Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. south fertilizers limited begins operations with $

South Fertilizers Limited begins operations with $10,000 cash on 1st January, 2020. With the available...

70.2K

Verified Solution

Question

Accounting

South Fertilizers Limited begins operations with $10,000 cash on 1st January, 2020. With the available cash, the company immediately purchased 1000 bags (50 kg per bag) of fertilizer at the price of $10 per bag. On 31st January, 2020 the company sells all the bags of fertilizer for $15 per bag. On this date, the current cost of each bag of fertilizer has risen to $20 per bag. Assume that 50% of profits made at the end of the accounting period is paid out as dividends after a tax payment at the rate of 30%.

REQUIRED:

A. What is the difference between financial capital maintenance and physical capital maintenance?

B. Using the current cost accounting as a measurement, calculate the maximum dividend the company can pay out while still maintaining its:

  1. Financial Capital
  2. Physical Capital

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students