference shares are noncumulative, they do not receive dividends for 2013. Therefore, the remaining $90,000 ($140,000 total dividend - $50,000 preference dividend) is distributed to the ordinary shareholders.

Archer, Inc Has 10,000 Shares of 5%, $100 Par Value