On the record date ownership of the shares is

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On the record date, ownership of the shares is determined so that corporation knows who to pay the dividends to. The records maintained by the corporation supply this information. In the interval of the declaration date and record date, corporation updates its share ownership records.
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Allocating Cash Dividends between preferred and Common Shares REMINDER: Preferred shares have priority over common shares in regards to dividends. Priority doesn’t guarantee payment of dividend. To illustrate: assume IBC Inc. has 1000 $8 cumulative preferred shares. It also has 50,000 common shares. The directors then declare a $6000 cash dividend The required annual preferred dividend is $8000 because (1000 x $8). In this case, the entire $6000 dividend goes to preferred shareholders. Entry is as follows: Because of the cumulative feature, dividends of $2 per share are in arrears on preferred shares for the next year. That dividend must be paid before they receive current year dividends and before any future dividends can be paid to common shareholders. Dividends in arrears are not recorded as a liability until declared. To disclose them in financial statements: If preferred shares were not cumulative, preferred shareholders would only receive $8000 in dividends. Common shareholders would receive $42000. In majority of cases, a company does not declare a combined dividend amount for both classes of shares, it separates the entries into two different entries. Stock Dividends A stock dividend is a pro rata (equal) distribution to shareholders of the corporation’s own shares. A stock dividend results in a decrease in retained earnings and an increase in share capital. No change in total assets, liabilities, or shareholders’ equity. To illustrate:
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