A company has 5,000; 8% Cumulative Preference shares of ₹100 each. The company did not pay the dividend to the Preference shareholders for the years 2020 and 2021. Profit for the year 2022, the company's profit is ₹3,00,000. What will be the profit available for Equity Shareholders?

₹1,80,000

The correct answer is option 2- ₹1,80,000.

Dividend on Cumulative Preference shares for a year = 5,00,000 x 8/100
                                                                                    = 40,000

Cumulative Dividend for 3 years = 40,000 x 3
                                                   = 1,20,000 

Profit left for Equity Shareholders = Total profit - Dividend on preference shares
                                                     = 3,00,000 - 1,20,000
                                                     = 1,80,000

Cumulative Preference Shareholders have the right to get the cumulative profit in the year, when the company has adequate profit, before Equity Shareholders. So, ₹1,80,000 is left for equity shareholders.