M4 - Stockholders' Equity: Part 2

List the significant dates with respect to cash dividends.

• Date of Declaration: Becomes a liability and reduces retained earnings

• Date of Record: No journal entry, memorandum entry only

• Date of Payment: Actually paid

List five types of dividends.

1. Cash:

2. Liquidating: Return of investment

3. Property: FMV of assets given up, with gain/loss recognized

4. Scrip: Promise to pay a dividend in future

5. Stock: Results in capitalizing part of retained earnings, increasing legal capital. Remember, if <20%-25%, record at market value; if >20%-25%, record at par value.

What is the threshold for treating stock dividends as large vs. small stock dividends?

Small stock dividend: <20%-25%

Large stock dividend: >20%-25% 

The treatment of stock dividends on the percentage of the dividend in proportion to the total shares outstanding prior to the declaration of the dividend.

What is the accounting treatment of small stock dividends?

Fair value of additional shares issued at the date of declaration is transferred from retained earnings to capital stock and additional paid-in capital.

What is the accounting treatment of large stock dividends?

Par value of additional shares issued is transferred from retained earnings to