ABC SAOG has in issue 2,000,000 ordinary shares of OMR 0.500 fully paid. On 31st Dec 2018 management board has decided to pay a dividend of 100 baisa on each ordinary share which was readily approved by the shareholders. The date of payment was 10th March 2019. During the year the company earned a profit after tax of OMR 200,000. The company paid the amount of dividends for the ordinary shareholders for the year 2019.

ANSWER QUESTION NO 40 TO 42

40-Which of the following journal entry is Correct for declaring dividend on 31st December 2018?

a.

Debit Equity dividend payable and Credit Retained earnings

b.

Debit Bank and Credit Equity dividend payable

c.

Debit Retained earnings and Credit Equity dividend payable

d.

Debit Equity Dividend payable and Credit Bank

41-The amount of ordinary dividend to be distributed to the shareholder is

a.

OMR 1,000,000

b.

OMR 700,000

c.

OMR 400,000

d.

OMR 200,000

42-What will be the Net Retained earnings after the payment of dividend to shareholders assuming that the company had opening Retained earnings on 1st January 2018 of OMR 800,000?

a.

OMR 300,000

b.

OMR 600,000

c.

OMR 1,000,000

d.

OMR 800,000