Question : Adjustment for Proposed Dividend is:
Option 1: Add the previous year’s proposed dividend under net profit before tax and extraordinary items and deduct it under Financing Activity.
Option 2: Add the current year’s proposed dividend under net profit before tax and extraordinary items and deduct previous year’s proposed dividend under Financing Activity.
Option 3: Add the current year’s proposed dividend under Net Profit before Tax and Extraordinary Items and deduct current year’s proposed dividend under Financing Activity
Option 4: None of the above
Correct Answer: Add the previous year’s proposed dividend under net profit before tax and extraordinary items and deduct it under Financing Activity.
Solution : In order to calculate net profit before tax and extraordinary items in the cash flow statement, the proposed dividend from the prior year is added back. As an outflow in finance activity, [Proposed Dividend of Previous Year - Unpaid (Unclaimed) Dividend] is recorded.
Hence the Correct answer is option 1.
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