PRACTICE QUIZ - BOOK VALUE AND PREFERENCE

DIVIDENDS

Culture Company provided the following on December 31,2019:

Ordinary share capital, P20 par value, 200,000 shares 4,000,000

Preference share capital, 6% P100 par value, cumulative and fully participating, 10,000

shares outstanding 1,000,000

Preference dividends have been in arrears for 2017 and 2018.

On December 31,2019, cash dividend of P900,000 was declared.

1. What amount should be recorded as dividend payable to preference

shareholders?

2. What amount should be recorded as dividend payable to ordinary shareholders?

The directors of Lora Company wish to declare a dividend whereby ordinary shareholders

are to receive a total per share dividend of P4. The shareholders' equity at year-end

appears as follows:

Preference share capital, P100 par, 7% participating up to 10%, noncumulative, 100,000

shares authorized, 25,000 shares issued 2,500,000

Ordinary share capital, P25 par, 250,000 shares authorized and issued 6,250,000

Share premium 1,250,000

Retained earnings 5,000,000

What is the total amount of the dividend that must be declared to meet the per share

goal of the board of directors?