Waec Model Questions Vol1 2024 Financial Accounting Question 40

A company reports a profit before tax of ₦1,200,000. Tax is charged at 30 % of profit before tax. The company has 5,000 preference shares of ₦100 each carrying a 10 % dividend and 20,000 ordinary shares of ₦50 each. Preference dividends are paid out of profit after tax before any appropriation to ordinary shareholders. The company also declares a bonus issue of 10 % of ordinary shares, to be issued out of retained earnings after appropriation. The company decides to retain 40 % of the profit after tax (after preference dividend) and distribute the remaining as ordinary dividend. Compute: a) profit after tax; b) amount of preference dividend; c) total amount available for ordinary shareholders (after preference dividend); d) ordinary dividend per share (before bonus issue); e) number of ordinary shares after the bonus issue; f) ordinary dividend per share after the bonus issue (assuming the total ordinary dividend amount remains unchanged).