H Limited draws up its financial statements each year to 30 April.
In the year ended 30 April 2025, the following events occurred:
1. After debenture interest had been charged, the company reported a profit for the year of $26 700.
2. $5000 was transferred to the general reserve.
3. A dividend of $5340 was paid. No further dividends are due for the year.
H Limited supplied these ledger account balances at 30 April 2025:
Fixtures and equipment at book value $155 000
Motor vehicles at 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% Debentures (repayable 2029) $5 000
(a)[4]
Prepare the statement of changes in equity for H Limited for the year ended 30 April 2025.
(b)[7]
Prepare the statement of financial position for H Limited at 30 April 2025.
(c)[1]
State the meaning of the term ‘equity’.
(d)[3]
Calculate the return on capital employed for the year ended 30 April 2025. State your answer to two decimal places.
(e)[5]
Advise the directors whether or not they should issue the debentures to fund an expansion. Support your answer with two points for and two points against issuing the debentures to fund an expansion.
Worked solution & mark scheme
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