1 Practice Problem.docx Dividend Allocation PDF

Preview

Summary

PRACTICE PROBLEM: Dividend per share Gerald Corp. has the following accounts in its stockholders' equity: 10% Preference Share, P100 par, authorized 100,000 shares, 40,000 shares issued and outstanding Ordinary share, P100 par, authorized 200,000 shares, 80, 4,000,000 000 shares issued and outstandi...

Description

PRACTICE PROBLEM: Dividend per share Gerald Corp. has the following accounts in its stockholders' equity: 10% Preference Share, P100 par, authorized 100,000 shares, 40,000 shares issued and outstanding Ordinary share, P100 par, authorized 200,000 shares, 80,000 shares issued and outstanding Retained Earnings

4,000,000 8,000,000 20,000,000

The board failed to declare dividends for the past three years. The current year operations results gave the board the reason to declare cash dividend of P4,000,000. Required: Determine the dividend per share, assuming the preference share is: Case 1: Non-Cumulative; Nonparticipating Preference shares Case 2: Cumulative; Nonparticipating Preference shares Case 3: Non-Cumulative; Participating Preference shares Case 4: Cumulative; Participating Preference shares

Case 1

Case 1: Non-Cumulative; Nonparticipating Preference shares

Total Dividends declared

4,000,000

40,000

PS (10% X 4M)

PS

80,000 OS

Total

4,000,000

8,000,000

12,000,000

400,000

Remainder/Balance to Ordinary ( 4M-400K) 400,000

Dividend per share

Case 2

10.00

Case 2: Cumulative; Nonparticipating Preference shares

400,000

3,600,000

3,600,000

3,600,000

4,000,000

45.00

Total Dividends declared

4,000,000

40,000 PS

80,000 OS

Total

4,000,000

8,000,000

12,000,000

Dividend in arrears PS ( 10% X 4M X 3 yrs)

1,200,000

1,200,000 -

Current Year Dividend (10% X 4M)

400,000

400,000 -

Remainder/ Balance to OS

-

(4M-1.6M) 1,600,000 40.00

2,400,000

2,400,000

2,400,000

4,000,000

30.00

Case 3: Non-Cumulative; Participating Preference shares

Total Dividends declared

4,000,000

40,000 PS

80,000 OS

Total

4,000,000

8,000,000

12,000,000

Current Dividends Current Year Dividend (10% X 4M)

400,000

OS (10% x 8M)

Remainder/ Balance ( 4M- 1.2M)

PS (4/12 X 2.8M) OS (8/12 X 2.8M)

400,000

800,000

800,000

2,800,000

933,333.33

933,333

1,333,333 33.33

1,866,666.67

1,866,667

2,666,667

4,000,000

33.33

Case 4: Cumulative; Participating Preference shares

Total Dividends declared

4,000,000

40,000 PS

80,000 OS

Total

4,000,000

8,000,000

12,000,000

Dividend in arrears PS ( 10% X 4M X 3 yrs)

1,200,000

1,200,000 -

Current Year Dividend (10% X 4M)

400,000

400,000 -

OS (10% x 8M)

Remainder/ Balance (4M-2.4M)

800,000

800,000

1,600,000

PS (4/12 X 1.6M)

533,333.33

OS (8/12 X 1.6M) 2,133,333

53.33

533,333 1,066,666.67

1,066,667

1,866,667

4,000,000

23.33...