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- This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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- December 8, 2015 at 10:45 pm #289369
Dear Mr Moffat,
This is a question from Kaplan’s F3 book.
A company has the following share capital:
—————————————-Authorised —- Issued
……………………………………$000…………..$000
25c ordinary shares……………8,000…………4,000
6% 50c preference shares……2,000…………1,000In addition to providing for the year’s preference dividend, an ordinary dividend of 2c per share is to be paid before the year end. What are the total dividends for the year?
This is how I would calculate it:
Ordinary dividend = 2c x 4,000,000 = 80,000
Preference dividend = 0.06 x 1,000,000 = 60,000
Total = 140,000However, this is the solution:
Ordinary dividends = 16,000,000 x 0.02 = 320,000
Preference dividends = 6% x 1,000,000 = 60,000
Total = 380,000I really don’t understand why the solution uses $16,000,000 to get to the ordinary dividends…
Thank you in advance!
December 9, 2015 at 8:32 am #289459The total issued share capital is $4M.
They are 25c shares, and therefore the total number of shares so as to get a total nominal value of $4M is $4M / $0.25 = 16M
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