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

question 13

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 per cent of share value is payable.Calculate the debt-to-asset ratio immediately before and after the share issue:

• A) Before - 47.4 per cent; after - 47.4 per cent
• B) Before - 47.4 per cent; after - 37 per cent
• C) Before - 52.6 per cent; after - 63 per cent
• D) Before - 52.6 per cent; after - 59 per cent
• E) Before - 47.4 per cent; after - 59 per cent

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