Day: May 9, 2020

A company has the following capital structure:

Authorised       Issued

25p 4% Preference shares          £400,000            £100,000
£2 Ordinary shares                      £500,000            £200,000

If the company declares a dividend of 10p per ordinary share, the total dividend payable by the company will be?

Select ONE answer:

1.  £14,000
2. £26,000
3. £54,000
4. £66,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Preference dividend = £100,000 * 4% = £4,000 + Ordinary dividend = 100,000 shares * 10p each = £10,000.  Therefore, (100,000 shares = £200,000 / £2 nominal (par) value) = £14,000
2. Not correct
3. Not correct
4. Not correct

 

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