H Limited draws up its financial statements to 30 April each year.
In the year ended 30 April 2025, these events occurred:
1. The company reported profit for the year of $26 700 after debenture interest was charged.
2. $5 000 was transferred to the general reserve.
3. $5 340 in dividends was paid. No further dividends are due for the year.
H Limited supplied these ledger account balances at 30 April 2025:
Fixtures and equipment, book value $155 000
Motor vehicles, book value $16 875
Inventory $28 120
Trade payables $26 815
Trade receivables $33 000
Provision for doubtful debts $990
Bank overdraft $5 195
$5 000 5% Debentures (repayable 2029)
(a)[4]
Set out the statement of changes in equity for H Limited for the year ended 30 April 2025.
(b)[7]
Draw up the statement of financial position for H Limited at 30 April 2025.
(c)[1]
State what is meant by the term ‘equity’.
(d)[3]
Calculate the return on capital employed for the year ended 30 April 2025. Give your answer to two decimal places.
(e)[5]
Advise the directors on whether they should, or should not, issue the debentures to finance the expansion. Support your judgment with two reasons in favour and two reasons against issuing the debentures to fund the expansion.
Worked solution & mark scheme
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