Distributable reserves limit maximum dividends Steps:

• Exclude share capital ($500,000) as it represents permanent capital and cannot fund dividends.
• Exclude revaluation reserve ($100,000) as it arises from unrealized gains and is non-distributable until realized.
• Include general reserve ($30,000) as it consists of accumulated realized profits available for distribution.
• Add share premium ($100,000) as it qualifies as a distributable reserve under applicable company law for dividend payments.
• Total distributable amount: $100,000 +$30,000 = $130,000.

Why B is correct:

• Company law (e.g., Companies Act provisions) allows dividends from realized profits and certain reserves like share premium and general reserve, totaling $130,000 here.

Why the others are wrong:

• A: Only general reserve; ignores distributable share premium.
• C: Understates by excluding all reserves; no basis for $20,000 limit.
• D: Only general reserve portion; incomplete as share premium is also available.

Final answer: B