Dividend

[lbuntha]

Hello everyone,

Cold you please help me the do adjustment of devidend ?

The balance on the Dividend Paid Account represents a half-year’s Preference Dividend and an Interim Ordinary Dividend. The directors are proposing to pay the second half-year’s Preference Dividend and a final Ordinary Dividend of $0.10 per share.

In trial balance
Dividends paid =$34,000
Ordinary share capital (in $ shares) =$200,000
5%Preference share capital =$80,000

What should I do adjustment and calculate in Balance Sheet?

Thanks

 

[iNinjaNotes]

Hello everyone,

Cold you please help me the do adjustment of devidend ?

The balance on the Dividend Paid Account represents a half-year’s Preference Dividend and an Interim Ordinary Dividend. The directors are proposing to pay the second half-year’s Preference Dividend and a final Ordinary Dividend of $0.10 per share.

In trial balance
Dividends paid =$34,000
Ordinary share capital (in $ shares) =$200,000
5%Preference share capital =$80,000

What should I do adjustment and calculate in Balance Sheet?

Thanks

The way I read this question is that dividends are paid for the first half and you need your second half of the year entry for preferred and common shares dividends.

$34,000 was paid out in dividends in the 1st half among common shareholders.

# Common shareholders = 34,000/ $0.1 = 340,000 shareholders
So the dividend is another $34,000 given that the dividend hasn't changed.

To find preferred shares...

$80,000/$100 since that is the issue price. 800 shareholders of preferred.
800 preferred holders x $5 dividend (5% of $100 par) = $4,000 in preferred dividends.

The adjustment to account for these dividends if they are cash is..

Retained Earnings DR. $34,000
Cash CR. $34,000

Retained Earnings DR. $4,000
Cash CR. $4,000

If they are stock dividends, replace cash in both instances with common shares, and preferred shars.

 

[Triest123]

The way I read this question is that dividends are paid for the first half and you need your second half of the year entry for preferred and common shares dividends.

I'm sorry that you make some mistakes on the question.

1. The dividends paid $34,000 also including preference share dividend.
2. The final ordinary shares dividend can be different from the interim dividend

The second half-year’s preference dividend = $80,000 x 5% x 1/2
= $2,000

The final ordinary share dividend = $200,000 / $1 shares x $0.1
= 200,000 shares x $0.1
= $20,000

The accounting entry is

Dr Retained Earnings $22,000
Cr Proposed Dividend - Preference shares $2,000
Cr Proposed Dividend - Ordinary shares $20,000

 

[iNinjaNotes]

The way I read this question is that dividends are paid for the first half and you need your second half of the year entry for preferred and common shares dividends.

I'm sorry that you make some mistakes on the question.

1. The dividends paid $34,000 also including preference share dividend.
2. The final ordinary shares dividend can be different from the interim dividend

The second half-year’s preference dividend = $80,000 x 5% x 1/2
= $2,000

The final ordinary share dividend = $200,000 / $1 shares x $0.1
= 200,000 shares x $0.1
= $20,000

The accounting entry is

Dr Retained Earnings $22,000
Cr Proposed Dividend - Preference shares $2,000
Cr Proposed Dividend - Ordinary shares $20,000

I agree with the preferred dividend, forgot to divide by 2 because of two dividend periods. But I don't see how your coming up with a $1/share valuation. Nothing in the question points to that. Just says $200,000 of common stock and the interim dividend was 34,000. I don't see how your getting your dividend for CS.

 

[Triest123]

I agree with the preferred dividend, forgot to divide by 2 because of two dividend periods. But I don't see how your coming up with a $1/share valuation. Nothing in the question points to that. Just says $200,000 of common stock and the interim dividend was 34,000. I don't see how your getting your dividend for CS.

=> Well, I just make an assumption.
I only outline the approach to the question as there is insufficent information.

I think the "ordinary share capital (in $ shares)" means $1 for 1 Share
so $200,000 means 200,000 shares

 

[lbuntha]

Thank for your assistant, I don't see you talk about Dividend Paid 34,000$, what it will affect in income statement?

Thank for your help.

 

[Triest123]

Thank for your assistant, I don't see you talk about Dividend Paid 34,000$, what it will affect in income statement?

Thank for your help.

The "Dividend Paid" shown on the "Trial Balance" implies that the company
has already made an accounting entry for the interim dividend. (i.e. Dr Retained Profit
Cr Bank), in other words, the retained profit is decreased by $34,000 and the bank is also
decreased by $34,000. Such effect has shown on the "Trial balance" as given by the question.

So you only need to make an additional entry to record the proposed dividends.