Accounting Test (With Answer) On Profit And Loss Appropriation Account

August 4th, 2007 Comments off
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Question:
 XYZ Ltd has an Ordinary Share Capital of 1,000,000 ordinary share of $1 each and 100,000 6% preference shares of $1 each.  The net profits for the first three years of business ended 31 Dec were:

20X1      $200,000

20X2      $250,000

20X3      $350,000 

Transfers to reserves were as follows:

20X1  Transfer to General Reserve    $20,000

20X2  Transfer to Fixed Assets Replacement Reserve  $40,000

20X3  Transfer to General Reserve    $60,000

20X3  Transfer to Fixed Assets Replacement Reserve  $40,000 

The directors have also recommended that:

(a)     dividend on preference share be paid

(b)    the dividend rate for ordinary shares are as follow:

·   20X1 – 10%

·   20X2 – 10%

·   20X3 – 10% 

Show The Profit & Loss Appropriation Accounts for the three years 

Answer to above Question:
    Profit & Loss Appropriation Account For The Year Ended 31 /12/X1

  $   $
General Reserve 20,000 Net Profit b/d 200,000
Proposed dividends:      
Balance c/d 74,000    
  200,000   200,000

    Profit & Loss Appropriation Account For The Year Ended 31 /12/X2

  $   $
Fixed Assets Replacement Reserve 40,000 Net Profit b/d 250,000
Proposed dividends:   Balance b/f from last year 74,000
Balance c/d 178,000    
  324,000   324,000

     Profit & Loss Appropriation Account For The Year Ended 31 /12/X3

  $   $
General Reserve 60,000 Net Profit b/d 350,000
Fixed Assets Replacement Reserve 40,000 Balance b/f from last year 178,000
Proposed dividends:      
Balance c/d 322,000    
  528,000   528,000

 

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Financial Accounting

 
 

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