Question

An entity had net assets of $10,000 at the start of the year. at the end of the year's trading the entity had earned a profit of $5,000 and had the following assets and liabilities: non-current assets $20,000 current assets $15,000 current liabilities $8,000 during the year the entity paid dividends of $2,000. how much share capital was issued during the year?

Answer 1

The share capital issued during the year was $-10,000, indicating a decrease in share capital.

Step-by-step explanation:

The share capital issued during the year can be calculated by considering the changes in net assets, profit, dividends, and the assets and liabilities of the entity.

At the start of the year, the entity had net assets of $10,000. During the year, it earned a profit of $5,000. Additionally, it paid dividends of $2,000.

Given that the non-current assets were $20,000, current assets were $15,000, and current liabilities were $8,000 at the end of the year, we can calculate the net assets at the end of the year by subtracting liabilities from assets: $20,000 + $15,000 - $8,000 = $27,000.

To find out how much share capital was issued during the year, we can subtract the change in net assets from the profit and dividends: $5,000 - ($27,000 - $10,000 + $2,000) = $-10,000.

Since the value is negative, it means that the entity had a decrease in share capital of $10,000 during the year.