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Flashcards in Dividends Deck (13):

What are the 3 important dates in relation to dividends?

1.) Declaration date - At this date the firm recognizes a liability and reduction in RE
2.) Date of record - cut off date. Shareholders of record on this date will be the recipients of the dividend payments.
3.) Payment date - date dividends actually distributed


What types of dividends require establishing a liability?

Those dividends involving a distribution of assets


Define "scrip dividend"

A dividend in the form of an interest bearing note payable. This happens when firm does not have the cash at date of declaration, but wants to assure shareholders it can pay


List the entry to record a scrip dividend payment

DR: Scrip dividend payable
DR: Interest expense
CR: Cash


What types of dividends are returns on Capital? (Not of Capital)

Cash, Property and Scrip. They are distribution of earnings, not contributed capital.


List the journal entry to record a scrip dividend declaration

DR: Retained earnings
CR: Scrip dividend payable


Define "liquidating dividends"

1.) A return of capital, rather than a return on capital;
2.) Reduces contributed capital account instead of retained earnings


List the journal entry to record payment of property dividend.

DR: Dividends Payable
CR: Cash or Asset


List the journal entry to record declaration of property dividends (assuming asset fair value exceeds book value)

DR: Retained Earnings (at FMV at declaration date)
DR: Asset (FMV - book value)
CR: Dividends Payable (FMV)
CR: Gain on Disposal (FMV - book value)


List the journal entries to record cash dividend declaration and payment

DR: Retained Earnings (or Dividends)
CR: Dividends Payable
DR: Dividends Payable
CR: Cash


What account does a liquidating distribution reduce?

Contributed Capital, it does not reduce RE. This is a return of Capital, not a return on capital. It also must be disclosed as a liquidating dividend.


Where in the financials are dividends in arrears reported?

As a disclosure in the footnotes


What is the only kind of dividend Owner's Equity is not reduced for?

Stock Dividend

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