A.     Show the journal entries to record the following transactions for Murrurundi Ltd.

1.     Profit for the year was $1 750 000. Ignore income tax.

2.     Directors resolved to transfer the amounts specified below from retained earnings to:

(a) contingencies reserve, $1 000 000

(b) general reserve, $400 000.

3.     Some years ago, the company had established an exchange fluctuation reserve, $4500000, but now that it had withdrawn from international trade, this reserve was no longer required.

4.     Start-up costs $250 000 were to be written off. This has not been reflected in the profit in (1) above.

5.     An interim dividend of $200 000 had been paid and directors recommended a final dividend of $300000 to be paid in 3 months’ time, after ratification by shareholders at the annual general meeting. Both dividends were paid out of retained earnings.

Note: The beginning balance of the Retained Earnings account was $1800000.

B. Prepare the statement of changes in equity for Murrurundi Ltd.