Reference no: EM131538030

Question: Megas Ltd. has an issued share capital of £50,000 ordinary shares and 10,000 7i per cent preference shares of £1 each. In addition, it has issued 10 per cent unsecured loan stock of £15,000 and £8,000 in 6 per cent debentures. The interest on these latter two items is payable in equal instalments on 1st January and 1st July. The company owns £6,000 3^ per cent Treasury Bonds, 1977/80 (interest payable 15th June and 15th December). The preference share dividends are payable in equal instalments on 1st April and 1st October and a final dividend on the ordinary shares of 8 per cent was paid on 15th April, 1962, in respect of the previous year, with an interim dividend of 7 per cent paid on 19th October, 1962. The company's year-end is on 31st December, and on 1st January, 1962, the provision for taxation amounted to £46,424 and the reserve for future taxation was £37,600. On 31st January profits tax of £5,418 was paid by cash and also Schedule D tax 1961/2 of £41,233. By 31st December the income tax 1962/3 was agreed at £38,129. The profits tax for the accounting period to 31st December, 1962, was estimated at £2,917 and the income tax 1963/4 was estimated at £27,648. You are required to set out the Taxation Account in the company's books for 1962 and to show the charge for taxation as it should appear in the published accounts of the company. (Income Tax is 7/9 in the £).

Re-printed by courtesy of the Association of Certified Accountants (A.C.C.A.).