ac101_ch11 - Revised September 2007 ACC101 CHAPTER 11...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Revised September 2007 1 ACC101 – CHAPTER 11 Accounting for Equity
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revised September 2007 2 Key Terms and Concepts to Know Authorized Shares – number of shares a corporation is legally entitled to issue Issued Shares – number of shares sold to stockholders Outstanding Shares – shares issued minus any shares reacquired by the corporation; i.e., the number of shares still owned by shareholders Common Stock – basic class of stock ownership with right to vote Preferred Stock – stock with a preferential right to dividends (preferred shareholders receive their stated dividend before common shareholders may receive a dividend) Cumulative Preferred Stock – stockholders have the right to receive dividends in arrears (their regular dividends passed or not paid in previous years) before common shareholders may receive a dividend
Background image of page 2
Revised September 2007 3 Dividends Cash Dividends – Most cash dividends are declared on a per share basis; therefore it is important to keep track of the number of outstanding shares of stock. The number of shares outstanding changes with each stock issuance and each purchase or sale of treasury stock. Cash Dividends – a temporary account closed to Retained Earnings at the end of the period Stock Dividends – Stock dividends distribute common stock rather than cash to the shareholders. Small stock dividends, up to 25% of the outstanding shares, are recorded by capitalizing an amount equal to the number of shares times the current market price. Large stock dividends are recorded by capitalizing an amount equal to the number of shares times the par value. Stock dividends do not affect total assets, total liabilities or total stockholders’ equity. All of the accounts used to record stock dividends are equity accounts. Stock dividends capitalize a portion of retained earnings transferring it to paid-in capital. Therefore retained earnings decreases by the same amount as the total increase in common stock and paid-in capital in excess of par. Stock Dividends – a temporary account closed to Retained Earnings at the end of the period Stock Dividend Distributable – a temporary owner’s equity account used until the shares are issued There are three important dates for both types of dividends: ± Date of Declaration – Journalize the entry to record cash dividends payable or shares distributable ± Date of Record – All stockholders on this date will receive the dividend (no entry) ± Date of Payment – Journalize the entry to pay cash dividends to shareholders or distribute the shares of stock Journal entries for cash dividends: Cash to be distributed: outstanding shares X dividend $ per share Date of Declaration: Cash Dividends XXX Cash Dividends Payable XXX Date of Payment: Cash Dividends Payable XXX Cash XXX
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Revised September 2007 4 Journal entries for stock dividends: Shares to be distributed: outstanding shares * dividend % Date of Declaration: Stock Dividends (Shares * Market Price) XXX
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/01/2011 for the course ACCOUNTING 101 taught by Professor All during the Spring '11 term at Harper.

Page1 / 18

ac101_ch11 - Revised September 2007 ACC101 CHAPTER 11...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online