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Q2.
Q3.
State two features each of the Ordinary shares and Preference shares?
Ordinary shares:
There is no fixed rate of dividend, and ordinary shareholders will receive a dividend only
if profits available for distribution still remain after other investors.
If the business is closed down, the ordinary shareholders will receive any proceeds from
asset disposals only after lenders and preference shareholders have received their
entitlements.
Ordinary shareholders have voting rights, which give them the power to elect the
directors and to remove the directors from office.
From the businesss perspective, ordinary shares can be a valuable form of financing as
at times it is useful to be able to avoid paying a dividend.
Preference shares:
They offer investors a lower level of risk than ordinary shares but no voting rights.
Provided that there are sufficient profits available, preference shares will normally be
given a fixed rate of dividend each year, and preference dividends will be paid before
ordinary ones.
Where a business is closed down, preference shareholders may be given priority over the
claims of ordinary shareholders.
Q5.
Debenture interest
Revenue
Ordinary dividends paid
Transfer to reserves
A 1 and 2
2.
B 1 and 4
C 2 and 3
D 3 and 4
A company has been wound up and the only assets that remain have realised $45 000.
A summary of the companys capital structure shows the following.
$
20 000
40 000
30 000
Ordinary shares
Preference shares
Debentures
How will the $45 000 be distributed?
A
B
C
D
3.
Ordinary shares
$
10 000
20 000
-
Preference shares
$
20 000
15 000
25 000
40 00
Debentures
$
15 000
30 000
5000
B $22 500
C $27 600
D $39 000
3
4.
5.
2, 3 and 4
2 and 3 only
1, 2 and 4 only
1, 3 and 4 only
A company has total assets of $60 000 and total liabilities of $40 000. During the year
the business recorded $100 000 in revenues, $55 000 in expenses, and paid dividends
of $10 000. The operating profit reported by the company for the year was:
A $35 000
6.
D $55 000
B $20 000
C $6 000
D $24 000
Samra Limited has issued $120 000 of 5% debentures which are repayable in 2016.
The debenture interest is payable quarterly. State the amount of interest payable by the
company each quarter.
A $6 000
8.
C $20 000
Pringle Limited has an issued share capital of $40 000 divided into ordinary shares of
$0.50 each. The company declared a dividend of $0.30 per share. What was the total
amount of the dividend paid to shareholders?
A $12 000
7.
B $45 000
B $12 000
C $1 500
D $3 000
B 1 and 3 only
C 2 and 3 only
D 1, 2 and 3
9.
Dio owns 5000 shares of $2 each in Diomedes Limited. The company declares a
dividend of $0.25 per share. State how much Dio will receive as a dividend.
A $2 500
10.
B $10 000
C $4 000
D $1 250
Transfer to reserves
Debenture interest
Taxation
Ordinary shares
[Total marks 10]
700 000
150 000
General reserve
35 000
Retained Profit
23 750
908 750
On 1 July 2013, the directors made a further issue of 200000 ordinary shares and
100000 5% preference shares. All the shares were fully subscribed.
(a) Calculate the total amount of ordinary and preference shares capital after the new
issue.
Ordinary shares [700000 + (200000 x 0.5)] = $800 000
[4]
The net profit of Carins Ltd for the year ended 31 December 2013 was $200 000.
No interim dividend was paid on 5% Preference shares but the final dividend was paid
at 31 December 2013.
[5]
The directors also decided to transfer $25000 to general reserve.
(d) Calculate the retained profit for the year ended 31 December 2013.
Profit for the year
$ 200000
(8125)
Ordinary dividend
(76000)
(25000)
90875
[5]
(e) Prepare a balance sheet extract only showing share capital and reserves.
Ordinary shares of $0.50 each
5% Preference shares of $0.25 each
$1600 000
175 000
General reserve
60 000
Retained Profit
114 625
1949 625
[5]
(f) State who owns a Public limited company.
Shareholders
[1]
(g) State who is responsible for the day-to-day management of a Public limited company.
Managing Directors
[1]
[Total Marks 25]