Liquidating dividend accounting

Retained Earnings [Cash Dividend Declared] = 2,000,000 [Credit]. Date of record, April 15, 2009 Memorandum entry that the firm will pay a dividend to all stockholders of record as of today, the date of record. Retained Earnings [Property Dividend Declared] = $600,00 [Credit]. The accounting treatment at the date of declaration consists of debiting retained earnings or scrip dividends declared and crediting notes payable to stockholders or scrip dividend payable. Retained Earnings [Scrip Dividends Declared] = 3,000,000 [Credit]. The transaction is made by a capitalization of retained earnings resulting in a reduction of retained earnings and an increase in some contributed capital accounts. Additional Paid-in-Capital from Stock Dividend 30,000 2. Common Stock Dividend Distribution = 120,000 [Credit]. At the date of declaration the bonds had a market value of $600,000. Date of Declaration Investments in Lie Dharma Company [Debit]. Gain on Appreciation of Bonds = 100,000 [$600,000 – $500,000] [Debit]. In such case, firms may elect to declare a “”—by issuing promissory notes requiring them to pay the dividends at a later date. Cash = 2,500,000 A firm with adequate retained earnings but insufficient liquidity may elect to issue “stock dividends” by a pro rate distribution of additional shares of the firm’s own stock to its stockholders. Common Stock Dividend Distributable = 120,000 [Credit]. Cash = 2,000,000 Let’s assume that the PUTRA Corporation declares a property dividend, payable in bonds of Lie Dharma Company being held to maturity and costing $500,000. Investments in Lie Dharma Company Bonds = 600,000 Firms may find themselves with sufficient retained earnings to declare a dividend but not enough liquidity for distribution.

Liquidating dividend accounting comments

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