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Calculating total dividends for the year

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Calculating total dividends for the year

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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    Posts
  • December 8, 2015 at 10:45 pm #289369
    kfaz
    Member
    • Topics: 6
    • Replies: 6
    • ☆

    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…………1,000

    In 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 = 140,000

    However, this is the solution:
    Ordinary dividends = 16,000,000 x 0.02 = 320,000
    Preference dividends = 6% x 1,000,000 = 60,000
    Total = 380,000

    I 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 #289459
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The 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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