1. Liontown Co-operative was formed to produce souvenirs for the booming tourist market. The co-operative started with share capital of $55 000 in $1 shares. The co-operative is now two years old and records the following information for the first two years of operation. 31 December, 2010 31 December, 2011 Cost of Goods 38,000 81,000 Sales 70,000 290,000 Expenses 21,000 46,000 Creditors 2,300 4,600 Loans to Members 120,300 Interest due from members 2,100 Loan from Cooperative Union Bank 100,000 Equipment 40,000 Portable Stalls 4,500 Inventory 5,100 29,300 Bank 60,500 126,400 The co-operative paid out dividends of 10¢ per share in its first year of operation and transferred the remainder to a Members’ Education Fund. (a) Prepare the Income Statement and the Appropriation Account for Liontown Co-operative for the first year ended 31 December 2010. (b) During the second year of operation, Liontown Co-operative began lending money to members who wished to start their own small business.
|
|
31 December, 2010 |
31 December, 2011 |
|
Cost of Goods |
38,000 |
81,000 |
|
Sales |
70,000 |
290,000 |
|
Expenses |
21,000 |
46,000 |
|
Creditors |
2,300 |
4,600 |
|
Loans to Members |
|
120,300 |
|
Interest due from members |
|
2,100 |
|
Loan from Cooperative Union Bank |
|
100,000 |
|
Equipment |
|
40,000 |
|
Portable Stalls |
|
4,500 |
|
Inventory |
5,100 |
29,300 |
|
Bank |
60,500 |
126,400 |
The co-operative paid out dividends of 10¢ per share in its first year of operation and transferred the remainder to a Members’ Education Fund.
Dividends forms a part of a company's profits that are distributed to it's shareholders. They represent a return on investment for shareholders and are typically paid in cash. The appropriation of profits refers to the allocation of a company's profits among its various stakeholders, including shareholders, reserves, and other purposes. In the case of Liontown Co-operative, the company transferred the remaining profit of $5,500 to the Members' Education Fund. This means that the profit was allocated to a specific purpose that benefits the co-operative's members by providing educational and training opportunities.
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(c) For the year ended 31 December 2011, the Board of Directors records a surplus of
$157 500. The board plans to
- transfer $32 600 to the Members’ Education Fund
- pay out $27 500 in dividends
- leave the remainder as undistributed profits.
Prepare a classified
31 December 2011 (second year of operation) taking the appropriation of the surplus into consideration
by Bartleby Expert
