Lecture Notes - Assign 8

Feel good factor for investors o conserves cash stock

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“Feel good” factor for investors o Conserves cash Stock Dividends Decrease retained earnings and increase paid-in capital. Require a journal entry. Only given/calculated on outstanding shares. E.g. 200,000 authorized shares, 100,000 issued shares, 90,000 outstanding shares, 10,000 treasury stock. Market value $100 5% stock dividend declared. o 4,500 new shares = 90,000 * 5% o After dividend: 104,500 shares issued, 94,500 outstanding, 10,000 treasury stock. 200,000 authorized shares. o Debit stock dividend for 4,500shares * $100 = $450,000 Treasury Stock Stock the company has repurchased. Has a debit balance, equity account. (decreases equity) When treasury stock is resold: o Sales price > purchase price, difference is credit Paid-in-Capital, Treasury Stock o Sales price < purchase price, difference is debit Paid-in-Capital, Treasury Stock To record the purchase: Dr Treasury Stock Cr Cash To record the sale: Dr Cash (sales price) Dr/CrPaid-in-capital, TS (difference) Cr Treasury Stock (purchase price)
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