Dividends - dividend. The date of payment or distribution...

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Dividends The Board of Directors must authorize all dividends. A dividend may distribute cash, assets, or the  corporation's own stock to its stockholders. Distribution of assets, also called property dividends, will  not be discussed here. Before authorizing a dividend, a company must have sufficient retained  earnings and cash (cash dividend) or sufficient  authorized stock (stock dividend). Three dates are  relevant when accounting for dividends: Date of declaration. Date of record. Date of payment or distribution. The  date of declaration  is the date the Board of Directors formally authorizes for the payment of a  cash dividend or issuance of shares of stock. This date establishes the liability of the company. On  this date, the value of the dividend to be paid or distributed is deducted from retained earnings. The  date of record  does not require a formal accounting entry. It establishes who will receive the 
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Unformatted text preview: dividend. The date of payment or distribution is when the dividend is given to the stockholders of record. If a company has both preferred and common stockholders, the preferred stockholders receive a preference if any dividend is declared. Having the preference does not guarantee preferred stockholders a dividend, it just puts them first in line if a dividend is paid. Preferred stock usually specifies a dividend percentage or a flat dollar amount. For example, preferred stock with a $100 par value has a 5% or $5 dividend rate. Five percent is the $5 dividend divided by the $100 par value. This means all preferred stockholders will receive a $5 per share dividend before any dividend is paid to common stockholders. Some shares of preferred stock have special dividend features such as cumulative dividend or participating dividend....
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This note was uploaded on 11/15/2011 for the course ACCT 2310 taught by Professor Staff during the Spring '09 term at Texas State.

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