Tissues and Co Has Elected to Issue Preference Shares to the Value

question 62

Multiple Choice

Tissues and Co has elected to issue preference shares to the value of $220 000.Prior to the share issue the company has assets of $780 000,liabilities of $370 000 and equity recorded at $410 000.The terms of the share issue state that these shares are non-redeemable but a guaranteed cumulative dividend of 8% of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue.

• A) before-47.4%; after - 47.4%
• B) before-47.4%; after - 37%
• C) before-52.6%; after - 63%
• D) before-47.4%; after - 59%

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