Foromin Limited has share capital of £20,000, share premium of £50,000 and retained earnings at the start of the financial year (1 July 2018) of £150,000. During the year ended 30 June 2019, Foromin Limited makes a profit of £60,000 from which a dividend of £40,000 is paid to shareholders. What is the total equity of Foromin Limited at 30 June 2019?

Question

Quizplus · Accepted Answer

The total equity is calculated by adding share capital, share premium, and retained earnings at the end of the year. Retained earnings at the end of the year are the initial retained earnings plus profit minus dividends: £150,000 + £60,000 - £40,000 = £170,000. Total equity = £20,000 (share capital) + £50,000 (share premium) + £170,000 (retained earnings) = £240,000.

Foromin Limited Has Share Capital of £20,000, Share Premium of £50,000