Ch 12 - Retained Earnings(2)

Payment of dividends from paid in capital in excess

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Unformatted text preview: rom Legal Capital is Illegal. Payment of dividends from Paid-In Capital in Excess of Par is Legal in some States. Payment of Dividends from Retained Earnings is Legal in All States. Companies are frequently constrained by Agreements with Lenders to Pay Dividends only from Retained Earnings Dividends Dividends Dividends Require Information On 3 Dates: Ex-Dividend Date–Last day to Buy/Sell stock & affect ownership as of Record Date. Usually, 3-days prior to Record Date. Dividend Dates • • Date of Declaration Board of Directors declares the dividend. Record a liability. On March 1, 2009, Board of Directors of Matrix, Inc. declares a $1.00 per share cash dividend on its 500,000 common shares outstanding. The dividend is payable to stockholders of record on April 1, & paid on May 1. Dividend Dates Ex-Dividend Date The day which serves as the ownership cut-off point for the receipt of the most recently declared dividend. Usually 3 days before Record date. NO ENTRY Dividend Dates Date of Record Date Stockholders holding shares on this date will receive the dividend. (No Entry) April 2009 X Dividend Dates Date of Payment Date Record the payment of the dividend to stockholders. Dividend Dates $ 100 × 8% = $ 8 Dividend Per Share 100 $ 8 × 2,500 = $20,000 Total Dividend On June 1, board of directors declared a dividend for the 2,500 Shares of its $100 Par Value, 8% Preferred Stock. The dividend will be Paid On July 15. Which of the following will be included in the July 15 Entry? a. Debit Retained Earnings $20,000. b. Debit Dividends Payable $20,000. c. Credit Dividends Payable $20,000. d. Credit Preferred Stock $20,000. Stock Dividends Distribution of Additional Shares of Stock to Stockholders No Change in Total Stockholders’ Equity No Change in Par Values All Stockholders retain same All Percentage Ownership Dividends Dividends Stock Dividends Pro Rata Distribution Of Corporation’s Own Stock Results in Decrease in Retained Earnings & Increase in Paid-In Capital. Dividends Dividends Stock Dividends Reasons Why Co...
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This document was uploaded on 03/12/2014 for the course ACCOUNTING 101 at Fullerton College.

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