Accounting for Dividends (30 points: 6 items x 5 points)

Mac Corporation’s share capital accounts on December 31, 200C showed the following:

12% Preference Share Capital, par P100, authorized 10,000 shares, and issued 4,000 shares P 400,000
Ordinary Share Capital, par P30, authorized 100,000 shares, and issued 20,000 shares P 600,000

On this date, the Board of Directors declared cash dividends of P260,000. No dividends were declared since
200A.

Compute the dividends per share for each class of share capital assuming that the preference share is:

A. Non-cumulative and non-participating

PER SHARE VALUE OF PREFERENCE SHARE = 400,000/4,000 = P100
Dividend per preference share = P100*12% = P12 PER SHARE
Remaining profit for equity share = P260,000 – P48,000 = P212,000
Dividend per equity share = P212,000/20,000 = P10.6 PER SHARE

B. Non-cumulative and fully participating

PER SHARE VALUE OF PREFERENCE SHARE = 400,000/4,000 = P100
Fixed dividend per preference share = P100*12% = P12 PER SHARE
Remaining profit for equity and fully participating preference share = P260,000 – P48,000 = P212,000
Weighted average number of preference and equity shares:
Per share value of preference share = 100
Per share value of equity share = 30
Preference shares weighted average 30 = 4,000*100/30 = 13333.33
Total weighted average shares = 13333.33 + 20,000 = 33333.33
Dividend per weighted share = P212,000/33333.33 = 6.36 PER SHARE
Dividend per equity share = P6.36 PER SHARE
Dividend per preference per share = 6.36*100/30 + 12 = P33.2 PER SHARE

C. Cumulative and non-participating

PER SHARE VALUE OF PREFERENCE SHARE = 400,000/4,000 = P100
Dividend per preference share = P100*12% = P12 PER SHARE
Remaining profit for equity share = P260,000 – P48,000 = P212,000
Dividend per equity share = P212,000/20,000 = P10.6 PER SHARE

D. Cumulative and fully participating

Total weighted average shares = 13333.33 + 20,000 = 33333.33
Dividend per weighted share = P212,000/33333.33 = 6.36 PER SHARE
Dividend per equity share = P6.36 PER SHARE
Dividend per preference per share = 6.36*100/30 + 12 = P33.2 PER SHARE
E. Cumulative and participating only up to 15%
Total weighted average shares = 13333.33 + 20,000 = 33333.33
Participating up to 15% = P212,000*15% = P31,800
Dividend per weighted share up to 15% = P31,800/33333.33 = P.954 PER SHARE
Dividend per equity share remaining 85% = P180,200/20,000 = P9.01 PER SHARE
Dividend per equity share = P0.954 + P9.01 = P9.964
Dividend per preference share = P0.954*100/30 + P12 = P15.18 PER SHARE

F. Cumulative and participating only after common gets 20%.

Total weighted average shares = 13333.33 + 20,000 = 33333.33
Participating up to 20% = P212,000*20% = P42,400
Dividend per weighted share up to 20% = P42,400/20,000 = P2.12 PER SHARE
Dividend per equity share remaining 80% = P169,600/33333.33 = P5.088 PER SHARE
Dividend per equity share = P2.12 + P5.088 = P7.208
Dividend per preference share = P5.088*100/30 + P12 = P28.96 PER SHARE