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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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