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QUESTION 5 Patch Garden plans to distribute $160 000 in dividends. It has 20,000 7 per...

QUESTION 5

Patch Garden plans to distribute $160 000 in dividends. It has 20,000 7 per cent preferred share (cumulative) originally issued at $10 and 60 000 ordinary shares.   How much will be distributed per share on preferred and ordinary shares?                               

  1. Preferred shares $1.68; Ordinary shares $1.68
  2. Preferred shares $0.70; Ordinary shares $2.43                   
  3. Preferred shares $3.35; Ordinary shares $1.12                   
  4. Preferred shares $0.70; Ordinary shares $2.26

QUESTION 6

Wolfgang issue shares via installment. On 1st June they issue a prospectus to potential investors advertising that they will sell 1,000,000 shares at $1 each. Payable $0.60 on application, $0.30 on allotment, and $0.10 on call. By 15th September, the applications are all received, and 1,500,000 share applications were received. On 30th September, Wolfgang decide to apply excess applications to allotment.

What journal entry should be entered on 15th September?         

  1. Dr Cash Trust $500,000

Cr Application $500,000                               

  1. Dr Cash Trust $1,000,000

Cr Application $1,000,000                             

  1. Dr Cash Trust $900,000

Cr Application $900,000

Dr Application $250,000

Cr Cash Trust $250,000                 

  1. Dr Cash Trust $900,000

               Cr Application $900,000

Homework Answers

Answer #1

question 5:

b.preferred shares $0.70 ordinary shares $2.43.

dividend per preferred share = 7%*$10 per value =>$0.70.

dividend on all preferred shares = $0.70*20,000 shares

=>$14,000.

so, remaining dividend to common share holders => 160,000 -14,000 =>$146,000.

dividend per share to common stock holders =$146,000/60,000

=>$2.43.

question 6:

d.cash trust $900,000.

..........To Application $900,000..

amount received towards application ($0.60*1,500,000) =>900,000.

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