Page 190 - F3 -FA Integrated Workbook STUDENT 2018-19

Chapter 13

Example 4

Dividend payment

Continuing with the example Campbell Co, more years have passed and
retained earnings now stand at $23 million. Campbell Co has now decided to
pay a dividend of $0.20 per share to its shareholders. Campbell Co currently
has the following issued share capital and other components of equity
immediately prior to the bonus issue:

Original Updated
$000 $000

Issued share capital @ $0.50 each 3,600 3,600
Share premium 5,900 5,900

Revaluation surplus 3,000 3,000
Retained earnings 23,000 21,560

––––– –––––
Total equity 35,500 34,060
––––– –––––

Required:

State the accounting entries required to account for the dividend
payment and prepare an updated summary of Campbell Co’s issued
share capital and other components of equity.

Solution

$000

Debit Retained earnings 1,440
Credit Cash paid 1,440

Shares in issue = 3.6m × 2 = 7.2m

Dividend paid = 7.2m × $0.20 = $1.44m

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