"M351 Notes-Day 14 Equity 2-17

"M351 Notes-Day 14 Equity 2-17 - M351 Notes, Class...

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Unformatted text preview: M351 Notes, Class 14: Stockholders Equity, pages 756-765 A. In order to pay cash dividends a company must have sufficient retained earnings and cash. B. There are four kinds of dividends: 1. cash 2. property 3. liquidating 4. stock (usually common) Dividends are paid only on outstanding shares. The first three kinds of dividends reduce stockholders equity; stock dividends do not reduce stockholders equity. C. There are three important dates for dividends: 1. date of declaration (by the Board) of the dividends; 2. date of record (stock must be owned at the close of business on this day) 3. date of payment (cash, property or stock distributed to shareholders) D. Lets illustrate the entries for each type of dividend: Cash dividend assume a company declares a $2 per share cash dividend at a time when it has 425,000 outstanding shares. Retained earnings ($2 x 425,000)..................................850,000 Dividends payable................................................... 850,000 Assume there remain 425,000 outstanding shares on the date of record. No entry would be required. 1 On the date of payment, the dividend is paid to shareholders....
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"M351 Notes-Day 14 Equity 2-17 - M351 Notes, Class...

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