A Company Has 10 000 Non- Cumulative Preference Shares Outstanding

Multiple Choice

A company has 10 000 non- cumulative preference shares outstanding and 20 000 ordinary shares outstanding. The preference shares pay an annual dividend of $5 per share. At the end of the current year, the company declares a dividend of $120 000. How is the dividend allocated between preference and ordinary shareholders?

A) The dividend is allocated $12 000 to preference shareholders and $108 000 to ordinary shareholders.
B) The dividend is allocated $60 000 to preference shareholders and $60 000 to ordinary shareholders.
C) The dividend is allocated $50 000 to preference shareholders and $70 000 to ordinary shareholders.
D) The dividend is allocated $5 000 to preference shareholders and $115 000 to ordinary shareholders.