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ACCA Applied Skills · Corporate and Business Law (Global) · Capital maintenance and dividend law

Orlo plc has accumulated realised profits of 400,000, accumulated realised losses of 150,000 and unrealised revaluation gains of 300,000 on property. Assuming distributable profits are accumulated realised profits less accumulated realised losses, what is the maximum lawful dividend?

The maximum lawful dividend is 250,000. Distributable profits are accumulated realised profits of 400,000 less accumulated realised losses of 150,000. Unrealised revaluation gains of 300,000 cannot be distributed, so they are excluded from the calculation.

  1. A550,000
  2. B250,000Correct
  3. C400,000
  4. D700,000

Explanation

Distributable profits equal realised profits less realised losses: 400,000 - 150,000 = 250,000. Unrealised gains are excluded. Adding them gives 550,000 and ignoring the losses gives 400,000, both wrong; 700,000 adds gains and ignores losses.

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