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…

JAMB Accounting 2023 60 views

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

  1. ₦7,500 ✓
  2. ₦25,000
  3. ₦20,000
  4. ₦10,000

Explanation

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.

pastquestions.ng