11.3 Dividends & Stock Split

Question 1

what does pro rata mean

Answer 1

proportional to ownership

Question 2

what are 3 ways to reimburse shareholders

Answer 2

cash dividends

stock dividend

stock split

Question 3

who receives cash dividends first

Answer 3

preferred sharehodlers

Question 4

what are the 2 criteria company has to meet before paying dividends

Answer 4

1) suffiecient cash or resources to be able to pay its liabilities as they become due after dividend is declared and paid

2. nrv of assets > total liabilties & share capital

Question 5

formula for retained earnings

Answer 5

re at begin of period +net income - div decl= re at end of period

Question 6

what are 3 important dates for cash dividends

Answer 6

1. declaration date
2. record date
3. payment date

Question 7

JE for div declarations

Answer 7

dr Dividends Declared
cr div payable

Question 8

is div declared reported on statement of comp income?

what does this account reduce @ end of fiscal year

Answer 8

not reported

retained earnings

Question 9

what type of acc is div payable

Answer 9

current laibility

Question 10

what is the JE for cash dividend record date

Answer 10

no entry

cuz corporation liability that was recognized on declaration date is unchanged

Question 11

what is the je for payment date

Answer 11

Dr Div payable
cr cash

Question 12

what is the affect on
ASSET
LAIBILITY
SHARE CAPITAL
RE

cuz of declartion date

Answer 12

NE
+
NE
-

Question 13

what is the affect on
ASSET
LAIBILITY
SHARE CAPITAL
RE

cuz of RECORD date

Answer 13

NE
NE
NE
NE

Question 14

what is the affect on
ASSET
LAIBILITY
SHARE CAPITAL
RE

cuz of PAYMENT date

Answer 14

NE
NE

Question 15

what is the affect on
ASSET
LAIBILITY
SHARE CAPITAL
RE

cuz of cumulative effect of cash dividend

Answer 15

-
NE
NE
-

Question 16

What are stock dividends

Answer 16

when company distributes shares rather than cash to stakeholder

NOT COMMON IN CANDA

Question 17

Why do companies wanna do stock dividedns

Answer 17

cuz no effect on assets, liabilities or se

only affect share capital cuz either common or preffered share increases`

Question 18

Because a stock dividend does not result in a distribution of assets, investors are not actually receiving anything they did not already own. In a sense, it is like asking for two pieces of pie instead of one piece and having your host take one piece of pie and cut it into two smaller pieces. You now have two pieces of pie, but you still have the same amount of pie.

Question 19

pros of stock dividend- for company

Answer 19

1. satisfying shareholders dividend expectation while conserving cash
2. increase marketability of shares (share price decrease cuz supply and demand)
3. emplasize portion of SE has been permanently reinvested to legal capital and unaviable for dividends

Question 20

Because of its effects, a stock dividend is often referred to as capitalizing retained earnings.

Question 21

3 key dates of stock dividends

Answer 21

declaration date
record date
distribution date

Question 22

stock dividends be recorded at fair value (market price per share

Answer 22

stock dividends be recorded at fair value (market price per share

Question 23

what is the je for declaration date of stock dividends

Answer 23

Dr dividends declared
CR stock dividends distributable

Question 24

what tpe of accoutn is stock dividends distributablw

Answer 24

SHAREHOLDERS EQUITY!! NOT LIABILITY

Question 25

what is the JE for record date of stock divdends

Answer 25

no entry

Question 26

what is the je for the distribution date of stock dividends

Answer 26

dr sok dividends distributable
cr common shares

Question 27

what is a stock split

Answer 27

increasing number of shares to boost stock liquidity

Question 28

primary purpose of stock split

Answer 28

increase marketability of shares by lowering share price

Question 29

, stock splits usually result in significantly more shares being issued than stock dividends do. For example, a stock dividend might result in an additional 10% of common shares issued, whereas a stock split could result in 100% more common shares issued.

Question 30

what type of share is split usually

Answer 30

only common shares!!! preferered shares are purchased for the dividend income and values dont rise

Question 31

in efficient market, what does a 2 for 1 stock split do to shares

Answer 31

double shares, half prices

Question 32

Regardless of the number of shares split, as is the case with a stock dividend, theoretically a shareholder should be no worse orbetter off after a stock split.

Question 33

due to increased investor interest, the share price will climb more rapidly, because stock splits are usually done for shares that have grown significantly in value. Many investors think that stock splits are indicative of more growth.

Question 34

stock splits have NO EFFECT ON TOTAL SHARE CAPITAL, RE OR TOTAL SE

Answer 34

i

Question 35

how to do je for stock split

Answer 35

NO JE is required, only a memo entry explaining the effect of the split (That is the increase in the number of shares)

Question 36

cash dividend impact on

A
L
Share capital
RE
TOTAL SE
NUMBER OF SHARES

Answer 36

-
NE
NE
-
-
NE

Question 37

STOCK dividend impact on

A
L
Share capital
RE
TOTAL SE
NUMBER OF SHARES

Answer 37

ne
ne
+
-
ne
+

Question 38

stock split impact on

A
L
Share capital
RE
TOTAL SE
NUMBER OF SHARES

Answer 38

ne
ne
ne
ne
ne
+

Question 39

Cash dividends reduce cash when paid and reduce the balance in the Retained Earnings account (after the Dividends Declared account is closed into Retained Earnings

Question 40

Stock dividends increase share capital, usually the Common Shares account, when distributed and decrease retained earnings when the Dividends Declared account is closed

Answer 40

Stock splits do not affect any of the accounts.Both stock dividends and stock splits increase the number of shares issued.

Answer 41

Stock splits do not affect any of the accounts.Both stock dividends and stock splits increase the number of shares issued.