Treasury Stock and Dividend Transactions Overview

Acquiring Treasury Stock Transactions

Debit Treasury Stock; Credit cash

Balance Sheet Presentation

Treasury stock is shown as a contra equity account.

Stock Split Purpose

To increase shares outstanding and lower share price.

Conditions for Dividends

Must have sufficient retained earnings, cash, and board approval.

Cash Dividend Declaration Entry

Debit Retained Earnings, credit Dividends Payable.

Cash Dividend Payment Entry

Debit Dividends Payable, credit Cash.

Legal Obligation of Dividends

Binding once declared by the board of directors.

Stockholders Equity Items

Includes common stock, preferred stock, and retained earnings.

Reasons for Stock Repurchase

To increase share value, improve ratios, or return cash.

Selling Treasury Stock

debit cash, credit treasury stock