Larry Limited has 4,000,000 ordinary shares of 50k each and 150,000 5% prefrence shares of ₦1 each fully paid.
₦
Net profit for the year
90,000
Interim dividends paid:
Ordinary shares
25,000
Profit and loss appropriation b/f
10,000
Goodwill written off
1,000
The amount of preference shares dividends payable at the end of the year is ____________
A. ₦10,000 B. ₦25,000 C. ₦7,500 D. ₦20,000
Correct Answer: C
Explanation
Preference shares dividends are calculated based on the nominal value of the preference shares and the fixed dividend rate. In this case, Larry Limited has 150,000 preference shares of ₦1 each, and the dividend rate is 5%. Therefore, the preference shares dividends payable at the end of the year is 150,000 * 1 * 5% = ₦7,500.
