Sunset Ltd has an operating profit for the year ended 31 December 2016, before dealing with the
Question:
Sunset Ltd has an operating profit for the year ended 31 December 2016, before dealing with the following items, of £150,000. Complete the statement of profit or loss.
(a) The standard rate of income tax is 25%.
(b) Sunset Ltd had issued £50,000 of 6% loan notes. It paid the interest for the year, less income tax, on 31 December 2016.
(c) Sunset Ltd owns £20,000 of 5% loan notes in another company. It received a year’s interest, less income tax, on 27 December 2016.
(d) No cheque has been paid to Revenue and Customs for income tax.
(e) Sunset Ltd has 30,000 ordinary shares of £1 each in Moonshine Ltd. Moonshine Ltd paid a dividend to Sunset Ltd of 12% on 24 November 2016. Moonshine Ltd is a ‘related company’ of Sunset Ltd.
(f) Sunset Ltd had a liability for corporation tax, based on profits for 2016, of £54,000.
(g) Sunset proposed a dividend of 10% on its 200,000 ordinary shares of £1 each, out of the profits for 2016.
(h) Transfer £10,000 to general reserve.
(i) Retained profits brought forward from last year amounted to £22,480.
Step by Step Answer:
Frank Woods Business Accounting Volume 2
ISBN: 9781292085050
13th Edition
Authors: Frank Wood, Alan Sangster