Question 1 HUGE Company is issuing one million T'i'h preference shares of Sh 1 each, payable 1'i't on application, 2MB on allotment, 4M6 on rst call and 30s on second call. Applications are reoeiyed for 155i] shares. A refund of the money is made in respect of t] shares. while for the remaining 150D applied for, an allotment is to be made on the basis of 2 shares for every 3 applied for. The exoess application monies are set o against allotment monies asked for. The remaining requested installments are all paid in full. You are required to show the journal entries of the above issue and then draw the relevant accounts. {El} marks] Question 2 The directors of Chimney, a limited liability company, wish to compare the firm's most recent financial statements with those of the previous year. The company's financial statements are given as follows: Chimney income statements Year ended 31st March 31st March 2006 2007 Sh: '000 Sh : '000 Sales Revenue(80% on credit, 20% on cash) 1,800 2,500 cost of sales(see note below) 1,200 1.800 Gross Profit 600 700 Distribution costs 160 250Administrative expenses 2m: 2!!!! operating prots Edit] 250 Finance cost 5_ Profit before tax 1% EDD Income tax expense 44 AB Net prot for the year ME 1% Note; post of sales figures are made as follows Year ended 31st March 31st March EDGE 200? Sh : 'DD Sh. 'D Opening stud: 13d sop Purmasei all on credit} M 1,4i} 2.1ED Less closing inventory 2m: ii Statements of financial position As at 31st March 2006 31st March 2007 Sh- '000 Sh- '000 Sh- 000 Sh- '000 Assets Non current assets at cost 3100 3674 Less accumulated depreciation 1214 1422 1886 2252 Current assets Inventory 200 360 Trade receivables 400 750 Cash at bank 100 120 700 1230 total assets 2586 3482 Equities and Liabilities Capital and reserves Issued ordinary share capital* 1000 1200 Share premium account* 400 600 Income statement 168 322 1568 2122 Non current liability 10% Loan notes 500 500 Current liabilities Trade payables 210 380 Sundry payables 260 430 Tax payable 48 50 518 860 2586 2586*The additional share capital was issued on 1 April, 2006 Required a) Calculate, for each of the two years, eight accounting ratios that should assist the directors in their comparison, using the closing figures for the statement of financial position items needed. (16 marks) b) Comment on the ratios. (4 marks)