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I have a question
The issued capital of Alpha, a limited liability company, is as follows:
Ordinary share of 10c each: $1,000,000
8% Redeemable preference shares of 50c each: $500,000In the year ended 31 October 20X2, the company has paid the preference dividend for the year and an interim dividend of 2c per share on the ordinary shares. A final ordinary dividend of 3c per share was proposed, before reporting date.
What would be recognised for dividend in the equity section of the SOFP at 31 October 20X2?
A. $580,000
B. $90,000
C. $130,000
D. $200,000My problem is that I don’t know why ordinary dividend proposed before reporting date isn’t put into the statement of financial position
Another thing is that i don’t know exactly about redeemable preference share, why we see it as financial cost?Have you watched free free lecture on company accounts (together with the free course notes)?
Proposed dividends at the year end never appear anywhere in the accounts – they do not become certain until they have been voted on. As at the date of the statements they have only been proposed/suggested.
Redeemable preference shares are always treated in the same way as debt borrowing and so the interest on them is shown as a finance cost.
(Only dividends on irredeemable preference shares are shown in the same way as ordinary dividends)
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