The paid up shares capital of S Ltd. consists of 2000, 8% pref. shares of ? 100 each and 10,000 equity shares of 7 50 each. According to articles of association the pref. shares are entitled to participate in the surplus profits to the extent of 1/10 of profits remaining after payment of 8% dividend on pref. shares and 12% dividend on Equity shares. The balance of profits is available to equity shareholders. The average annual profits of the company are 7 186000 after providing for depreciation and taxation. It is considered necessary to transfer 7 20,000 per annum to reserve fund. The normal return expected on Pref. shares is 10% and on equity shares is 12%. Find out the value of each Pref. and equity shares in the company.

The paid up shares capital of S Ltd. consists of 2000, 8% pref. shares of ? 100 each and 10,000 equity shares of 7 50 each. According to articles of association the pref. shares are entitled to participate in the surplus profits to the extent of 1/10 of profits remaining after payment of 8% dividend on pref. shares and 12% dividend on Equity shares. The balance of profits is available to equity shareholders. The average annual profits of the company are 7 186000 after providing for depreciation and taxation. It is considered necessary to transfer 7 20,000 per annum to reserve fund. The normal return expected on Pref. shares is 10% and on equity shares is 12%. Find out the value of each Pref. and equity shares in the company.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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