(a) Outline what profits are available for distribution by each of the following:

(i) A private limited company; and

(it) A public limited company.

(b) You are given the following extracts from the draft statement of profit or loss and other comprehensive income of Morgan Enterprises for the year ended 31 December 2017:

Draft Statement of Profit or Loss and Other Comprehensive Income (Extracts) for the Year Ended 31 December 2017

The following additional information is also available:
1. During 2017 two of the company’s assets were revalued as follows:
Property A —_ surplus of €200,000; and Land — deficit of €110,000.
2. With respect to Property A, the depreciation charge for 2017 had been based on the revalued amount of the asset. The depreciation charge for 2017 was €30,000 more than would have been charged on a historical cost basis.
3. A flood occurred in the main warehouse of Morgan Enterprises just before the year-end and inventory worth €70,000 was destroyed. No adjustment has been made for this in the draft statement of profit or loss and other comprehensive income.
4. Just before the year-end, two employees were made redundant at a total cost of €20,000.
No adjustment has been made for this in the draft statement of profit or loss and other comprehensive income.
5. Deferred development expenditure in the statement of financial position of Morgan Enterprises at 31 December 2017 amounted to €1,000,000.
6. An increase in trade investments before the year-end, amounting to €150,000, had not been reflected in the financial statements.
7. A portion of the company car park was sold before the year-end, yielding an after-tax profit of €900,000. No adjustment has been made for this in the draft statement of profit or loss and other comprehensive income.
8. The company is financed by equity capital as follows:

9. Retained earnings at 1 January 2017 were €2,800,000.
10. The tax rate is 20%.

Requirement

(a) Assuming that Morgan Enterprises is a private limited company, show what profits are available for distribution.

(b) Assuming that Morgan Enterprises is a public limited company, show what profits are available for distribution.

(c) Would your answers in

(a) and

(b) above have been any different if all of the company’s non-current assets had been revalued during the year?

Transcribed Image Text:

Profit before taxation Taxation Profit after taxation 000 1,000 (200) 800