How much cash will be repaid on each preference share

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Question - Dumler Limited has total assets of £18,000,000 and total liabilities of £11,500,000 when the company goes into liquidation. The issued share capital of the company is as follows:

EQUITY:

Ordinary share capital (5,000,000 shares of £1 each)

Preference share capital (4,000,000 4% shares of 50p each)

Dumler Limited's assets are eventually sold for £12,500,000 and this cash is used to pay off the liabilities in full.

Required -

1. How much cash will be repaid on each preference share?

2. How much cash will be divided between the ordinary shareholders?

Reference no: EM133071635

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