Durham Limited had an authorised capital of £200,000 divided into 100,000 ordinary shares of £1 each and 200,000 8 per cent preference shares of 50p each. The following balances remained in the accounts of the company after the income statement had been prepared for the year ending 30 April 2012.

The Directors have recommended: a transfer of £5,000 to general reserve; an ordinary dividend of £0.15p per share; and that the unpaid preference share dividend be paid.

(a) Prepare an appropriate extract from the statement of changes in equity for year ending 30 April 2012.

(b) Prepare the statement of financial position as at 30 April 2012, in a form which shows clearly the working capital and the shareholders’ funds.

(c) Identify and calculate: (i) one ratio indicating the firm’s profitability; (ii) two ratios indicating the firm’s liquidity position.

(d) Make use of your calculations in

(c) above to comment on the firm’s financial position.

(e) Name two points of comparison which are not available from the information above in this question but which could make your comments in

(d) above more meaningful.

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Premises at cost General reserve Ordinary shares: fully paid 8% Preference shares: fully paid Electricity Cash at bank Retained profits 1 May 2011 Accounts receivable and accounts payable Net profit (year ending 30 April 2012) Machinery and plant at cost Provision for depreciation on machinery and plant Inventory Allowance for doubtful debts Insurance Preference share dividend paid Debit 86,000 13,100 20,000 60,000 60,000 900 2,000 242,000 Credit 4,000 100,000 50,000 100 14,500 12,900 16,500 40,000 4,000 242,000