Question
Dempsey Ltd was incorporated on 01 March 2018 with an authorised share capital of N$500 000 which consist of: 2 000 000 ordinary no par
Dempsey Ltd was incorporated on 01 March 2018 with an authorised share capital of N$500 000 which consist of:
2 000 000 ordinary no par value shares.
100 000 6% convertible no par value preference shares.
20 000 8% cumulative preference shares of N$5 each
On 29 February 2020 the following balances, amongst others, appeared in the books of the company:
Share Capital: Ordinary shares (80 000 shares) 80 000
6% Preference shares (20 000 shares) 40 000
8% Cumulative preference shares 25 000
Fixed Investment in shares (Market value N$60 000) 53 560
General administrative costs 11 000
Credit losses 5 700
Bank (dr) 24 480
5% Debentures 30 000
Land at cost price 110 530
Furniture and Equipment at cost price 3 040
Vehicles at cost price 5 870
Creditors 36 340
Debtors 40 180
Retained income (01 March 2019) - $9 510
Debenture interest (paid up to 01 September 2019) - $750
Share premium 1 250
Accumulated depreciation – 01 March 2019:
-Furniture and Equipment 440
-Vehicles 2 610
Delivery costs ( to customers) 4 900
Allowance for credit loss 5 823
Gross profit 74 787
Provisional tax payments to NamRa - $18 000
Traffic fines - $2 750
Inventory (29 February 2020) -$ 27 000
Investment income (dividends on listed shares) - $2 000
Additional information:
1. The gross profit % is 50% on cost price.
2. Depreciation must be written off as follows: Furniture and equipment – 10% per annum on carrying value. Vehicles – 20% per annum on cost price
3. Debtors to the amount of N$180 must be written off as irrecoverable
4. Allowance must be made for credit losses at 10% of debtors.
5. The following share transactions took place during the year and due to the inexperience of the accountant, no entry has yet been made.
5 000 (8%) cumulative preference shares were issued at N$6 each on 01 July 2019 ;
6 000 (6%) convertible preference shares were converted to ordinary shares on 01 January 2020 at the conversion price of N$2 per share.
These movements in share capital is the first to occur since incorporation of the company.
6. A final dividend of N$40 814 was declared on 02 January 2020 but was still not paid on 29 February 2020. This dividend is the first dividend to ever be declared to the company.
7. Land is held as security for the debentures.
8. Included in administrative costs are directors fees of N$2 500 and auditors fees of N$1 000.
9. N$3 000 must be transferred to the General Reserve.
10.The income tax for the year is calculated at N$16 316.
11.The debentures are redeemable on 28 February 2024.
REQUIRED:
1. Prepare a statement of profit or loss and other comprehensive income for the year ended on 29 February 2020
2. Prepare the Statement of Financial Position of the company as on 29 February 2020.
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