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Dear all,
Company has $2000 loss carried forward from previous years and its profit for the current year is $3000 while revaluation reserve is $4000.
Based on the answer dividend has to be paid out of $3000 since revaluation reserve is not considered unrealized profit. But why loss carried forward from previous years is not deducted from profit?
My best guess would be a capital reduction took place to allow them to make the dividend payment.Does the question indicate this happened?
Actually, the purpose of the question is to emphasize that revaluation of non-current assets should be added to profit when determining available profit for dividend. However the 2000 loss was not deducted from current year’s profit which is weird since it probably will be deducted for tax purposes.
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