Polar Equip Ltd operates a ski hire business. The company reported retained earnings of \($80\) 000 and a general reserve of \($250\) 000 in its statement of financial position at 30 June 2018. During the year ended 30 June 2019, Polar Equip Ltd generated profit of \($30\) 000. It paid an interim dividend of \($20\) 000 in January and declared a final dividend of \($40\) 000 on 30 June 2019. The directors decided to transfer \($50\) 000 from the general reserve account to the retained earnings account on 30 June 2019.
Calculate the closing balance of retained earnings and the general reserve at 30 June 2019 and prepare reconciliation statements showing the movement in each of these accounts.
Reasoning
The general reserve account is reduced by the transfer from the general reserve to retained earnings. The retained earnings account is increased by profit and the transfer from the general reserve dividends.