ABC Ltd is an Australian listed company. Its results for the financial year ended 30 June2018

have exceeded expectations: profit before tax is $6.5 million and income tax expense is $1.5 million.

As at 30 June 2017, there were 10 million ordinary shares on issue. On 11 May 2018, 3 million additional ordinary shares were issued at a price of $2.50 (paid to -date $2.00). The partly

paid shares carry rights to dividends in proportion to the amount paid relative to the total

issue price.

In addition, ABC Ltd has 1 million $1.00 preference convertible shares, which provide

dividends at a rate of 10% per year. The dividend rights are cumulative. The preference share

dividends were not treated as part of interest expense. The owners of the preference shares

have the right to convert into ordinary shares at the rate of two preference shares for one

ordinary share at a future date.

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