F7M6

Additional Paid-in Capital: decrease Retained earnings: decrease (a liquidating dividend is a return of capital-which decreases additional paid-in capital-and is not a distribution of earnings-which decreases retained earnings)

A corporation declared a dividend, a portion of which was liquidating. How would this affect Additional paid-in capital and Retained Earnings?

a) Market value at date of declaration

A property dividend should be recorded in retained earnings at the property's: a) Market value at date of declaration b) Market value at date of issuance (payment) c) Book value at date of declaration d) Book value at date of issuance

c) Stock split ( A "stock split" increases the number of shares. Only the number of shares changes. The capital stock and retained earnings do not change so it is NOT considered a capital or asset distribution)

All of the following distributions to stockholders are considered asset or capital distributions except, a) Property distribution b) Cash dividend c) Stock split d) Liquidating dividend

May 8

Bal Corp. declared a $25,000 cash dividend on May 8, to stockholders of record on May 23, payable on June 3. As a result of this cash dividend, working capital decreased when?

debit dividend payable credit cash (date on which the dividend if actually disbursed by the corporation)

Date of Payment J/E

Stock Rights

Existing stockholders have the right (preemptive privilege) to purchase newly issued shares in proportion to their holdings.

Assets= no effect Total Stockholders Equity= no effect Retained Earning= decrease

How does a stock dividend affect Assets, Total Stockholder's Equity and Retained Earnings?

debit dividend payable credit R/E (date board of directors formally approves a dividend)

J/E for Date of Declaration

N/A (date the board of directors specifies as the date the names of the shareholders to receive the dividend are to be determined)

J/E for Date of Record

total cash dividend declared - retained earnings

Liquidating dividend=

dividend

The portion of corporate profits paid out to stockholders- usually represents a distribution of earnings

the cost you bought the treasury stock for

Under the Cost Method what is the value used to measure the treasury stock reissued?

Paid-in capital

What does a liquidating dividend reduce?

implies there is no RE left to decrease

What is a pure "liquidating dividend"?

No entry- only a disclosure

What is the entry for a stock right issued without consideration?

b) Declaration

When a company declares a cash dividend, retained earnings is decreased by the amount of the dividend on the date of: a) Payment b) Declaration c) Declaration or record, whichever is earlier d) Record

liquidating dividend

When a company goes out of business and distributes its proceeds to shareholders; Treated as a return of capital for tax reasons and not taxed unless it is over the investor's cost basis

d) Increases net income for the period (A property dividend is recorded at the fair value of the property to be distributed. The property has to be adjusted to fair value with the adjustment affecting earnings for the period. Additional paid-in capital IS NOT affected)

When a property dividend is declared and the market value of the property exceeds its book value, the excess a) Decreases net income for the period b) Decreases additional paid-in capital c) Increases additional paid-in capital d) Increases net income for the period

stock subscription

contract or agreement to buy a specific number and kind of shares when they are issued by the corporation

property dividend

distributing non cash assets (inventory, investment securities) to shareholders

number of shares x dividend per share

dividend income=

YES-credit

if stock is issued above par to non employees is there an entry to additional paid in capital?

NO

if stock is issued at par to non employees is there an entry to additional paid in capital?

YES- debit

if stock is issued below par to non employees is there an entry to additional paid in capital?

par value

if there's a large stock dividend (more than 20%) what do you value it?

FMV

if there's a small stock dividend ( less than 20%) what do you value it?

NO- only a memo entry (no change to total equity and no change to legal capital)

is there a J/E with stock splits?

restated to FAIR VALUE and G/L in income

on the date of declaration the property should be what?

date of declaration

on what date is the property to be distributed restated to fair value and any gain or loss recognized in income?

Scrip Dividends

special form of Notes PAyable when a corporation commits to paying a dividend at a later date (when there is a cash shortage)

CONTRA EQUITY ACCOUNT (not an asset - it represents the subscriptions of stock NOT paid for at year end)

subscription receivable is what?

memo only until stocks are exercised

what do you record with stock rights?