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Unformatted text preview: • Cash is reduced when you pay dividends Declaration Retained Earnings Dividends Payment Cash Dividend Payable Cash Sticker company declares a $70,000 dividend in 2008 (no dividends were paid in 2006 or 2008). There are 10,0000 shares of of $10 par 8 % preferred stock and 40,0000 shares of $5 par common stock outstanding • Preferred shareholders dividend .80 per share, 10,000 shares= 8,000 • If non cumulative o Preferred shareholders get 8,000 o Common stockholders get 62,000 • If cumulative o Preferred shareholders 24,000 o Common shareholders 46,0000 • Stock dividend when Jones company pays a dividend in shares of Jones company • Large stock dividend is over 20 percent : done only at par nothing goes to additional paid in capital • Dividend deducted from retained earnings...
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