Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

On 1 January, X Limited had the following equity: Ordinary share capital ($1$ shares): $400\,000$ Share premium: $30\,000$ General reserve: $10\,000$ Retained earnings: $70\,000$ Over the year ending 31 December, these transactions occurred: 1 January: bonus issue of 1 ordinary share for every 8 ordinary shares; the company’s policy is to retain its reserves in the most flexible form. 1 July: debentures were issued for $150\,000$. 1 December: rights issue of 1 ordinary share for every 15 ordinary shares at a price of $1.60$ per share; the rights issue was fully taken up. 31 December: profit for the year ended 31 December was $120\,000$. What was the total equity at 31 December?

  • A$678\,000$
  • B$728\,000$
  • C$828\,000$
  • D$878\,000$

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