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ACCA Applied Knowledge · Business and Technology · Financial information provided by business

At 1 January a company had equity of $500,000. During the year it made a profit after tax of $80,000, recognised a revaluation surplus of $30,000 in other comprehensive income, issued shares for $50,000 cash and paid dividends of $20,000. What is closing total equity?

Closing equity is $640,000: opening $500,000 plus profit $80,000, revaluation surplus $30,000 and share issue $50,000, less dividends $20,000. The statement of changes in equity includes total comprehensive income and transactions with owners, so the dividend is deducted.

  1. A$610,000
  2. B$640,000Correct
  3. C$660,000
  4. D$590,000

Explanation

Closing equity = 500,000 + 80,000 profit + 30,000 revaluation surplus + 50,000 share issue - 20,000 dividends = 640,000. Option $660,000 ignores the dividend. Option $610,000 omits the share issue. Option $590,000 omits the revaluation surplus and the share issue.

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