Tham khảo tài liệu 'accounting webster's timeline history, 1998 - 1999 by icon group international (jun 6, 2009)_3', tài chính - ngân hàng, tài chính doanh nghiệp phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 46 Critical Financial Accounting Problems date. 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. At the date of distribution the firm debits the note payable or scrip payable and the related interest expense and credit cash. For example let s assume that the Ban-nos Company declared on June 17 1996 a scrip dividend in the form of a three-month promissory note amount to 1 a share on 3 000 000 shares outstanding. The interest rate on the notes is 10 per year. The following entries are required 1. At the date of declaration June 17 1996 Retained Earnings Scrip Dividends Declared Notes Payable to Stockholders Scrip Dividends Payable 1 X 3 000 000 2. At the date of payment September 17 1996 Note Payable to Stockholders 3 000 000 Interest Expense 75 000 3 000 000 X .10 X 3 12 Cash 3 000 000 3 000 000 3 075 000 Liquidating Dividends Dividends paid based on other than retained earnings are called liquidating dividends as a return of contributed capital rather than a distribution of retained earnings. They are treated as a reduction of contributed capital either additional paid-in-capital or a special contracontributed capital account designated as Contributed Capital Distributed as a Liquidating Dividend. For example let s assume that the Weigandt Company issued dividend to its common stockholders of 2 500 000 of which 1 000 000 is considered income and the rest a return of contributed capital. The following entries are required A. At the date of declaration Retained Earnings Additional Paid-in-Capital 1 000 000 1 500 000 Contributed Capital and Retained Earnings 47 Dividends Payable B. At the date of payment Dividends Payable Cash 2 500 000 2 500 000 2 500 000 Stock Dividends 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
