Orleans Company was incorporated on 1 January 2013. Orleans issued 4 000 ordinary shares and 500 preference shares on that date. The preference shares pay annual dividends of $8 each. Orleans has not paid any dividends yet. In 2016, Orleans had its first profitable year, and on 1 November 2016, Orleans declared a total dividend of $28 000. What is the total amount that will be paid out to ordinary shareholders?

Question

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The preference shareholders are entitled to dividends first. With 500 preference shares at $8 each, $4,000 is paid to them. The remaining $24,000 ($28,000 - $4,000) is paid to ordinary shareholders.

Orleans Company Was Incorporated on 1 January 2013