Allocation of Dividends - more than one class of preference shares

The shareholder’s equity in the statement of financial position on December 31, 2014, of Quijones Corporation showed the following:

Class “A” Preference share capital, 10% P50 par, 40,000 sharesP2,000,000

Class “B” Preference share capital, 14% P50 par, 20,000 sharesP1,000,000

Ordinary shares capital, P100 par, 30,000 shares 3,000,000

Share premium 500,000

Retained earnings 2,500,000

Total shareholder’s equity P9,000,000

No dividends are in arrears up to December 31, 2012. The company declared a P1,100,000 dividend at the end of 2014 at the appropriate rate for preference shares and the remainder to ordinary. Determine the allocation of the dividend to 

(1)preference and (2) ordinary assuming both classes of preference shares are cumulative and participating.

Answer rating: 100% (QA)

We are given that no dividend is outstanding until 31st Decemb... View the full answer