Chapter 18: (Accounting for Dividends)

Cash dividends are declared by:

-Declared by board of directors

Stock dividends:

-Distribution of additional shares of stock to owners

Stock Split:

-Par value, Paid-In Capital, and Retained Earnings not effected in total. -No Journal Entry. -Only effect is that par value per share is reduced.

Large Stock dividend:

-Same effect on market price as a stock split. -Par value of new shares is transferred from retained earnings to capital stock account. -Total Stockholders' Equity is unchanged.

Date of Record:

-Stockholders holding shares on this date will receive the dividend. (No entry)

Ex-dividend date:

-The first day the shares trade without the right to receive the declared dividend. (No entry)

Preferred stock dividends can be both:

-cumulative or noncumulative

Small stock dividends are recorded at:

-current fair value of stock

Property dividends are recorded at:

-fair value of noncash asset

Property dividends:

_distributions of non-cash assets

Preferred stock can also be:

partially participating, fully participating, or nonparticipating

Small stock dividend:

-less than 25% the fair value of the additional shares distributed is transferred from retained earnings to paid-in capital

Large stock dividends are recorded at:

-par value of stock

The amount reclassified depends on the size of the stock dividend:

-small stock dividend -large stock dividend

Cumulative means:

-that if the specified dividend is not paid for a year, the unpaid dividends (called dividends in arrears) accumulate and must be made up in a later dividend year before any dividends are paid on common shares

Stock Split:

-to reduce the market value of shares

A liability is not recorded UNTIL a company;s board of directors:

-votes to declare a dividend

When directors declare a cash dividend:

-we reduce retained earnings and record a liability DR Retained earnings CR Dividends payable

Types of Dividends:

1. Cash dividends 2. Property dividends 3. Liquidating dividends 4. Stock dividends

Large stock dividend: At date of distribution journal entry:

DR Common Stock Dividend Distributable CR Common stock

Small stock dividend: Date of distribution journal entry:

DR Common stock dividend distributable CR Common Stock

Date of Payment: Record the dividend payment to stockholders:

DR Dividends payable CR Cash

Large stock dividend Date of declaration journal entry:

DR Retained Earnings CR Common stock dividend distributable shares distributed x % share dividend= # of shares x $ par value

Small stock dividend: Date of declaration journal entry:

DR Retained Earnings (shares x price/share) CR Common stock dividend distrinutable CR Paid-in Capital in Excess of Par-come

Small stock dividend journal entry:

DR Retained earnings CR Common Stock CR Paid-in capital