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?
