Calculation of Dividend and Reserves for a Company with Preference and Equity Shares

Introduction: The given problem requires the calculation of the dividend and reserves for a company with preference and equity shares based on its annual profits and tax rate.

Given Information:
- 1,000, 14% Preference Shares of Rs. 100 each
- 20,000 Equity Shares of Rs. 10 each
- Annual profit Rs. 1,90,000, Rs. 2,10,000, Rs. 2,05,000 and Rs. 2,15,000 respectively in 2010-11, 2011-12, 2012-13 and 2013-14
- Tax Rate 25%
- General Reserve Transfer 20% of Profits
- Normal Rate 20%

Calculation of Dividend:
1. Calculate the total profits for each year by adding the annual profits from 2010-11 to 2013-14.
- Total profits = Rs. (1,90,000 + 2,10,000 + 2,05,000 + 2,15,000) = Rs. 8,20,000
2. Calculate the amount of profits available for distribution to shareholders by subtracting the general reserve transfer from the total profits.
- Profits available for distribution = Rs. (8,20,000 - 20% of 8,20,000) = Rs. 6,56,000
3. Calculate the dividend for preference shareholders by multiplying the number of preference shares, the par value of each share, and the preference dividend rate.
- Preference dividend = 1,000 x Rs. 100 x 14% = Rs. 14,000
4. Calculate the dividend for equity shareholders by subtracting the preference dividend from the profits available for distribution and dividing the result by the number of equity shares.
- Equity dividend = (Rs. 6,56,000 - Rs. 14,000) / 20,000 = Rs. 32.10 per share

Calculation of Reserves:
1. Calculate the amount of profits transferred to the general reserve by multiplying the profits available for distribution by the general reserve transfer rate.
- General reserve transfer = 20% of Rs. 6,56,000 = Rs. 1,31,200
2. Calculate the amount of profits remaining after the general reserve transfer by subtracting the general reserve transfer from the profits available for distribution.
- Remaining profits = Rs. (6,56,000 - 1,31,200) = Rs. 5,24,800
3. Calculate the amount of profits transferred to the normal reserve by multiplying the remaining profits by the normal reserve transfer rate.
- Normal reserve transfer = 20% of Rs. 5,24,800 = Rs. 1,04,960

Conclusion: The company with preference and equity shares can pay a dividend of Rs. 14 per preference share and Rs. 32.10 per equity share based on its annual profits and tax rate. The company can also transfer Rs. 1,31,200 to the general reserve and Rs. 1,04,960 to the normal reserve.