Final answer:
Thus, the correct answer to the student's question is d. $265,000.
Step-by-step explanation:
To calculate Junior plc's profit for the year, we need to sum the retained profit with the dividends paid and the debenture interest paid. Junior plc's retained profit is reported as $160,000, the debenture interest paid is $25,000, and the dividend paid per share is 8 pence. Since there are 1 million £1 ordinary shares, we convert the dividend to dollars and multiply by the number of shares. We must remember that 8 pence is 8/100 of a pound, and to convert to dollars we need the exchange rate, which is typically not at par. However, for simplicity, let's assume that $1 is equivalent to £1 for our calculations (the student should verify the correct exchange rate).
Calculating the total dividends paid: 8 pence per share multiplied by 1 million shares equals 8 million pence, or £80,000. Convert this to dollars as £80,000 <if> $1 = £1 (exchange rate dependent).
Now, we add this to the debenture interest and retained profit:
- Debenture Interest: $25,000
- Dividends Paid (converted): $80,000
- Retained Profit: $160,000
Adding these amounts together:
$25,000 (Interest) + $80,000 (Dividends) + $160,000 (Retained Profit) = $265,000
Therefore, the correct answer is d. $265,000, which is Junior plc's profit for the year.