Ross pic has operated since the business was founded with the following capital structure:

Year I Year 2 Year 3 Year 4 2 million, 50 pence Ordinary Shares , fully paid 8 per cent Cumulative Preference Shares 10 per cent Non-cumulative Preference Shares Earnings after tax for the first four years of operations are:

£000 50 80 140 520

£000 1000 500 500

£2000 You are required to show dividends on each class of shares, assuming:

(a) The directors ofthe company have agreed to pay no dividend unless ordinary shareholders can be guaranteed a dividend of 10 pence per share, in which case retained earnings will amount to 50 per cent of the earnings available to ord inary shareholders, after first providing for the 10 pence dividend;

(b) All profits are to be paid out as dividends with non-cumulative preference shareholders ranking first in order of priority for dividends .