OPERATIONS, DIVIDENDS, BOOK VALUE PER SHARE, EARNINGS PER SHARE

ACCOUNTING CYCLE Worksheet Financial Statements Statement of financial Position Statement of Comprehensive Income Statement of changes in shareholders equity Statement of cash flows Adjusting entries Closing entries

SHAREHOLDERS EQUITY DIVIDENDS, BOOK VALUE Contributed capital AND EARNINGS PER Share capital SHARE Share premium Dividends Retained Earnings Cash Appropriated Scrip Unappropriated Property Share Book value per share One class of shares Two classes of shares Earnings per share One class of shares Two classes of shares

DIVIDENDS
DISTRIBUTION TO SHAREHOLDERS OF CORPORATE EARNINGS IN PROPORTION TO THE NUMBER OF SHARES HELD BY THEM DIVIDENDS ARE PAID OUT OF ACCUMULATED PROFITS LIQUIDATING DIVIDEND A RETURN OF SHAREHOLDERS INVESTMENT

DATES RELATED TO DIVIDENDS

DATE OF DECLARATION

DATE OF RECORD

DATE OF PAYMENT

DATE OF DECLARATION Accumluated Profits

Cash Dividends payable

xxx
xxx

DATE OF RECORD
No entry

DATE OF PAYMENT
Cash Dividends payable Cash xxx
xxx

FORMS OF DIVIDENDS

SHARES

CASH

PROPERTY

SCRIP

Par value of P10 and cash dividend rate of 10%.

Date of declaration Jan 15

Journal Entry
Accumulated Profits 10,000 Cash dividends payable 10,000

Outstanding shares 10,000 Par value / share P10 ------P100,000 Dividend rate .10

Date of Record February 15

No journal entry

Date of payment March 15 Cash dividends payable 10,000 Cash 10,000

No par value shares and dividend is P1.50 per share

Date of declaration Jan.20 Accumulated profits Cash dividends payable Cash dividend of P1.50 /share was declared 15,000 15,000 Date of payment - -March 20 Cash dividends payable 15,000 Cash 15,000 Payment of cash dividend

SHARE DIVIDENDS

SMALL SHARE DIVIDENDS

LESS THAN 20% - use market value

LARGE SHARE DIVIDENDS

20% AND ABOVE use par value

(100,000 SHARES X P4) X 10%

Date of declaration Accumulated profits 40,000 Share dividends distributable 10,000 Share premium 30,000 A 10% share dividend Was declared Date of payment Share dividends Distributable 10,000 Share capital 10,000 Issuance of share dividends

(100,000 SHARES X P1) X 30%

Date of declaration Accumulated profits 30,000 Share dividends distributable 30,000 A 30% share dividend Was declared Date of payment Share dividends Distributable 30,000 Share capital 30,000 Issuance of share dividends

DIVIDENDS FOR TWO CLASSES OF SHARES

CUMULATIVE
A PREFERENCE

NON-CUMULATIVE
A PREFERENCE

SHARE IS ENTITLED TO DIVIDENDS EVERY YEAR IF DIVIDENDS ARE NOT DECLARED AND PAID DUE TO LACK OF RRESOURCES, DIVIDENDS IN ARREARS ARE

SHARE IS ENTITLED TO DIIDENDS FOR THE CURRENT YEAR ONLY.

DIVIDENDS IN

ARREARS ARE NOT ACCUMULATED IN THE SUCCEDING YEARS

DIVIDENDS FOR TWO CLASSES OF SHARES

NON PARTICIPATING
AFTER DIVIDENDS

PARTICIPATING
PREFERENCE

ARE ALLOCATED TO PREFERENCE SHARES, THE REMAINING AMOUNT OF DIVIDENDS ARE ALLOCATED TO ORDINARY SHARES

SHARES PARTICIPATE ON THE REMAINING AMOUNT OF DIVIDENDS AFTER ALLOCATIONS ARE MADE TO BOTH PREFERENCE AND ORDINARY

Preference share capital is noncumulative and non-participating

PREFERENCE P100,000 X 5% Remainder : P28,000 P5,000 Total
Accumulated profits Cash dividends payable preference Cash dividends payable - ordinary

ORDINARY

Total P 5,000

P5,000 P23,000

23,000 P5,000 P23,000 28,000 5,000 23,000 P28,000

Preference share capital is cumulative and non-participating

PREFEREN ORDINAR CE Y P100,000 X X 5% x 3 Remainder : : P28,000 P15,000 Total
Accumulated profits Cash dividends payable

Total P15,000

P15,000

P15,000

P13,000 P13,000 28,000

13,000 P28,000

15,000

Preference share is noncumulative and fully participating

PREFERENCE
P100,000 X 5% P5,000 P200,000 x 5% P10,000 10,00

ORDINARY

Total
P 5,000

P13,000 x 1/3 13,000 x 2/3

Total

4,333.33
8,666.67 P9,333.33 P18,666.67

13,000
P28,000

Accumulated profits

28,000

Cash dividends payable preference

Cash dividends payable - ordinary

9.333.33
18,666.67

Preference share capital is cumulative and fully participating

PREFERENCE
P100,000 X 5% x 3 years P200,000 x 5%

ORDINARY

Total
P 15,000

P15,000 P10,000 10,00

P3,000 x 1/3 3,000 x 2/3

Total

1,000
2,000 P16,000 P12,000 3,000 P28,000

Accumulated profits

28,000

Cash dividends payable preference

Cash dividends payable - ordinary

16,000
12,000

Cumulative and non-participating

PREFERENCE P300,000 x .10x2 P392,000 x .10 TOTAL P60,000 P60,000 P25,000 P25,000 ORDINARY TOTAL P60,000 25,000 P85,000

Accumulated profits Cash dividends payable preference

Cash dividends payable -ordinary

85,000 60,000
25,000

Maxine Corporation
No. of shares issued

40,000 No. of shares in the treasury 5,000 No. of shares outstanding 35.000 Dividends per share P5 ---------Decrease in accumulated profits P175,000 ====== Accumulated profits 175,000
Cash dividends payable

175,000

 C. Cash dividends payable

Cash Payment of cash dividends declared
Cash dividends decrease total assets by P175,000 due to the decrease in cash

175,000
175,000

Charity Corporation
PREFERENCE P1,000,000 X 6% 6% Remainder: P150,00-60,000 total No. of shares Dividends per share 60,000 10,000 P6.00 P60,000 ORDINARY TOTAL P60,000

P90,000 90,000 20,000 P4.50

90,000 150,000

Charity Corporation
c. Effect of cash dividends on shareholders equity:

decrease of P150,000 due to the debit to accumulated profits.

Olivia Corporation
a. Accumulated profits 80,000 Share dividends distributable A 20% share dividends was declared. No. of outstanding shares share dividend rate Nof shares needed 80,000 b 10,000 0.20 2,000

The share dividends have no effect on the shareholders' equity. and the total assets Accumulated profits 200,000 Cash dividends payable

200000

e f. g

Cash needed for the dividends is P200,000. The cash dividend decreases total assets and shareholders' equity. The share dividend is recommendable because it does not have an effect on the total assets and shareholders' equity.

Mikhail Corporation
a Accumulated profits, Jan. 1, 20Y1 Net income Dividends: Share P 170,000 Cash 190,000 Accumulated profits, Dec. 31, 20Y1 b P 1,500,000 800,000 2,300,000 360,000 1,940,000

The full amount of Accumulated profits may be declared as dividends.

Carlo Corporation
a Accumulated profits-free, Dec. 31, 20y1 Less: Reversal of appropriation Net income P 250,000 60,000 125,000 65,000 Add: dividend declared P 10,000 appropriation for treasury 12,000 Accumulated profits-free, Dec. 31, 20Y1 P b

22,000 87,000

The effect of appropriation reduces the free portion of the accumulated profits but has no effect on the total accumulated profits
The purpose of appropriation of accumulated profits is to set aside a portion of the accumulated profits for a specific purpose. The reversal of the appropriation of accumulated profits means that what was appropriated is returned or reverted backto the free portion of the account

c.