ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Dunmore Co has the following extracts: opening retained earnings $120,000, closing retained earnings $150,000, profit for the year $70,000. Opening and closing share capital are unchanged. What dividend was paid in the year, assuming no other equity movements and that dividends were paid in cash during the year?
The dividend paid was $40,000. Opening retained earnings of $120,000 plus profit of $70,000 gives $190,000, and closing retained earnings are $150,000, so $40,000 must have been distributed. This is shown as a financing outflow.
- A$40,000Correct
- B$30,000
- C$70,000
- D$100,000
Explanation
Closing RE = opening + profit - dividends, so 150,000 = 120,000 + 70,000 - dividends. Dividends = 40,000. Choosing 30,000 only uses the movement in retained earnings and ignores the profit.
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