Kenmare Architects Ltd$.($KAL$)$ was incorporated and commenced operations on January $1,2023.$ Sheila Kenmare, the company's only employee, consults with various clients and uses expensive equipment to complete her work. When the company was formed, Sheila bought $10,000$ common shares but at the beginning of $2024,$ another $1,000$ common shares were sold to Sheila's mother.

In addition to selling shares, KAL received financing from Sheila's Uncle Harry in the form of a loan that was taken out on January $1,2023.$ Her uncle required the company to pay only the interest on the loan and no principal in $2023,$ which KAL did. However, he wanted both interest and a portion of the principal to be paid during $2024.$ These payments were made evenly throughout $2024.$ Harry was surprised when Sheila paid down more of the loan balance in $2024$ than he asked her to$.$

Kenmare Architects Statement of Income and Statement of Financial Position

Instructions

Answer the following questions using the information above:

When forming the company, how much did Sheila pay for her shares? How much did her mother pay for her shares? $(5$ marks$)$

At the end of $2023,$ what portion of the loan did Uncle Harry want paid off in $2024?$ How much of the loan did KAL actually pay off in $2024?$ What was the total amount of cash received by Harry in $2023$ and $2024?(5$ marks$)$

Calculate the current ratio for each year. Has the company's liquidity improved or deteriorated? $(4$ marks$)$

Calculate the debt to total assets ratio for each year. Did the company's solvency improve or deteriorate? What effect did the change in this ratio have on the statement of income? $(4$ marks$)$

Calculate the basic earnings per share $($EPS$)$ of the company for each year. Why do you think that basic EPS changed in $2024?(4$ marks$)$