Manner, Inc. has 10,000 shares of 5%, ₤100 par value, noncumulative preference shares and 20,000 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 ₤90,000 dividend in 2014. What is the amount of dividends received by the ordinary share holders in 2014?
A) ₤0
B) ₤50,000
C) ₤90,000
D) ₤40,000

Question

Quizplus · Accepted Answer

The preference shares are noncumulative, so they only receive dividends for the current year. The preference dividend is 5% of ₤100 par value, which is ₤5 per share. With 10,000 preference shares, the total preference dividend is ₤50,000. The remaining ₤40,000 of the ₤90,000 total dividend goes to the ordinary shareholders.