Dividends Flashcards
Dividends reduce both assets and retained earnings on the date of declaration? T/F
True
Dividends are recorded as liabilities on the date of declaration T/F
True
What is the JE upon declaration?
dr. Retained Earnings (-)
cr. Dividends Payable (+)
What is the JE upon the date of record?
No entry
What is a “dividend in arrears” and and how is it accounted for?
Unpaid dividends for a particular year on cumulative preferred stock. Disclosed in the footnotes.
Property dividends are recorded at their book value upon issuance T/F
False. Market value.
After a property dividend is declared, and after the declaration JE, how is the FMV reflected in the journal?
A JE has to be made to reduce or raise the asset to the FMV price prior to dividend distribution. This would be done by either debiting the asset for the change and crediting “gain on disposal” or vice versa.
Define scrip dividend
A scrip dividend is first distributed in note payable form because the firm does not have the cash at date of declaration but wants to assure investors that the dividend is forthcoming.
How are scrip dividend declarations accounted for?
dr. Retained Earnings (-)
cr. Scrip Dividends Payable (+)
How are scrip dividend payments accounted for?
dr. Scrip dividend payable (-)
dr. Interest Expense (uses rate on note)
cr. Cash
Define liquidating dividend
A return of capital
Upon declaration, how is a liquidating dividend accounted for?
dr. Contributed Capital (-)
cr. Dividends Payable (+)
What are the differences between US GAAP and IFRS in respect to dividends?
For IFRS the amount of dividends proposed or declared for the fin stmts were authorized for issue must be disclosed.
