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hey sir.
Kindly explain the following from dec 2011 question.
Q2
(1).Revenue includes goods sold and desptached in sept 2011 on a 30-day right of return basis. The selling price was $2.4 million and they were sold at a gross profit margin of 25%.Keystone is uncertain as to whether the these goods will be returned within 30 days period.(iii) on 15 august 2011, keystone’s share price stood at $2.40 per share . On this date, keystone paid a dividend (included in administrative expenses) that was calculated to give a dividend yield of 4%.
sir, help. I do not really understand how I can go about this questions.thanks in advance for always being there for us
If they are “sold” on a sale-or-return basis, then they are not sold so we need to remove them from revenue an receivables and bring them back into inventory at cost
Revenue and receivables adjustment is $2.4m
Inventory adjustment is 75% of $2.4mDividend yield is calculated as the cent return per dollar invested.
If you want a 4% return on your investment of $2.40, you’re looking to receive a dividend of 9.6 cents per share
Is that ok?
Share capital given is 50000 so as per calculation dividend paid should be 50000*2.4*0.04*6/12 = 2400
but the answer give has calculated as 50000*5*2.4*0.04 = 24000
could you please explain this as exam is tomorrow.
Hi,
The 0.04 is the dividend yield and the 2.40 is the price per share. By multiplying the two we are getting the dividend per share (dividend yield = dividend per share / price per share).
The 50,000 x 5 will be the number of share in issue. If the share capital is $50,000 then we need to divided by the par value to calculate the number of shares in issue. Presumably they are $0.20 shares, where dividing by 0.2 is the same as multiplying by 5.
Thanks
In this question why is the Dividend deducted instead of added to the Administrative expenses? Am I missing something?
Hi,
The dividend has been included in the administrative expenses, when it shouldn’t be. By including it in the administrative expenses then it will have increased the expenses. To remove the increase in expenses then we would need to deduct the dividend.
Using numbers to illustrate then imagine if the expenses were 1,000 and a dividend of 100 had been included in the admin expenses. To get the right expenses figure then we would deduct the 100 from the 1,000 to get the correct 900.
Thanks
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