14 - Presentation Deck - ACC 212 PRINCIPLES OF ACCOUNTING...

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ACC 212: PRINCIPLES OF ACCOUNTING CHAPTER 14: CORPORATIONS: Dividends, Retained Earnings, and Income Reporting PRESENTATION DECK Prepared by: Jill Mitchell, Assistant Professor, NOVA Reference: Weygandt, Jerry, Kieso, and Kimmel. Accounting Principles Unless noted, illustrations are from the referenced text.
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Chapter 14-2 Corporations: Dividends, Retained Earnings, and Income Reporting Course Competencies 1. Dividends 2. Retained Earnings 1.1 Prepare the journal entries for cash dividends and stock dividends 1.2 Allocate cash dividends between preferred and common stock 1.3 Understand what a stock split is and how it affects ownership of stock 2.1 Understand what retained earnings are and the three causes of restrictions on retained earnings
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Chapter 14-3 A distribution of cash or stock to stockholders on a pro rata (proportional) basis. Types of Dividends: Dividends 1.1 Prepare the journal entries for cash dividends and stock dividends 1. Cash dividends. 2. Property dividends. Dividends expressed: (1) as a percentage of the par or stated value, or (2) as a dollar amount per share. 3. Script (promissory note). 4. Stock dividends.
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Chapter 14-4 For a corporation to pay a cash dividend, it must have: 1. Retained earnings - Payment of cash dividends from retained earnings is legal in all states. 2. Adequate cash. 3. A declaration of dividends by the Board of Directors. Dividends: Cash Dividends 1.1 Prepare the journal entries for cash dividends and stock dividends
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Chapter 14-5 Dividends require information concerning three dates: Dividends : Cash Dividends 1.1 Prepare the journal entries for cash dividends and stock dividends Dr. Retained Earnings Cr. Dividends Payable NO JOURNAL ENTRY Dr. Dividends Payable Cr. Cash The cumulative effect of the declaration and payment of cash dividend is to decrease both stockholders’ equity and total assets. Dividend becomes a binding legal obligation.
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Chapter 14-6 Illustration: What would be the journal entries made by a corporation that declared a $50,000 cash dividend on December 1, payable on January 20 to shareholders of record on December 22? December 1 (Declaration Date) Dr. Retained earnings (capital +) 50,000 Cr. Dividends payable (liability +) 50,000 December 22 (Date of Record) No entry January 20 (Payment Date) Dividends Dr. Dividends payable (liability -) 50,000 Cr. Cash (asset -) 50,000 1.1 Prepare the journal entries for cash dividends and stock dividends
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14-7 Allocating Cash Dividends Between Preferred and Common Stock Dividends : Cash Dividends Holders of cumulative preferred stock must be paid any unpaid prior-year dividends ( dividends in arrears ) before common stockholders receive dividends. 1.2 Allocate cash dividends between preferred and common stock
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14 - Presentation Deck - ACC 212 PRINCIPLES OF ACCOUNTING...

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