Professional Documents
Culture Documents
Corporations:
Dividends, Retained
Earnings, and Income
Reporting
Chapter
14-1 Accounting Principles, Ninth Edition
Study
Study Objectives
Objectives
Chapter
14-2
Corporations:
Corporations: Dividends,
Dividends, Retained
Retained Earnings,
Earnings,
and
and Income
Income Reporting
Reporting
Statement
Retained
Dividends Presentation and
Earnings
Analysis
Chapter
14-3
Dividends
Dividends
Types of Dividends:
1. Cash dividends. 3. Stock dividends.
2. Property dividends.
Chapter
14-4 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Chapter
14-5 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Cash Dividends
For a corporation to pay a cash dividend, it must have:
2. Adequate cash.
Chapter
14-6 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Illustration: On Dec. 1, the directors of Media General
declare a 50¢ per share cash dividend on 100,000 shares of
$10 par value common stock. The dividend is payable on Jan.
20 to shareholders of record on Dec. 22?
December 1 (Declaration Date)
Retained earnings 50,000
Dividends payable 50,000
Chapter
14-8 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Chapter
14-9 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Chapter
14-11 SO 1 Prepare the entries for cash dividends and stock dividends.
Chapter
14-12
Dividends
Dividends
Stock Dividends
Reasons why corporations issue stock dividends:
1. To satisfy stockholders’ dividend expectations
without spending cash.
2. To increase the marketability of the corporation’s
stock.
3. To emphasize that a portion of stockholders’ equity
has been permanently reinvested in the business.
Chapter
14-14 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Stock issued
Common stock div. distributable 500
Common stock (5,000 x 10% x $1) 500
Chapter
14-16 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
H H In c .
B ala nce S he et (partial)
S to ckh o ld ers' eq u ity
P a id-in capita l
C om m on stock, $ 1 p ar, 5,000 issue d
and outstanding $ 5,000
C o m m o n sto ck d iv id en d s d is trib u tab le 500
P a id-in capita l in excess of par 64,500
Re tained earnings 90,000
T o tal sto ckh o ld ers' eq u ity $ 160,000
Chapter
14-17 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Chapter
14-18 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Question
Which of the following statements about small stock
dividends is true?
a. A debit to Retained Earnings for the par value of
the shares issued should be made.
b. A small stock dividend decreases total
stockholders’ equity.
c. Market value per share should be assigned to the
dividend shares.
d. A small stock dividend ordinarily will have no
effect on book value per share of stock.
Chapter
14-19 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Question
In the stockholders’ equity section, Common Stock
Dividends Distributable is reported as a(n):
a. deduction from total paid-in capital and
retained earnings.
b. current liability.
c. deduction from retained earnings.
d. addition to capital stock.
Chapter
14-20 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Stock Split
Reduces the market value of shares.
Chapter
14-21 SO 1 Prepare the entries for cash dividends and stock dividends.
Dividends
Dividends
Illustration: HH Inc. has 5,000 shares issued and
outstanding. The per share par value is $1, book
value $32 and market value is $40.
Chapter
14-22 SO 1 Prepare the entries for cash dividends and stock dividends.
Chapter
14-23
Dividends
Dividends
Chapter
14-24 SO 1 Prepare the entries for cash dividends and stock dividends.
Retained
Retained Earnings
Earnings
Chapter
14-25 SO 2 Identify the items reported in a retained earnings statement.
Retained
Retained Earnings
Earnings Restrictions
Restrictions
2. Contractual restrictions.
3. Voluntary restrictions.
Chapter
14-26 SO 2 Identify the items reported in a retained earnings statement.
Prior
Prior Period
Period Adjustments
Adjustments
Corrections of Errors
Result from:
mathematical mistakes
mistakes in application of accounting principles
oversight or misuse of facts
Chapter
14-27 SO 2 Identify the items reported in a retained earnings statement.
Prior
Prior Period
Period Adjustments
Adjustments
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2010
Before issuing the report for the year ended December 31, 2010, you discover a
$50,000 error (net of tax) that caused the 2009 inventory to be overstated
(overstated inventory caused COGS to be lower and thus net income to be
higher in 2009. Would this discovery have any impact on the reporting of the
Statement of Retained Earnings for 2010?
Chapter
14-28 SO 2 Identify the items reported in a retained earnings statement.
Retained
Retained Earnings
Earnings Statement
Statement
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2010
Chapter
14-29 SO 2 Identify the items reported in a retained earnings statement.
Retained
Retained Earnings
Earnings Statement
Statement
Chapter
14-30 SO 2 Identify the items reported in a retained earnings statement.
Retained
Retained Earnings
Earnings Statement
Statement
Question
All but one of the following is reported in a retained
earnings statement. The exception is:
a. cash and stock dividends.
b. net income and net loss.
c. some disposals of treasury stock below cost.
d. sales of treasury stock above cost.
Chapter
14-31 SO 2 Identify the items reported in a retained earnings statement.
Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Illustration 14-15
Chapter
14-32 SO 3 Prepare and analyze a comprehensive stockholders’ equity section.
Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Chapter
14-33 SO 3 Prepare and analyze a comprehensive stockholders’ equity section.
Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Statement
Presentation
Chapter
14-34 SO 4 Describe the form and content of corporation income statements.
Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Chapter
14-35 SO 5 Compute Earnings Per Share.
Statement
Statement Analysis
Analysis and
and Presentation
Presentation
Question
The income statement for Nadeen, Inc. shows income
before income taxes $700,000, income tax expense
$210,000, and net income $490,000. If Nadeen has
100,000 shares of common stock outstanding
throughout the year, earnings per share is:
a. $7.00.
b. $4.90. ($490,000 / 100,000 = $4.90)
c. $2.10.
d. No correct answer is given.
Chapter
14-36 SO 5 Compute Earnings Per Share.
Copyright
Copyright
“Copyright © 2009 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted
in Section 117 of the 1976 United States Copyright Act
without the express written permission of the copyright owner
is unlawful. Request for further information should be
addressed to the Permissions Department, John Wiley & Sons,
Inc. The purchaser may make back-up copies for his/her own
use only and not for distribution or resale. The Publisher
assumes no responsibility for errors, omissions, or damages,
caused by the use of these programs or from the use of the
information contained herein.”
Chapter
14-37