Question

The following information has been compiled from the accounting records of Muddy Ltd for the year ended 30 June 2020.

Final dividend payable $500,000 - (30/06/2019); $850,000 - (30/06/2020)

Retained earnings $7,500,000- (30/06/2019); $8,200,000 - (30/06/2020)

During the year ended 30 June 2020, the company declared and paid interim dividend 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 $2,900,000 profit for the year ended 30 June 2020.

Required:Calculate the amount of interim dividend paid in cash. (3 marks. Show all workings)

Answer 1

Answer:-

Retained Earnings (30/06/2019) - $7500000

Add: Profit for the year ended 30/06/2020 - $2900000

Less: Transfer to property maintenance - $600000

Less: Dividend announced for the year - $1600000 (Balancing Figure)

_________

Retained Earnings (30/06/2020) - $8200000

_________

Dividend Payable for the year 2020 = ($850000 - $500000)

= $350000

Therefore,Amount of Interim dividend paid in cash will be = Dividend announed - Dividend payable

= $1600000 - $350000

=$1250000