Profit and Loss Appropriation Account and Dividend Calculation Practice Questions — JAMB UTME

Question 1Question →

Apex Zenith Ltd has an authorized share capital of $1,000,000$ ordinary shares of $₦1$ each, out of which $600,000$ shares are fully issued and paid up. The company also has $200,000$ , $5\%$ preference shares of $₦1$ each. For the year ended 31st December 2025, the net profit before appropriations was $₦150,000$ .

The directors resolved to:
- Transfer $₦30,000$ to General Reserve
- Pay preference share dividends in full
- Pay a $10\%$ dividend on ordinary shares

What is the balance of retained profit carried forward to the Statement of Financial Position?

₦50,000

₦10,000

₦60,000

₦90,000

Show answer & explanation

Answer: ₦50,000

Answer

The retained profit balance carried forward to the Statement of Financial Position is ₦50,000.

The retained profit carried forward is determined by deducting all profit appropriations (preference dividend of ₦10,000, ordinary dividend of ₦60,000 calculated on issued capital, and general reserve transfer of ₦30,000) from the net profit of ₦150,000, yielding ₦50,000.

Step-by-Step Solution

1

Calculate the preference dividend payable

5% of ₦200,000 preference shares = ₦10,000

Preference dividends are fixed obligations based on the paid-up preference share capital.

2

Calculate the ordinary dividend payable

10% of paid-up ordinary share capital (₦600,000) = ₦60,000

Dividends are computed exclusively on issued and paid-up share capital, not authorized capital.

3

Sum total appropriations of profit

₦10,000 (Preference Div) + ₦60,000 (Ordinary Div) + ₦30,000 (General Reserve) = ₦100,000

All distributions and allocations from net profit must be totaled.

4

Subtract total appropriations from net profit to determine retained profit

₦150,000 - ₦100,000 = ₦50,000

The undistributed portion of net profit is carried forward to equity in the balance sheet.

Key Concept

Profit and Loss Appropriation Account and Dividend Calculation on Paid-Up Capital

Question 2Question →

Chidubem Ventures PLC has an authorized capital of ₦500,000 divided into 1,000,000 ordinary shares of 50k each. Out of these, 600,000 shares have been issued and fully paid-up. If the directors declare a dividend of 8% on ordinary share capital, what is the total dividend amount to be debited to the Profit and Loss Appropriation Account?

₦24,000

₦40,000

₦48,000

₦16,000

Show answer & explanation

Answer: ₦24,000

Answer

₦24,000

Dividends must be calculated strictly on the paid-up capital. The paid-up capital is 600,000 shares multiplied by ₦0.50 (50k), yielding ₦300,000. Computing 8% of ₦300,000 gives ₦24,000, which is the total dividend amount transferred from the Profit and Loss Appropriation Account.

Step-by-Step Solution

1

Calculate total paid-up share capital

600,000 shares × ₦0.50 = ₦300,000

Dividends are paid only on shares actually issued and paid for, converted from kobo to Naira (50k = ₦0.50).

2

Calculate the total dividend declared

8% × ₦300,000 = ₦24,000

The declared dividend percentage is applied directly to the total paid-up ordinary share capital.

Key Concept

Dividend Calculation on Paid-Up Capital

Estimated Time:45s

Question 3Question →

Kolawole Nigeria Ltd has an authorized share capital of $500,000$ ordinary shares of ₦1 each, of which $300,000$ shares are fully issued and paid-up. If the directors declare a dividend of $10\%$ on ordinary shares, what is the total amount of dividend payable?

₦50,000

₦30,000

₦20,000

₦80,000

Show answer & explanation

Answer: ₦30,000

Answer

The total amount of dividend payable is ₦30,000.

Dividends are always calculated on the paid-up share capital of the company. With

300,000

fully paid-up shares at ₦1 each, total paid-up capital is ₦300,000. A

10\%

dividend yields

0.10 \times \text{₦}300,000 = \text{₦}30,000

.

Step-by-Step Solution

1

Determine the paid-up share capital value.

Paid-up Share Capital =

300,000 \text{ shares} \times \text{₦}1 = \text{₦}300,000

.

Dividends can only be declared and paid on shares that have actually been issued and paid for, not on authorized or unissued capital.

2

Calculate the declared dividend amount.

Dividend Payable =

10\% \times \text{₦}300,000 = \text{₦}30,000

.

Applying the declared percentage dividend rate (

10\%

) to the paid-up share capital.

Key Concept

Calculation of Ordinary Share Dividend on Paid-up Capital

Estimated Time:45s

Question 4Question →

Bello Plc has an authorized share capital of 800,000 ordinary shares of ₦1 each, out of which 400,000 ordinary shares are fully issued and paid up. If the directors propose a final dividend of 12% on the paid-up capital, what is the total amount payable as dividends to the ordinary shareholders?

Show answer & explanation

Answer: 48000

Answer

The total amount payable as dividends to ordinary shareholders is ₦48,000.

Dividends are declared and paid exclusively on issued and paid-up capital. With 400,000 issued and fully paid shares at ₦1 per share, the paid-up capital equals ₦400,000. A 12% dividend on ₦400,000 yields ₦48,000.

Step-by-Step Solution

1

Calculate the total paid-up share capital

Paid-up Share Capital = 400,000 shares × ₦1 = ₦400,000

Dividends are distributed based on capital actually paid up by shareholders, not authorized capital.

2

Calculate the dividend amount

Total Dividend = 12% × ₦400,000 = ₦48,000

Applying the 12% dividend rate to the total paid-up capital gives the dividend payout.

Key Concept

Dividend Calculation on Paid-Up Share Capital

Estimated Time:45s

Question 5Question →

Kano Textiles Plc presents the following financial extracts at the end of its trading period:

Financial Item	Amount (₦)
Issued and fully paid Ordinary Shares (50k each)	500,000
8% Preference Shares	200,000
Share Premium Account	30,000
Retained Profit brought forward	30,000
Net Profit for the year	180,000

The directors proposed a $6\%$ dividend on ordinary shares and resolved to transfer $₦40,000$ to the general reserve. What is the retained profit carried forward to the Statement of Financial Position?

₦124,000

₦154,000

₦64,000

₦140,000

Show answer & explanation

Answer: ₦124,000

Answer

The retained profit carried forward to the Statement of Financial Position is ₦124,000.

The total profit available for distribution consists of the current year's net profit (₦180,000) plus the retained profit brought forward (₦30,000), giving ₦210,000. Capital reserves such as Share Premium (₦30,000) cannot be added to distributable profits. The total appropriations required are the 8% Preference Share Dividend (₦16,000), the 6% Ordinary Share Dividend (₦30,000), and the transfer to General Reserve (₦40,000), totaling ₦86,000. Deducting ₦86,000 from ₦210,000 leaves a retained profit of ₦124,000 to be carried forward.

Step-by-Step Solution

1

Calculate preference share dividend

8\% \times ₦200,000 = ₦16,000

Preference shareholders are entitled to a fixed percentage dividend calculated on preference share capital.

2

Calculate proposed ordinary share dividend

6\% \times ₦500,000 = ₦30,000

Dividend rate applies to the paid-up ordinary share capital.

3

Calculate total profit available for appropriation

₦180,000 \text{ (Net Profit)} + ₦30,000 \text{ (Retained Profit b/f)} = ₦210,000

Total revenue profit available comprises current net profit plus prior accumulated unappropriated profit. Share premium is a capital reserve and is excluded.

4

Deduct total appropriations to find retained profit carried forward

₦210,000 - (₦16,000 + ₦30,000 + ₦40,000) = ₦210,000 - ₦86,000 = ₦124,000

Subtract preference dividend, ordinary dividend, and transfer to general reserve from total profit available.

Key Concept

Profit and Loss Appropriation Account and Dividend Calculation

Estimated Time:2m 0s

Question 6Question →

Vanguard Logistics PLC presents the following financial balances at the end of its financial year:

Financial Item	Amount ( $₦$ )
Authorized Share Capital ( $1,000,000$ Ordinary shares of $₦1.00$ each)	$1,000,000$
Issued and Fully Paid-up Capital ( $600,000$ Ordinary shares of $₦1.00$ each)	$600,000$
$10\%$ Preference Share Capital	$200,000$
Retained Profit brought forward	$45,000$
Net Profit for the year	$180,000$

During the year, the directors transferred $₦30,000$ to the General Reserve, paid an interim ordinary dividend of $5\%$ , and proposed a final ordinary dividend of $10\%$ . Preference share dividends were also fully provided for.

What is the retained profit to be carried forward to the next financial year?

₦25,000

₦85,000

₦40,000

₦105,000

Show answer & explanation

Answer: $₦85,000$

Answer

The retained profit carried forward to the next financial year is

₦85,000

.

Total profit available for distribution is

₦225,000

(

₦45,000

opening retained balance plus

₦180,000

net profit). The total appropriations equal

₦140,000

, consisting of preference dividend (

₦20,000

), transfer to reserve (

₦30,000

), interim ordinary dividend (

₦30,000

), and proposed final ordinary dividend (

₦60,000

). Subtracting

₦140,000

from

₦225,000

yields

₦85,000

as retained profit carried forward.

Step-by-Step Solution

1

Calculate total profit available for appropriation

Total Available Profit = Retained Profit b/f (

₦45,000

) + Net Profit for the year (

₦180,000

) =

₦225,000

.

Appropriations are made out of the aggregate of accumulated profits brought forward and current year profit.

2

Calculate individual appropriations and total dividends

Preference Dividend =

10\% \times ₦200,000 = ₦20,000

.
Transfer to General Reserve =

₦30,000

.
Interim Ordinary Dividend =

5\% \times ₦600,000 = ₦30,000

.
Proposed Final Ordinary Dividend =

10\% \times ₦600,000 = ₦60,000

.
Total Appropriations =

₦20,000 + ₦30,000 + ₦30,000 + ₦60,000 = ₦140,000

.

Dividends must be calculated on issued and paid-up capital, not on authorized share capital.

3

Deduct total appropriations from total profit available

Retained Profit carried forward =

₦225,000 - ₦140,000 = ₦85,000

.

The remaining unappropriated balance represents the balance carried forward to the balance sheet.

Key Concept

Profit and Loss Appropriation Account and Dividend Computation on Paid-up Capital

Question 7Question →

The following trial balance extract was taken from the books of Omolola Plc as at 31st December 2025:

Account Details	Amount (₦)
Retained profit (1st January 2025)	$45,000$
Net profit for the year ended 31st December 2025	$180,000$
$8\%$ Preference Share Capital (₦1 nominal value)	$200,000$
Issued Ordinary Share Capital (₦1 nominal value)	$500,000$

Additional Information:
1. Authorized share capital consists of $800,000$ ordinary shares of ₦1 each and $200,000$ preference shares of ₦1 each.
2. The directors recommended a transfer of $10\%$ of the current year's net profit to General Reserve.
3. An interim dividend of $5\%$ was paid on ordinary shares during the year.
4. Preference dividend for the year is to be fully provided for, and a final dividend of $8\%$ is proposed on ordinary shares.

What is the retained profit balance carried forward to the next accounting period?

Show answer & explanation

Answer: 126000

Answer

The retained profit balance carried forward to the next accounting period is ₦126,000.

The retained profit carried forward to the next period is determined by taking the total profit available (retained profit brought forward of ₦45,000 plus net profit for the year of ₦180,000 = ₦225,000) and deducting total appropriations: general reserve transfer (₦18,000), preference share dividend (₦16,000), interim ordinary dividend (₦25,000), and proposed final ordinary dividend (₦40,000), giving a final balance of ₦126,000.

Step-by-Step Solution

1

Calculate total profit available for appropriation

₦225,000

Total profit available is the sum of retained profit brought forward (₦45,000) and net profit earned during the year (₦180,000).

2

Calculate transfer to General Reserve

₦18,000

The transfer to General Reserve is computed as 10% of the current year's net profit of ₦180,000.

3

Calculate preference share dividend

₦16,000

Preference dividend is calculated at 8% on the paid-up preference share capital of ₦200,000.

4

Calculate ordinary share interim and final dividends

Interim: ₦25,000; Final: ₦40,000

Dividends are calculated on issued ordinary share capital (₦500,000). Interim dividend = 5% of ₦500,000 = ₦25,000; Proposed final dividend = 8% of ₦500,000 = ₦40,000.

5

Deduct total appropriations from total profit available

₦126,000

Retained profit carried forward = ₦225,000 - (₦18,000 + ₦16,000 + ₦25,000 + ₦40,000) = ₦225,000 - ₦99,000 = ₦126,000.

Key Concept

Profit and Loss Appropriation Account Balance Determination

Question 8Question →

Highridge Capital Plc presents the following capital structure and financial information for the year ended 31st December 2025:

Financial Item	Details / Amount
Issued $6\%$ Preference Shares of $₦1.00$ each	$₦500,000$
Issued Ordinary Shares of $₦0.50$ each	$800,000$ shares
Net profit for the year ended 31st December 2025	$₦185,000$
Retained profit brought forward ( $1\text{st}$ January 2025)	$₦35,000$

The board of directors approved the following appropriations:
- Transfer to General Reserve: $₦40,000$
- Interim ordinary dividend paid: $₦15,000$
- Preference share dividend: Fully provided for
- Proposed final ordinary dividend: $5\%$ on paid-up ordinary share capital

What is the retained profit balance carried forward to the next financial year?

₦95,000

₦115,000

₦80,000

₦145,000

Show answer & explanation

Answer: ₦115,000

Answer

The retained profit carried forward to the next financial year is ₦115,000.

The total profit available for appropriation is ₦220,000 (₦185,000 current net profit + ₦35,000 opening retained profit). The total appropriations consist of the preference dividend of ₦30,000 (

6\% \times ₦500,000

), general reserve transfer of ₦40,000, interim ordinary dividend of ₦15,000, and proposed final ordinary dividend of ₦20,000 (

5\% \text{ of } [800,000 \times ₦0.50 = ₦400,000]

). Subtracting the total appropriations of ₦105,000 from ₦220,000 leaves a retained profit carried forward of ₦115,000.

Step-by-Step Solution

1

Calculate the total profit available for appropriation

Total Available Profit = ₦185,000 (Net Profit for year) + ₦35,000 (Retained Profit b/f) = ₦220,000

Retained profits brought forward from previous periods must be added to the current period's net profit to determine distributable profits.

2

Calculate preference share dividend

Preference Dividend = 6% × ₦500,000 = ₦30,000

Fixed preference dividends are calculated as a percentage of paid-up preference share capital.

3

Calculate ordinary share capital and proposed final ordinary dividend

Paid-up Ordinary Share Capital = 800,000 shares × ₦0.50 = ₦400,000. Proposed Final Ordinary Dividend = 5% × ₦400,000 = ₦20,000

Dividends are computed on the total nominal paid-up monetary value of capital, not simply on the number of issued shares.

4

Sum all appropriations and calculate retained profit carried forward

Total Appropriations = ₦30,000 (Pref. Div) + ₦40,000 (General Reserve) + ₦15,000 (Interim Div) + ₦20,000 (Final Ord. Div) = ₦105,000. Retained Profit c/f = ₦220,000 - ₦105,000 = ₦115,000

Subtracting total appropriations from total available profit gives the retained balance carried forward.

Key Concept

Profit and Loss Appropriation Account and Dividend Calculation

Estimated Time:2m 0s

Question 9Question →

The following financial information was extracted from the books of Zaria Foods Plc for the year ended 31st December 2025:

Financial Item	Amount (₦)
Authorized Share Capital (1,000,000 Ordinary shares of ₦1.00 each)	1,000,000
Issued and Paid-up Ordinary Share Capital (600,000 shares of ₦1.00 each)	600,000
10% Preference Share Capital (200,000 shares of ₦1.00 each)	200,000
Retained Profit brought forward (1st January 2025)	45,000
Net Profit for the year ended 31st December 2025	250,000

The directors resolved to transfer ₦30,000 to the General Reserve, pay the preference dividend in full, and declare a 12% dividend on ordinary shares.

What is the retained profit carried forward to the next financial year?

₦173,000

₦125,000

₦128,000

₦193,000

Show answer & explanation

Answer: ₦173,000

Answer

The retained profit carried forward to the next financial year is ₦173,000.

The total profit available for appropriation is ₦295,000 (current net profit of ₦250,000 plus retained profit brought forward of ₦45,000). Total appropriations comprise the preference dividend of ₦20,000 (10% of ₦200,000), ordinary share dividend of ₦72,000 (12% of ₦600,000 paid-up capital), and general reserve transfer of ₦30,000, totaling ₦122,000. Subtracting ₦122,000 from ₦295,000 leaves a retained profit carried forward of ₦173,000.

Step-by-Step Solution

1

Calculate the total profit available for appropriation

Total Available Profit = ₦250,000 (Net Profit) + ₦45,000 (Retained Profit b/f) = ₦295,000

Retained earnings from previous periods are combined with current year net profits to determine total distributable profit.

2

Calculate the 10% Preference Share Dividend

Preference Dividend = 10% × ₦200,000 = ₦20,000

Preference shareholders are entitled to a fixed dividend rate based on paid-up preference share capital.

3

Calculate the Ordinary Share Dividend on paid-up ordinary capital

Ordinary Dividend = 12% × ₦600,000 = ₦72,000

Dividends are declared and paid exclusively on issued and paid-up capital, never on authorized capital.

4

Sum total appropriations and compute retained profit carried forward

Total Appropriations = ₦20,000 + ₦72,000 + ₦30,000 = ₦122,000
Retained Profit c/f = ₦295,000 - ₦122,000 = ₦173,000

Deducting total appropriations (reserve transfers plus dividends) from available profit gives the balance remaining in retained earnings.

Key Concept

Profit and Loss Appropriation Account and Dividend Distribution

Profit and Loss Appropriation Account and Dividend Calculation

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