A company is formed with the issue of 100000 6% non-cumulative preference shares of $1 each and 300000 ordinary shares of $1 each issued at a premium of $0.20.
It earned profits of $3000, $16000 and $31000 in the first three years of trading. The directors wish to pay an ordinary dividend of 5% each year when possible.
What value of ordinary dividends does the company actually pay in years 2 and 3?
year 2 year 3
$ $
A 7000 15000
B 7000 18000
C 10000 15000
D 10000 18000

Q: What topic does this question test?

This question tests Company Accounts in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2016 examination, Paper 1 Variant 2 (9706_w16_qp_12.pdf).

Question

A company is formed with the issue of 100000 6% non-cumulative preference shares of $1 each and 300000 ordinary shares of $1 each issued at a premium of $0.20.
It earned profits of $3000, $16000 and $31000 in the first three years of trading. The directors wish to pay an ordinary dividend of 5% each year when possible.
What value of ordinary dividends does the company actually pay in years 2 and 3?
year 2 year 3
$ $
A 7000 15000
B 7000 18000
C 10000 15000
D 10000 18000

Oracle Prep · Accepted Answer

The correct answer is C: 10000 15000.

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