BOOK VALUE AND PREFERENCE DIVIDENDS

Problem 27-6

Lawin Company provided the following information for 2014 and 2015:

Ordinary shareholders equity, December 31, 2014

4,400,000
Ordinary shareholders equity, December 31, 2015
5,000,000
Outstanding Ordinary Share, December 31, 2015
160,000
Preference Dividends paid for 2015
100,000

What is the book value per ordinary share for 2015 ?

a. 27.50
b. 31.25
c. 30.62
d. 26.88

Solution :
Book value per ordinary share (5,000,000/160,000) 31.25

Problem 27-7

On December 31, 2015 and 2016, Can Company had outstanding 40,000 6 % cumulative
preference shares of P100 par value and 200,000 ordinary shares of P10 par value. On December
31, 2015 preference dividends in arrears amounted to P120,00. Cash dividends declared in 2016
totaled P440,000.
What amount should be reported as dividend payable to preference and ordinary shares,
respectively in 2016 ?

a. 440,000 and 0
b. 360,000 and 80,000
c. 320,000 and 120,000
d. 240,000 and 200,000

Solution :

Total dividend declared

440,000
Preference Dividends
In arrears on December 31, 2015 120,000
 2016 dividend (6% x 4,000,000) 240,000
360,000
Balance to ordinary share
80,000

Problem 27-8

Marie company had outstanding 50,000 8% preference share with 100 par value and 125,000
P30par value ordinary shares. Dividends have been paid every year except last year and the
current year. The preference shares are cumulative and non-participating. The entity distributed
P2,500,000 as dividend in the current year .

What is the dividend payable to the ordinary shareholders?

a. 2,100,000
b. 1,700,000
c. 2,500,000
d. 0

Solution :
Total dividends distributed in the current year
2,500,000
Preference dividend (8% x 5,000,000 x 2)
(800,000)
1,700,000