Reference no: EM132539620

Tunn Company revealed the following shareholder's equity on December 31, 2019:

1. 12% noparticipating, noncumuluative preference share capital, par value of 100, 10,000 shares 1,000,000
2. 10% fully participating, cumulative preference share capital, par value of 100, 25,000 shares 2,500,000
3. Ordinary share capital, par value of 100, 75,000 shares 7,500,000

• The entity has not paid a cash or a stock dividend before. There was no change in the capital balances since the entity started operations five years ago.
• The entity reported net loss for 2015, 2016 and 2017 at 1,500,000, 1,000,000 and 500,000 respectively, and net income for 2018 and 2019 at 1,750,000 and 6,250,000 respectively.
• The maximum amount available for dividend on December 31, 2019 is declared and paid.

What amount of dividend should be distributed to

Question 1. Ordinary Shareholders?

Option a. 3,750,000

Option b. 2,910,000

Option c. 500,000

Option d. 750,000

Question 2. 12% Preference shareholders?

Option a. 120,000

Option b. 600,000

Option c. 300,000

Option d. 0

Question 3. 10% preference shareholders?

Option a. 1,250,000

Option b. 1,970,000

Option c. 720,000

Option d. 250,000