DC Limited was formed some years ago. The financial year ends on 30 April. The following information
Question:
DC Limited was formed some years ago. The financial year ends on 30 April. The following information is available:
$
On 1 May 20–8:
Ordinary share capital (300,000 shares of $0.50 each) ............................... 150,000
General reserve ............................................................................................... 35,000
Retained earnings .......................................................................................... 13,500
On 31 August 20–8:
Ordinary share dividend of $0.05 was paid
On 1 November 20–8:
An issue of 5% debentures was made ......................................................... 40,000
For the year ended 30 April 20–9:
Operating profit for the year .......................................................................... 65,500
On 30 April 20–9:
The directors recommended a transfer to general reserve of $6,000 and the payment of an ordinary share dividend of $0.10.
a. Explain each of the following terms:
i. Issued share capital
ii. Called-up share capital
iii. Paid-up share capital.
b. State two differences between ordinary shares and debentures.
c. Explain why DC Limited retains some profit each year.
d. State one reason why DC Limited pays a dividend to ordinary shareholders.
e. Calculate the profit for the year ended 30 April 20–9.
f. Calculate the retained earnings on 30 April 20–9.
g. Prepare an extract from the statement of financial position on 30 April 20–9 to show the capital and reserves section.
Step by Step Answer:
Cambridge IGCSE And O Level Accounting Coursebook
ISBN: 9781316502778
2nd Edition
Authors: Catherine Coucom