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WAEC Financial Accounting 2006 Question 11

Question 11

Company Accounts

Ordinary shares of N1 each N500,000
8% preference shares of N1 each N200,000
Interim dividends paid: ordinary shares N40,000; preference shares N12,000
Profit for the year N100,000
If no profit is to be retained, proposed preference shares dividend is

  1. A.N28,000
  2. B.N16,000
  3. C.N12,000
  4. D.N4,000
Show the answer and explanation

Answer: D (N4,000)

Explanation

The full preference dividend is 8% × 200,000 = 16,000; N12,000 has been paid as interim, so N4,000 is proposed.