The Company has the same capital structure (except for retained earnings) for the past five year, see details below: 6% Preference Share Capital, 80,000 shares issued and outstanding, P 50 par P4,000,000 Ordinary Share Capital, 200,000 shares issued and outstanding, P 30 par 6,000,000 Retained Earnings
Problem 4 (Allocation of Cash Dividends to Preference and Ordinary Shareholders)
The Company has the same capital structure (except for
6%
Ordinary Share Capital, 200,000 shares issued and outstanding, P 30 par 6,000,000
Retained Earnings 5,000,000
No dividends were paid prior to 2020 for two years. On December 10, 2020, the Company declared P 1,500,000 as cash dividends to shareholders of record of December 21, 2020, payable on January 5, 2021.
Requirements:
- Prepare all the necessary
journal entries to record the dividend transactions. - Allocate the dividends between ordinary shareholders and preference shareholders if:
Case A. Preference share capital is NON-CUMULATIVE and NON-PARTICIPATING
Case B. Preference share capital is CUMULATIVE and NON-PARTICIPATING
Case C. Preference share capital is NON-CUMULATIVE and FULLY PARTICIPATING
Case D. Preference share capital is NON-CUMULATIVE and PARTICIPATING UP TO ADDITIONAL 5%
- Assuming the dividend declared is P 1,000,000 what will be the allocation of dividends if in case the preference share is CUMULATIVE and FULLY PARTICIPATING
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