Larry Limited has 4,000,000 ordinary shares of 50k each and 150,000 5% prefrence shares of ₦1 each fully paid.₦Net profit for the year90,000Interim…

JAMB Accounting 2023 51 views

Larry Limited has 4,000,000 ordinary shares of 50k each and 150,000 5% prefrence shares of ₦1 each fully paid.

₦
Net profit for the year 90,000
Interim dividends paid:
Ordinary shares 25,000
Profit and loss appropriation b/f 10,000
Goodwill written off 1,000

At the end of the period, what is the balance of the profit and loss appropriation account?

Larry Limited has 4,000,000 ordinary shares of 50k each and 150,000 5% prefrence shares of ₦1 each fully paid.

₦
Net profit for the year 90,000
Interim dividends paid:
Ordinary shares 25,000
Profit and loss appropriation b/f 10,000
Goodwill written off 1,000

At the end of the period, what is the balance of the profit and loss appropriation account?

  1. ₦100,000
  2. ₦90,000
  3. ₦66,500 ✓
  4. ₦74,000

Explanation

Start with: Brought forward ₦10,000 + Net profit ₦90,000 = ₦100,000. Deduct: Goodwill written off ₦1,000 + Ordinary dividends ₦25,000 + Preference dividends ₦7,500 = ₦33,500.

Balance carried forward: ₦100,000 – ₦33,500 = ₦66,500. This retained profit carries forward to next year.

Remember: Appropriation account shows profit distribution. What’s not distributed stays as retained earnings.

pastquestions.ng