Question

The authorized capital of CAS Ltd. consists of both cumulative preference shares and equity shares. Each 5% cumulative preference share has a par value Rs 100. Each equity share has a par value Rs 10. During the year the cumulative preference share capital balance was Rs 4,00,000 and the equity share capital balance was Rs 10,00,000
If dividend declarations totalled Rs 16,000 and Rs 30,000 in the previous year and current year respectively, the dividends allocated to the equity share holders in the current year = ?

• A. Rs 6,000
• B. Rs 10,000
• C. Rs 20,000
• D. Rs 24,000

Answer 1

The correct option is A Rs 6,000

Dividend on preference shares is certified by the company but dividend on equity share is not asserted.

$Dividendonpreferenceshareincurrentyear=\frac{dividend}{100}\times preferencesharevalue$

Substitute values in the above equation

$Dividendonpreferenceshareincurrentyear=\frac{5}{100}\times Rs4,00,000=Rs20,000$

$Dividendonequityshareincurrentyear=Rs30,000-Rs20,000=Rs10,000$

The dividend on equity shares for the current year is $Rs10,000$.