Question

The following information has been compiled from the accounting records of Muddy Ltd for the year ended 30 June 2020. Final dividend payable $750,000 - (30/06/2019); $850,000 - (30/06/2020) Retained earnings $7,000,000- (30/06/2019); $8,500,000 - (30/06/2020) During the year ended 30 June 2020, the company declared and paid interim dividend of $450,000 to all ordinary shareholders and issued 500,000 shares at $2.00 per share in cash in March 2020. The management transferred $600,000 from the retained earnings account on 30 June 2020 to set up a property maintenance reserve account in preparation of some major maintenance work suggested by the Health and Safety department. Muddy Ltd reported $3,400,000 profit for the year ended 30 June 2020. Required:Identify and report Muddy Ltd’s financing cash flow activities for the year ended 30 June 2020. (3 marks. You must provide each cash flow item’s specification, e.g. interim dividend paid.)

Answer 1

WORKING :

Retained earning Beginning 30/6/2019	7000000
Add:Net income for the year	3400000
less:Reserves set aside	-600000
Retained earning at end 30/6/2020	-8500000
Total dividend declared in a year	1300000
less:Interim dividend declared	-450000
Final dividend declared during the year	850000

Amount of final dividend paid during the year= Beginning dividend payable +dividend declared -ending dividend payable

        = 750000 [phone]

      = 750000

CASH FLOW STATEMENT (PARTIAL) JUNE 30 2020
Financing activities
Issue of common stock (500000*2)	1000000
Interim dividend paid	-450000
Final dividend paid	-750000
Cash flow from financing activity		-200000