Student Notes, Equity(18)

Re and comprehensive income re and comprehensive

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R/E and Comprehensive Income R/E and Comprehensive Income R/E and Comprehensive Income R/E and Comprehensive Income
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Chapter 18-25 Dividend Policy Dividend Policy Dividend Policy Dividend Policy Dividend distributions generally are based on accumulated profits (retained earnings). Few companies pay dividends in amounts equal to their legally available retained earnings. Why? Maintain agreements with creditors. Meet state incorporation requirements. To finance growth or expansion. To smooth out dividend payments. To build up a cushion against possible losses.
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Chapter 18-26 1. Cash dividends. 2. Property dividends. Types of Dividends Types of Dividends Types of Dividends Types of Dividends Dividends require information concerning three dates: a. Date of declaration b. Date of record c. Date of payment 3. Liquidating dividends. 4. Stock dividends.
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Chapter 18-27 Cash Dividends Board of directors vote on the declaration of cash dividends. A declared cash dividend is a liability. Companies do not declare or pay cash dividends on treasury  stock. Types of Dividends Types of Dividends Types of Dividends Types of Dividends
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Chapter 18-28 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) March 25 (Date of Record) April 6 (Payment Date) Debit Credit Cash Dividend Cash Dividend Cash Dividend Cash Dividend
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Chapter 18-29 Property Dividends Dividends payable in assets other than cash. Restate at fair value the property it will distribute,  recognizing any gain or loss. Types of Dividends Types of Dividends Types of Dividends Types of Dividends
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Chapter 18-30 Illustration A dividend is declared Jan. 5th and paid Jan. 25th, in bonds held as an investment; the bonds have a book value of $100,000 and a fair market value of $135,000. Date of Declaration Date of Issuance Debit Credit Property Dividend Property Dividend Property Dividend Property Dividend
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Chapter 18-31 Liquidating Dividends Any dividend not based on earnings reduces corporate paid- in capital. Types of Dividends Types of Dividends Types of Dividends Types of Dividends
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Chapter 18-32 June 1 (Payment Date) April 20 (Declaration Date) Debit Credit Radical Rex Mining Company declared, on April 20, a dividend of $700,000 payable on June 1. Of this amount, $125,000 is a return of capital. Prepare the April 20 and June 1 entries for Radical Rex. Liquidating Dividend Liquidating Dividend Liquidating Dividend Liquidating Dividend
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Chapter 18-33 Stock Dividends Issuance of own stock to stockholders on a pro rata basis, without receiving  any consideration. When stock dividend is less than 20–25 percent of the common shares  outstanding, company transfers  fair market value  from retained earnings  ( small stock dividend ).   If greater than 20-25 percent of the common shares outstanding, then it is a 
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