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Difficulty: MediumPreparation of Company Statement of Financial Position

Apex Maritime Services Plc extracted the following balances from its financial records at 31st December 2025:

Ledger AccountAmount (₦)
Ordinary Share Capital800,000800,000
Share Premium120,000120,000
Retained Earnings250,000250,000
Proposed Dividends50,00050,000
8% Debentures (2032)300,000300,000

What is the correct total value of Shareholders' Funds (Equity and Reserves) to be reported in the Statement of Financial Position?

  1. A
    ₦1,050,000
  2. ₦1,170,000Answer
  3. C
    ₦1,220,000
  4. D
    ₦1,470,000

Answer

The correct total value of Shareholders' Funds to be presented in the Statement of Financial Position is ₦1,170,000.
Shareholders' Funds (Equity and Reserves) in a company Statement of Financial Position consists of paid-up share capital plus capital and revenue reserves. Here, Ordinary Share Capital (₦800,000₦800,000), Share Premium (₦120,000₦120,000), and Retained Earnings (₦250,000₦250,000) sum up to ₦1,170,000₦1,170,000. Proposed dividends are current liabilities, and debentures are non-current liabilities.

Step-by-Step Solution

1
Identify the components of Shareholders' Funds (Equity and Reserves).
Components are Ordinary Share Capital (₦800,000₦800,000), Share Premium (₦120,000₦120,000), and Retained Earnings (₦250,000₦250,000).
Shareholders' funds represent the owners' equity interest in the company, comprising paid-up share capital along with capital and revenue reserves.
2
Sum the equity and reserve items.
₦800,000+₦120,000+₦250,000=₦1,170,000₦800,000 + ₦120,000 + ₦250,000 = ₦1,170,000.
Share Premium is a non-distributable capital reserve and Retained Earnings is a revenue reserve, both of which belong under Shareholders' Funds.
3
Exclude items belonging to liabilities.
Proposed Dividends (₦50,000₦50,000) are current liabilities and 8% Debentures (₦300,000₦300,000) are non-current liabilities.
Debentures represent borrowed loan capital, while proposed dividends represent short-term payables.

Key Concept

Classification of Equity and Reserves in Company Statement of Financial Position
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Topics

Preparation of Company Statement of Financial Position

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