4.1. Capital and revenue expenditure and receipts
A subsection of Accounting, 7707, through 4. Accounting procedures
Listing 10 of 85 questions
MPT Limited prepares its financial statements to 30 April each year. The company’s retained earnings at 1 May 2019 were $14 000. The general reserve was $35 000. During the year ended 30 April 2020 the following took place. The company made a profit for the year of $28 000 after charging debenture interest. A transfer of $5000 was made to the general reserve. A dividend of $4500 was paid. No other dividends were payable for the year. MPT Limited provided the following balances at 30 April 2020. $ Fixtures and equipment at book value 152 000 Motor vehicles at book value 60 400 Inventory 30 330 Bank overdraft 6 200 Trade payables 24 900 Trade receivables 31 500 Provision for doubtful debts 5% Debentures (repayable 2025) 20 000 Ordinary share capital 150 000 REQUIRED Calculate the retained earnings of MPT Limited at 30 April 2020. Prepare the statement of financial position for MPT Limited at 30 April 2020. MPT Limited Statement of Financial Position at 30 April 2020 ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… ………………………………………………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… $ ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… ……………… The directors of MPT Limited are considering using the general reserve to repay the bank overdraft. REQUIRED State why it is not appropriate to use the general reserve to repay the bank overdraft. Calculate the return on capital employed (ROCE) for the year ended 30 April 2020. The calculation should be correct to two decimal places and should be based on closing capital employed. The directors are considering increasing dividend in 2021 as a way of increasing return on capital employed (ROCE). REQUIRED Advise the directors how the return on capital employed (ROCE) can be increased. Justify your answer by commenting on both profit and capital employed.
7707_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Questions Discovered
85