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Company Profit and Loss The following information was extracted from the books of Hannigan Ltd: • Hannigan Ltd has an authorised capital of 900,000 ordinary shares at €1 each and 600,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 2 - 2020
Question 2
Company Profit and Loss The following information was extracted from the books of Hannigan Ltd: • Hannigan Ltd has an authorised capital of 900,000 ordinary shares ... show full transcript
Worked Solution & Example Answer:Company Profit and Loss The following information was extracted from the books of Hannigan Ltd: • Hannigan Ltd has an authorised capital of 900,000 ordinary shares at €1 each and 600,000 5% preference shares at €1 each - Leaving Cert Accounting - Question 2 - 2020
Step 1
Show the profit and loss account for the year ended 31/12/2019.
Answer
Profit and Loss Account for the year ended 31/12/2019
Net profit for year: €192,000
Less Interest: €20,000
Less Tax: €44,000
Calculation
Net profit after deducting interest and tax:
total = 192,000 - 20,000 - 44,000 = €128,000
Less appropriation:
- Increase in general reserve: €24,000
- Ordinary dividend (580,000 shares * €0.07): €40,600
- Preference dividend (400,000 shares * €0.05): €20,000
Total Appropriations
Total Appropriations = Increase in General Reserve + Ordinary Dividend + Preference Dividend
Total Appropriations = 24,000 + 40,600 + 20,000 = €84,600
Retained profit for year:
total = net profit after tax - total appropriations = 128,000 - 84,600 = €43,400
Retained profit brought forward (01/01/2019):
= €286,000
Retained profits carried forward:
€329,400 (Retained Profit: €43,400 + Brought Forward: €286,000)
Step 2
Prepare a balance sheet showing the relevant accounts after making the above provisions and appropriations.
Answer
Balance Sheet as at 31/12/2019
Fixed Assets and Current Assets:
Total Assets: €1,473,400
Creditors: amounts falling due within 1 year:
- Interest due: €20,000
- Tax due: €44,000
- Total Creditors: €64,000
Net Assets:
Total Assets - Total Creditors = 1,473,400 - 64,000 = €1,409,400
Financed by:
Capital and Reserves:
-
Authorised:
- Ordinary shares: 900,000
- Preference shares: 600,000
- Total Authorised: €1,500,000
-
Issued:
- Ordinary shares (Issued): 580,000
- Preference shares (Issued): 400,000
Total Issued Capital:
= 580,000 + 400,000 = €980,000
General reserve:
= €76,000 + €24,000 = €100,000
Total Liabilities:
= €1,409,400