When liquidating dividends exceed the cost of investment, the difference is credited to gain on investment. If the cost of investment is not fully recovered, the balance is written off as a loss. 7. Stock dividends are in the form of the issuing entity’s own shares. The IAS term for stock dividend is bonus issue. Property dividends are shares of another entity declared as dividends 8. Stock dividends- changing the legal capital by capitalizing RE. Not an income since there is no distribution of assets. 9. Received 2,000 shares representing 20% stock dividend on 10,000 original shares held. Shares now held, 12,000 shares. 10. Shareholders may receive a stock dividend which is different from the original shares 11. Investment in preference share 50,000 Investment in OS 50,000 the allocated cost to OS is 750,000 based on its relative fair value. 50,000 to preference share. Total cost is 800,000 11. Shares received in lieu of cash dividend are income at fair value of the shares received . Such shares are in effect property dividends. 12. If there is no market value, dividend income is recorded at cash dividend 13. The “as if approach” is used when 150,000 cash is received in lieu of 1,000 stock dividend declared. It is then assumed that the shares are received and subsequently sold at the cash received. the original cost of 1,100,000 will now apply to 11,000 shares and so, the revised cost per share would then be 100. Cash 150,000 Investment in ES 100,000 Gain on Investment 50,000 14. In BIR, all cash received is income. Thus, the above transaction is simply recorded as: Cash 150,000 Dividend income 150,000 15, In split up, outstanding shares are called in, and replaced by a larger number, with the effect of increasing the no.of shares and decreasing the par value per share. 16. Received 20,000 new shares as a result of 2-for-1 split of 10,000 original shares. 17. Special assessments are addi.tional capital contribution of the shareholders. On the part of the shareholders, special assessments are recorded as additional cost of the investment and on the part of the entity as share premium Investment in ES Cash 17. Stock right is inherent in every share. Its purpose is to give the shareholders the chance to preserve their equity interest in the corporation 18. If stock rights are accounted for separately, carrying amount of the original investment in ES is allocated to the stock rights at an amount equal to the fair value of the stock rights at the time of acquisition. 19. Under PAS 39, embedded derivative shall be separated from the host contract. While under PFRS 9, if the host contract is a financial asset, the embedded derivative isn’t separated. 20. The shares are selling right-on if it is between the date of declaration and date of record. Same as in dividend-on. No accounting problem is encountered because stock rights are not yet received.
- Fall '17
- Balance Sheet, Generally Accepted Accounting Principles, VOL1 SUMMARY _VALIX, ACCOUNTING VOL1 SUMMARY, FINANCIAL ACCOUNTING VOL1