From the information given below, you are required to prepare a profit and loss appropriation accounts for the first three years for Dambo Limited, a company based in Lusaka.

Ordinary share capital of 40 000 ordinary shares of K1.00 each and 20 000 5% preference shares of K1.00 each.

Corporation Tax based on the net profits of each year, is:

K4 100

K5 250

K 6 300

Transfers to reserves are made as follows: 2004 nil, 2005 general reserve K1 000, and 2006, fixed asset replacement reserve, K2 250.

Dividends were proposed for each year on the preference shares at 5 % and on the ordinary shares at: 2004, 10%; 2005, 12.5%; and 2006, 15%.

The net profits for the first three years of business ended 31 December are: K10 967, K14 864 and K15 822, respectively.