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Chapter 15: Question 19Q (page 810)
What factors influence the dividend policy of a company?
Dividend policies are affected by the profitability and availability of cash in the business.
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(Stock Dividends) Kulikowski Inc., a client, is considering the authorization of a 10% common stock dividend to common stockholders. The financial vice president of Kulikowski wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of directors.
Instructions
Distinguish among: cash dividends, property dividends, liquidating dividends, and stock dividends.
Swarten Corporation issued 600 shares of no-par common stock for \(8,200. Prepare Swarten鈥檚 journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of \)2 per share.
Teller Corporation鈥檚 post-closing trial balance at December 31, 2017, was as follows.
TELLER CORPORATION POST-CLOSING TRIAL BALANCE DECEMBER 31, 2017 | ||
Dr. | Cr. | |
Accounts payable | \( 310,000 | |
Accounts receivable | \) 480,000 | |
Accumulated depreciation鈥攂uilding and equipment | 185,000 | |
Allowance for doubtful accounts | 30,000 | |
Bonds payable | 700,000 | |
Building and equipment | 1,450,000 | |
Cash | 190,000 | |
Dividends payable on preference shares鈥攃ash | 4,000 | |
Inventories | 560,000 | |
Land | 400,000 | |
Prepaid expenses | 40,000 | |
Retained earnings | 201,000 | |
Share capital鈥攐rdinary (\(1 par value) | 200,000 | |
Share capital鈥攑reference (\)50 par value) | 500,000 | |
Share premium鈥攐rdinary | 1,000,000 | |
Share premium鈥攖reasury | 160,000 | |
Treasury shares鈥攐rdinary at cost | 170,000 |
|
Totals | \(3,290,000 | \)3,290,000 |
On December 31, 2017, Teller had the following number of ordinary and preference shares.
Ordinary | Preference | |
Authorized | 600,000 | 60,000 |
Issued | 200,000 | 10,000 |
Outstanding | 190,000 | 10,000 |
The dividends on preference shares are \(4 cumulative. In addition, the preference shares have a preference in the liquidation of \)50 per share.
Instructions
Prepare the equity section of Teller鈥檚 statement of financial position at December 31, 2017.
Dave Matthew Inc. issues 500 shares of \(10 par value common stock and 100 shares of \)100 par value preferred stock for a lump sum of \(100,000.
Instructions
a) Prepare the journal entry for the issuance when the market price of the common shares is \)165 each and the market price of the preferred is \(230 each. (Round to the nearest dollar.)
b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is \)170 per share.
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