Download Chapter 15 - Salem State University

PARTICIPATING PREFERRED
 Fully
Participating
» Shares equally with the common stock
in any extra dividends
» Distributed proportionally, based on
total par values of common and
preferred
 Partially
Participating
» Participation is limited
PROPERTY DIVIDENDS
A nonreciprocal transfer of nonmonetary
assets between a corporation and its
owners.
 Assets other than cash
 Usually securities of other companies
 Record at fair value of the asset
transferred
 Gain or loss is recognized

LIQUIDATING DIVIDENDS
A
return of contributed capital
 Not
based on earnings; decreases
paid-in capital
STOCK DIVIDENDS
A
pro-rata nonreciprocal distribution
of additional shares of a
corporation's stock to its
stockholders.
STOCK DIVIDENDS
 Why?
» Capitalize retained earnings, thus
signaling to the stockholders that a
portion of retained earnings is no
longer available for future dividends.
» Pacify stockholders without using cash.
» Reduce market price of stock (large
stock dividend).
EFFECT OF STOCK DIVIDENDS
Increase number of shares outstanding
 No change in total Stockholders' Equity,
but Retained Earnings decreases and
Contributed Capital increases
 No change in par or stated value
 No change in ownership interest of
stockholders
 Market price of stock may decrease
 No change in cash

SMALL STOCK DIVIDEND
 Less
than 20% or 25% of
outstanding shares
 Fair
market value of the stock issued
is transferred from Retained
Earnings to Contributed Capital
accounts.
LARGE STOCK DIVIDEND
 Greater
than 25% of outstanding
shares
 "Split-up effected in the form of a
dividend"
 Par or stated value of the stock
issued is transferred from Retained
Earnings to Contributed Capital