Handout Chapter 11 - CASH DIVIDENDS Distribution of co profits to shh on prorate basis Must have retained earnings enough cash Decreases total shh

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CASH DIVIDENDS - Distribution of co. profits to shh on prorate basis. - Must have retained earnings & enough cash - Decreases total shh equity & total assets - Not a liability until BOD declares Example: Corp. has 100,000 shares of $10 par value common stk. BOD declares $.50/sh cash dividend. 1. Declaration date: BOD formally authorizes cash dividend. Commits corp. to legal obligation. Retained Earnings $50,000 Dividends Payable $50,000 (100,000 shares x $.50) 2. Record date: Ownership of outstanding shares is determined for dividend purposes No Entry in Accounting Records 3. Payment date: Dividends checks mailed Dividends Payable $50,000 Cash $50,000 DIVIDENDS – CHAPTER 11 STOCK DIVIDENDS - Prorata distribution of corp stock - Changes components of shh equity o Decreases Retained Earnings o Increases Paid In Capital - Does not decrease total shh equity or total assets - You own more shares but your ownership interest does not change. -
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This note was uploaded on 12/12/2010 for the course ACCT ACCT207 taught by Professor Dragone during the Fall '10 term at University of Delaware.

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