Dividend Policy LO 7 3102016 12 Illustration David Freight Corp on June 10

Dividend policy lo 7 3102016 12 illustration david

This preview shows page 11 - 15 out of 15 pages.

Dividend Policy LO 7
Image of page 11
3/10/2016 12 Illustration: David Freight Corp. on June 10 declared a cash dividend of 50 cents a share on 1.8 million shares payable July 16 to all stockholders of record June 24. At date of declaration (June 10) Retained Earnings 900,000 Dividends Payable 900,000 At date of record (June 24) No entry At date of payment (July 16) Dividends Payable 900,000 Cash 900,000 Dividend Policy LO 7 Property Dividends Dividends payable in assets other than cash. Restate at fair value the property it will distribute, recognizing any gain or loss. Also called dividends in kind. Dividend Policy LO 7
Image of page 12
3/10/2016 13 Illustration: Hopkins, Inc. transferred to stockholders some of its equity investments costing $1,250,000 by declaring a property dividend on December 28, 2013, to be distributed on January 30, 2014, to stockholders of record on January 15, 2014. At the date of declaration, the securities have a market value of $2,000,000. Hopkins makes the following entries. At date of declaration (December 28, 2013) Equity Investments 750,000 Unrealized Holding Gain or Loss Income 750,000 Retained Earnings 2,000,000 Property Dividends Payable 2,000,000 Dividend Policy LO 7 Dividend Policy Property Dividends Payable 2,000,000 Equity Investments 2,000,000 LO 7 Illustration: Hopkins, Inc. transferred to stockholders some of its equity investments costing $1,250,000 by declaring a property dividend on December 28, 2013, to be distributed on January 30, 2014, to stockholders of record on January 15, 2014. At the date of declaration, the securities have a market value of $2,000,000. Hopkins makes the following entries. At date of distribution (January 30, 2014)
Image of page 13
3/10/2016 14 Liquidating Dividends Any dividend not based on earnings reduces corporate paid-in capital. The portion of these dividends in excess of accumulated income represents a return of part of the stockholder’s investment. Dividend Policy LO 7 Illustration: Horaney Mines Inc. issued a “dividend” to its common stockholders of $1,200,000. The cash dividend announcement noted stockholders should consider $900,000 as income and the remainder a return of capital. Horaney Mines records the dividend as follows. Date of declaration Retained Earnings 900,000 Paid-in Capital in Excess of Par-Common 300,000 Dividends Payable 1,200,000 Dividend Policy LO 7 Date of payment Dividends Payable 1,200,000 Cash 1,200,000
Image of page 14
3/10/2016 15 End of Lecture 2
Image of page 15

You've reached the end of your free preview.

Want to read all 15 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes