Use the following information to answer the given question. \(\begin{array}{c|c} \text{Net profit for the year} & N75.000\\ \text{Ordinary share capital of ...

Assessment: WAEC SSCE - Financial Accounting - 2003 (Objective) Subject: Financial Accounting

Question 1 Report

Use the following information to answer the given question.
\(\begin{array}{c|c} \text{Net profit for the year} & N75.000\\ \text{Ordinary share capital of 50 kobo each} & N65,000\\ \text{10% Preference shares of 50 kobo each} & N100,000\end{array}\)
The amount available as dividend to ordinary shareholders is
Answer Details
To determine the amount available as dividend to ordinary shareholders, we need to calculate the amount of profit available for distribution to shareholders, and then deduct the preference dividend. The amount of profit available for distribution to shareholders is the net profit for the year minus the preference dividend. The preference dividend is 10% of the preference share capital, which is N100,000, so the preference dividend is N10,000. Net profit for the year = N75,000 Preference dividend = N10,000 Amount of profit available for distribution to ordinary shareholders = N75,000 - N10,000 = N65,000 The amount available as dividend to ordinary shareholders is N65,000. This is because the net profit for the year is N75,000, but N10,000 is deducted as preference dividend. The remaining N65,000 is available to be distributed to ordinary shareholders.

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