Handout Chapter 11 - CASH DIVIDENDS Distribution of co...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
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. -
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online