Anders, Inc has 10,000 shares of 5%, €100 par value, cumulative preference shares and 20,000 ordinary shares with a $1 par value outstanding at December 31, 2014. There were no dividends declared in 2012. The board of directors declares and pays a €90,000 dividend in 2013 and in 2014. What is the amount of dividends received by the ordinary shareholders in 2014?
A) €30,000
B) €50,000
C) €90,000
D) €0

Question

Quizplus · Accepted Answer

In 2014, the preference shareholders must first receive their cumulative dividends for 2012, 2013, and 2014. This amounts to 3 years of dividends: 10,000 shares * €100 * 5% * 3 = €150,000. Since only €90,000 is declared, all goes to preference shareholders, leaving nothing for ordinary shareholders.

Anders, Inc Has 10,000 Shares of 5%, €100 Par Value