Question
During the year ended 30 June 2019, the directors of Cooma Ltd paid a final dividend out of retained earnings of $50,000, which had been
During the year ended 30 June 2019, the directors of Cooma Ltd paid a final dividend out of retained earnings of $50,000, which had been recommended at the end of the previous financial year. They also declared and paid an interim dividend of $126,000 on 1 February 2020. The balance of the retained earnings account at 1 July 2019 was $168,000. At 30 June 2020, the ledger accounts showed that the company had made a total profit of $840,000 for the year. However, the directors determined that the following adjustments were still necessary to finalise the accounts.
1. | Provide for an income tax liability of $252,000. | ||
2. | Recommend the payment of a final dividend of $84,000 out of retained earnings. | ||
3. | Transfer $147,000 to a general reserve and $84,000 to a plant replacement reserve. |
Closing entries
Date | Particulars | Debit | Credit |
2020 June 30 | Income and expenses (incl. tax expense) | ||
Profit or loss summary | |||
(Profit for the year (after tax)) | |||
Profit or loss summary | |||
Retained earnings | |||
(Transfer profit to retained earnings) |
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