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Discuss the requirement for the Ethical Trading Group of franking accounts. Why is it required and when can dividends be paid? What is the process that Ethical Trading Group should follow in regards to coming to the decision to pay a dividend?
Ethical Trading Group had a credit franking account balance of $8,500 at the beginning of the financial year (1 July).
The following transactions occurred during the year:
• A fully franked interim dividend of $10,000 was paid on 2 July.
• During the year, PAYG instalments of $3,000 were paid on the 28 July, 28 October, 28 February and 28 April of the current income tax year.
• The company received a fully franked dividend of $5,000 on 1 September and a further $2,000 in fully franked dividends on the 31 March.
• On 1 April they paid a fully franked final dividend of $7,500.
• On 20 February they received a tax refund of $4,500 for last financial year.
• On 28 July of the next financial year, a PAYG instalment of $4,000 was paid.
Based on the information provided, prepare a franking account for ETHICAL TRADING GROUP. Show any workings (where relevant