MGAB01H3 Lecture : Dividends

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ochretortoise616

10 Nov 2010

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Dividends may be expressed in two ways: as a dollar amount per share, or as a percentage of the stated or par value of the shares if shares have been issued with stated or par values. Dividends are generally reported quarterly as a dollar amount per share. A cash dividend is a pro rata distribution of cash to shareholders. For a dividend distribution to occur, it must have all the following: sufficient retained earnings, adequate cash, and a declaration of dividends. Note that dividends are not accrued; they only become a liability when declared. The amount and timing are crucial as large cash dividends may lead to liquidity problems and small and/or missed dividends may lead to unhappiness among shareholders. Entries for cash dividends three dates are important for dividends: the declaration date, the record date, and the payment date. On the declaration date, the board of directors formally declares the cash dividend and announces it to shareholders.

Related Questions

Dividend Distribution

Lakeside Company has the following shares outstanding: 20,000shares of $50 par value, six percent cumulative preferred stock and80,000 shares of %10 par value common stock. The company declaredcash dividends amounting to $160,000.

If no dividends in arrears on the preferred stock exist, howmuch in total dividends, and in dividends per share, is paid toeach class of stock?

If one year of dividends in arrears exist on the preferredstock, how much in total dividends, and in dividends per share, ispaid to each class of stock?

yellowweasel220

Which one of the following is not necessary in order for a corporation to pay a cash dividend?

a. Approval of stockholders

b. Adequate cash

c. Declaration of dividends by the board of directors

d. Retained earnings

silverraccoon818

Helifex , Inc. began operations in 2010 and has the following Capital Stock:
	Helifex , Inc. Capital Stock:
	Preferred Stock:	# Shares	Stated Dividend Rate	Par value
	Authorized shares of cumulative, non-participatory preferred stock	80,000	6%	$10
	Issued shares of prefered stock	60,000
	Outstanding shares of preferred stock	30,000

	Common Stock:	# Shares
	Authorized shares of $1 par value common stock	50,000
	Issued shares of common stock	40,000
	Outstanding shares of common stock	10,000

Required:
a)	Compute the amount of Preferred Stock dividends.



b)	On January 1, 2017, the Board of Directors declared dividends of	$ 35,000

	Prepare the journal entry for the declaration of the dividends.





c)	On March 31, 2017, the dividends are disbursed to stockholders of record. Determine the allocation of dividends to Preferred and Common Stockholders.




d)	The Board of directors did not declare dividends during 2018. Determine the allocation of dividends to Preferred and Common Stockholders.

	Total dividends for Preferred Stockholders
	Total dividends for Common Stockholders

e)	On June 8, 2019 the Board of Directors declared dividends of	$110,000
	Determine the allocation of dividends to Preferred and Common Stockholders.










f)	The following year, on November 30, 2020, the board declared dividends of	$100,000
	Determine the allocation of dividends to Preferred and Common stockholders.










g)	Explain the advantages and disadvantages of investing in preferred stock.

redcoyote294

MGAB01H3 Lecture : Dividends

MGAB01H3 Full Course Notes

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