Ipcc a/c paper doubt

shreya (student) (67 Points)

28 May 2014

Was ques 2 (a) of ipcc a/c paper correct?? I found the given profit insufficient to fulfil the required distribution..

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N.Naveena Maheswara Rao (Assistant manager for accounts) (1096 Points)
Replied 28 May 2014

you are true. Question may be wrong ?(share value should be 10/-). How ever below is the suggested answer.

Current year Profit	1,000,000
Less: Depreciation	37,500
Tax provision	120,000
Balance available for appropriations	842,500
Less: Transfer to reserve (842,500 * 25%)	210,625
Staff bonus provision (75,000 X 100 X 20% X 10%)	150,000
Balance available for distribution of dividend	481,875
Less: Preference dividend (12,000 X 100 X 15%)	180,000
Balance	301,875
Less: Carried forward profit (12,000 X 100 X 14%)	168,000
Balance for additional dividend	133,875

Distribution of additional dividend
Balance for additional dividend	133,875
To preference share holders (1/3)	44,625
To equity share holders (2/3)	89,250