chapter14 - Chapter 14-1 CHAPTER 14 ACCT100 Autumn 2011...

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Unformatted text preview: Chapter 14-1 CHAPTER 14 ACCT100 Autumn 2011 Teresa Chu Corporations: Dividends, Retained Earnings and Income Reporting Chapter 14-2 Dividends Distribution of cash or stock to stockholders on pro rata (proportional) basis Types: (1) Cash (2) Property (3) Scrip – Promissory note to pay cash (4) Stock Expressions: ⇒ ?% of par or stated value ⇒ $? per share Chapter 14-3 Cash Dividends Cash dividends require: (1) Retained earnings- Liquidating dividends: Dividends declared from paid-in capital (2) Cash- Consider current and future cash demand (3) Declaration by Board of Directors Appropriate amount of cash dividends???- Too much ⇒ Liquidity problem- Too little ⇒ Not attractive to investors Chapter 14-4 3 important dates 2 journal entries only Chapter 14-5 Illustration: What would be the journal entries made by a corporation that declared a $50,000 cash dividend on March 10, payable on April 6 to shareholders of record on March 25? March 10 (Declaration Date) Retained earnings 50,000 Dividends payable 50,000 March 25 (Date of Record) No entry April 6 (Payment Date) Dividends payable 50,000 Cash 50,000 Effect: ↓ both total assets and total stockholders’ equity Chapter 14-6 Require allocation of cash dividends if there are 2 classes of stockholders Cumulative preferred stock is paid first for their dividends-in-arrears AND current dividends before common stockholders Dividends-in-arrears is lost if PS is non-cumulative Exercise Arnez Corporation was organized on January 1, 2007. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2007, $6,000, 2008, $12,000, and 2009, $28,000. Chapter...
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This note was uploaded on 09/09/2011 for the course ACCT 100 taught by Professor T.chu during the Spring '11 term at University of Macau.

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chapter14 - Chapter 14-1 CHAPTER 14 ACCT100 Autumn 2011...

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