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Patch Garden plans to distribute $150 000 in dividends. It has 20,000 7 per cent preferred...

Patch Garden plans to distribute $150 000 in dividends. It has 20,000 7 per cent preferred share (cumulative) originally issued at $10 and 60 000 ordinary shares. How much will be distributed per share on preferred and ordinary shares?

Preferred shares $1.68; Ordinary shares $1.68

Preferred shares $3.35; Ordinary shares $1.12

Preferred shares $0.70; Ordinary shares $2

Preferred shares $0.70; Ordinary shares $2.26

Solutions

Expert Solution

Preferred shares $0.70; Ordinary shares $2.26

Working:

Step-1:Calculation of dividend payable to shareholders
a. Dividend payable to preferred shareholders = Number of Preferred Shars x Face Value per Share x Dividend Rate
=               20,000 x $          10 x 7%
= $           14,000
b. Total Dividend Declared $       1,50,000
Less:Dividend payable to preferred shareholders $           14,000
Dividend payable to ordinary shareholders $       1,36,000
Step-2:Calculation of Dividend per Share
Total Dividend Number of shares Dividend Per Share
a b a/b
Preferred Shares $     14,000 20000 $       0.70
Ordinary Shares $ 1,36,000 60000 $       2.27

ekkarill92 answered 1 year ago
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