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 year90,000Interim…
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 |
At the end of the period, what is the balance of the profit and loss appropriation account?
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
Preference share dividend = Number of shares × Face value × Dividend rate. Calculate: 150,000 shares × ₦1 × 5% = ₦7,500. This is the fixed dividend preference shareholders receive.
The ₦25,000 is ordinary share dividend already paid. Other figures don’t relate to preference dividend calculation. Preference dividends are always calculated from face value and stated percentage.
Remember: Preference shares get fixed dividend first, then ordinary shareholders split remaining profit.
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