ACCT 240 004 December 6th Notes Dividend Dates Chapter 11 Cont Reporting and Interpreting Owners Equity Declaration date Board of directors declares them immediately record liability Entry Retained Earnings SE Dividends Payable L Date of record Stockholders holding shares on this date will receive the dividend Date of Payment Dividends Payable L Cash A M11 7 On April 15th Retained Earnings 65 000 Dividends Payable 65 000 On June 14th Dividends Payable 65k Cash 65k Distribution of additional shares of stocks to owners No change in total stockholders equity All stockholders retain same percentage ownership No change in par values Stock Dividend Small Stock dividend 20 25 Record at current market value of stock Large Stock dividend 20 25 Record at par value of stock Stock Splits Stock splits change the par value per share but the total par value is unchanged Before 3000 shares 2 After 6000 shares 1 Preferred Stock Preference over common stock Usually has not voting rights Usually has a fixed dividend rate Two types of preferred stock 1 Current dividend preference The current preferred dividends must be paid before paying any dividends to common stock 2 Cumulative dividend preference Any unpaid dividends from previous years dividends in arrears must be paid before common dividends are paid If the preferred stock s noncumulative any dividends not declare in previous years are lost permanently Dividends on preferred stock Example Kites inc has the following stock outstanding Common stock 1 par 100 000 Preferred stock 3 100 par cumulative 5000 shares Preferred stock 6 50 par noncumulative 3000 shares Dividends were not paid last year In the current year the board of directors declared dividends of 50 000 E11 3 Cash 320 000 Cash 60 000 Stockholder s Equity Common 200 000 Capital in excess of par Common 120 000 SE Preferred 24 000 Capital in excess of par Preferred 36 000 Contributed Capital Preferred Stock 24 000 Common Stock 200 000 Capital in excess of par preferred 36 000 Capital in excess of par common 120 000 Total 380 000 Retained Earnings 40 000 Total SE 420 000
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