Question

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provided the following data at year-end: 10% Preference share capital, 30,000 shares, P90 par value 2,700,000...

provided the following data at year-end:

10% Preference share capital, 30,000 shares, P90 par value 2,700,000
12% Preference share capital, 20,000 shares, P250 par value 5,000,000
Ordinary share capital, 80,000 shares, P60 par value 4,800,000
Retained earnings 1,540,000
Share premium 2,800,000

The 10% preference share is cumulative and participating. The 12% preference share is noncumulative and participating. Dividends are in arrears for 3 years.
What is the book value of the following shares:
1. Ordinary Shares
2. 10% Preference Shares
3. 12% Preference Shares
4. How much is the dividend distributed to ordinary shares?
5. How much is the dividend distributed to 10% preference shares?
6. How much is the dividend distributed to 12% preference shares?
7. What is the total balance of ordinary shares?
8. What is the total balance of the 10% preference shares?
9. What is the total balance of the 12% preference shares?
10. How much is the balance for participation?

Expert Solution

Given information,

10% Preference share capital, 30,000 shares,P90 par value 2,700,000

12% Preference share capital, 20,000 shares, P250 par value 5,000,000

Ordinary share capital, 80,000 shares, P60 par value 4,800,000

Retained earnings 1,540,000 Share premium 2,800,000

The 10% preference share is cumulative and participating.

The 12% preference share is noncumulative and participating.

Dividends are in arrears for 3 years.

Answers for flthe questions =

1. Book value of ordinary shares :-

= 80000 × 60 = 4800000

Book value of ordinary shares = 4800000

2. Book value of 10% preference shares

= 30000 × 90 = 2700000

Book value of 10% preference shares = 2700000

3. Book value of 12% preference shares :-

= 20000 × 250 = 5000000

Book value of 12% preference shares = 5000000

4. Dividend distributed to ordinary shares:- payment of dividend distributed to ordinary shares to be declared by the organisation in annual general meeting. in the question there is no information regarding the declaration of dividend to the ordinary shares, hence we cannot provide accurate answer to this question.

5. Dividend distributed to 10% preference shares

= 2700000 × 10% × 3 years = 810000

Dividend distributed to 10% preference shares = 810000

6. Dividend distributed to 12% preference shares = 5000000 × 12% × 3 years = 1800000

Dividend distributed to 12% preference shares = 1800000

7. Total balance of ordinary shares = 4800000

8. Total balance of 10% preference shares =

= 2700000 +810000 = 3510000

Total balance of 10% preference shares = 3510000

9. Total balance of 12% preference shares =

= 5000000 + 0 = 5000000

Total balance of 12% preference shares = 5000000 (these rates are non cumulative shares so the arrears in dividends does not accumulate)

10. Balance of participation = balance of 10% preference shares (capital but not arrears in dividends) + balance of 12% preference shares (capital but not arrears in dividends)

= 2700000 + 5000000 = 7700000

Balance of participation = 7700000

These are the information required to solve the above given question.

If there is any clarifications required regarding the above provided answer, please mention them in comment box.

I hope, all the above provided information and calculations are useful and helpful to you.

Thank you.

ekkarill92 answered 1 year ago

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