The impairment of non-current assets attracted tax relief of $1 million which has been included in the tax charge. Niagara paid an interim ordinary dividend of 3c per share in June 2002 and declared a final dividend on 25 March 2003 of C per share. The issued share capital of Niagara on 1 April 2002 was: Ordinary shares of 25c each million 8% Preterence sharess million he preference shares are non-redeemable The company also had in issue $2 million 79% convertible loan stock dated 2005. The loan stock will be redeemed at par in 2005 or converted to ordinary shares on the basis of 40 new shares tor each sl00 ot loan stock at the option of the stockholders. Niagara's income tax rate is 30%. There are also in existence directors share warrants (issued in 2001) which entitle the directors to receive /D0,000 new shares in tolal in z2005 at no cost to the directors. The following share issues took place duing the year to 31 March 2003: I July 2002; a rights issue of l new share at $1-50 for every 5 shares held. The market price of Niagaras shares the day betore the rights was s2-40. 1 October 2002; an issue of $1 milion 6% non-redeemable preference shares at par Botn issues were Tuily SUDscribed Niagara's basic earnings per share in the year to 31 March 2002 was correctly disclosed as 24c. Required: Calculate for Niagara for the year to 31 March 2003: (0 the dividend cover and explain its significance i) the basic earnings per share including the comparative. (i) the fuly diluted earnings per share (ignore comparative); and advise a prospective investor of the significance of the diluted earnings per share figure.

(a) Most companies prepare their financial statements under the historical cost convention. In times of rising prices it has been said that without modification such financial statements can be misleading. Requirea: ) Explain the problems that can be encountered when users rely on financial statements prepared under the historical cost convention for their information needs.

Note: your answer should consider problems with the income statement and the balance sheet. ) Update has been considering the effect of altermative methods of prepaning their tinancial statements. Asan example they picked an item of plant that they acquired from Suppliers on l April 2000 at a cost of s250,000. he following details have been obtained: the company policy is to depreciate plant at 20% per annum on the reducing balance basis. the moverment in the retail price index has been: 1 2000 80 2001 02 April: 2002 31 March 2003 Suppliers' price catalogue at 3l March 2003 shows an item of similar plant at a cost of $320,000. On reading the specitication it appears that the new model can produce 480 units per hour whereas the model owned by Update can only produce 420 units per hour. Required: Calculate for Update the depreciation charge for the plant for the year to 31 March 2003 (based on year end values) and its balance sheet carrying value on that date using: the historical cost basis; a current purchasing power basis; and a current cost basis. Question is complete