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, 2011.There were no dividends declared in 2010.The board of directors declares and pays a $120,000 dividend in 2011.What is the amount of dividends received by the ordinary shareholders in 2011?

Question

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The preference shareholders receive $50,000 (5% of $100 par value * 10,000 shares) as dividends for 2011. Since the preference shares are noncumulative, they do not receive dividends for 2010. The remaining $70,000 ($120,000 total dividend - $50,000 preference dividend) is distributed to the ordinary shareholders.

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