The following instruction relates to Question 13 Merga Bien Ltd issues redeemable preference shares. The...
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Accounting
The following instruction relates to Question 13
Merga Bien Ltd issues redeemable preference shares. The shares carry a cumulative. 2%% dividend.
The shares are redeemable for cash if the company makes an accounting profit in am eat. Mera
Bien Ltd is highly proftable for the past 10 years. However, Merga had a huge loss in the 2020-2021
period due to the COVID challenges. Merga pays ordinary dividends at a yield of about 3% ammaly
without fail for the past 10 years. The market interest rate for the long-term debit at the time the
preference shares were issued was 5% p.a.
Required:
Given this senario, explain whether Merga Bien has a financial liability, Note you are not required to calculate
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