Question

The capital of a company is made up of 50,000 preferences shares with a dividend of 16% and 25,000 ordinary shares. The par value of each of preference and ordinary shares is ₹ 10. The company had a total profit of ₹ 1,60,000. If ₹ 20,000 were kept in reserve and ₹ 10,000 in depreciation, what percent of dividend is paid to the ordinary shareholders.

Answer 1

No. of preferential shares = 50,000

F.V. = ₹ 10

∴ Preferential stock = 50,000 × 10 = 5,00,000

No. of ordinary shares = 25000

∴ Stock of ordinary shares = 25000 × 10 = 2,50,000

∴ Total dividend = Total Profit − Amount kept in reserve − Depreciation amount

= 1,60,000 − 20,000 − 10,000

= ₹ 1,30,000

∴ Dividend income from preferential shares = Preferential shares × `16/100`

= `5,00,000 xx 16/100`

= ₹ 80,000

Ordinary stock = ₹ 2,50,000

Let the dividend rate = x%

Dividend income from ordinary shares = `"Ordinary Stock" xx "x"/100`

50,000 = `2,50,000 xx "x"/100`

x = `(50,000)/2500`

x = 20%