Three unrelated companies, Tower plc (a public company), Book Ltd (a private company) and Holdings plc (a quoted investment company) have summarised balance sheets, as on 30 June 1985, as set out below with relevant additional information.

\section*{Requirements}

(a) State concisely for each of the three types of company mentioned, the principles for calculating distributable profits under the Companies Act 1980 (now part of the Companies Act 1985).

(b) Calculate for each of the three companies the maximum legally distributable profits.

(c) Discuss the reasons why it is not normally commercially or practically desirable to make the maximum distribution.

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(a) Tower plc m m Share capital 2.0 Fixed assets 3.3 Share premium account 0.5 Revaluation reserves 1.0 Net current assets 2.7 Profit and loss account 2.5 6.0 6.0 (1) A partial revaluation of fixed assets took place during the year with the following result: Surplus on land Surplus on buildings Surplus on plant and machinery Deficit on fixtures and fittings m 0.65 0.35 0.10 (0.10) 1.00 The directors consider that the value of the remaining fixed assets not revalued is equal to their net book amounts. (2) Depreciation is provided at 2% on buildings, 15% on plant and machinery, and 20% on fixtures and fittings. All fixed assets are depreciated for the full year on the cost or revalued amounts. (3) Fixed assets comprise: