Contabilidad Básica II

ACCO 112
Taller Cinco
Profesor Noel Ortiz Torres

Universidad del Este, Universidad Metropolitana,Universidad del Turabo

Profesor Noel Ortiz
Corporacione
s:
Dividendos,
Ganacia
retenida y
reporte de
 Objetivos

1. Preparar las entradas para dividendos y acciones.

2. Identificar las cuentas que se reportan en el
“retained earnings”.
3. Preparar y analizar la sección de “comprehensive
stockholder’s equity”
4. Describir la forma y contenido de los estados de
ingresos y gastos de las corporaciones.
5. Computar el “earning per share”
 Dividendos

Una distribución de dinero o acciones para los

accionitas en base proporcional.

Tipos de Dividendos:

1. Cash dividends. 1. Script (promissory note).

2. Property dividends. 2. Stock dividends.

Dividendos se expresan: (1) como un porciento del valor par o valor

establecido, o (2) como una cantidad en dólares por acción.
 Dividendos
Los dividendos tienen tres fechas importantes:
 Dividendos
Dividendos en efectivo

Para una corporación pagar a dividendos, este

tiene que tener:

2. “Retained earnings” (ganancia retenida) –

Pagar dividendos de “retained earnings” es
legal en todos los estados.

3. Suficiente dinero.

4. Una declaración de dividendos por la Junta

de Directores.
 Dividendos
What would be the journal entries made by a
corporation that declared a $50,000 cash
dividend on March 10, payable on April 6 to
shareholders of record on March 25?

March 10 (Declaration Date)

Retained earnings 50,000
Dividends payable 50,000

March 25 (Date of Record) No entry

April 6 (Payment Date)

Dividends payable 50,000
Cash 50,000
 Dividendos
Distribución de dividendos entre
acciones preferidas y acciones comunes.

Los accionitas de acciones preferidas que

acumlan los dividendos no pagados en años
anteriores, los cobran antes que los dividendos
para los accionistas de acciones comunes.
 Dividendos
Exercise Arnez Corporation was organized on January 1, 2008. During its
first year, the corporation issued 2,000 shares of $50 par value preferred
stock and 100,000 shares of $10 par value common stock. At December
31, the company declared the following cash dividends: 2008, $6,000,
2009, $12,000, and 2010, $28,000.
Instructions: (a) Show the allocation of dividends to each class of stock,
assuming the preferred stock dividend is 8% and not cumulative.
 Dividendos
Exercise (a) Show the allocation of dividends to each class of stock,
assuming the preferred stock dividend is 8% and not cumulative.

2008 2009 2010

Dividends declared $ 6,000 $ 12,000 $ 28,000
Allocation to preferred * 6,000 8,000 8,000
Remainder to common $ - $ 4,000 $ 20,000

* 2,000 shares x $50 par x 8% = $8,000

 Dividendos
Exercise (b) Show the allocation of dividends to each class of stock,
assuming the preferred stock dividend is 9% and cumulative.

2008 2009 2010

Dividends declared $ 6,000 $ 12,000 $ 28,000
Dividends in arrears 3,000 **
Allocation to preferred * 6,000 9,000 9,000
Remainder to common $ - $ - $ 19,000

* 2,000 shares x $50 par x 9% = $9,000

** 2008 Pfd. dividends $9,000 – declared $6,000 = $3,000
 Dividendos
Exercise (c) Journalize the declaration of the cash dividend at December
31, 2010, under part (b).

2008 2009 2010

Dividends declared $ 6,000 $ 12,000 $ 28,000
Dividends in arrears 3,000
Allocation to preferred 6,000 9,000 9,000
Remainder to common $ - $ - $ 19,000

Journal entry:

Retained earnings 28,000

Dividends payable 28,000

 Dividendos
Stock Dividends
Pro rata distribution of the corporation’s own stock.

Results in decrease in retained earnings and increase in paid-in capital.

 Dividendos
Stock Dividends
Reasons why corporations issue stock dividends:
3. To satisfy stockholders’ dividend expectations
without spending cash.
4. To increase the marketability of the corporation’s
stock.
5. To emphasize that a portion of stockholders’ equity
has been permanently reinvested in the business.
 Dividendos
Size of Stock Dividends

 Small stock dividend (less than 20–25% of

the corporation’s issued stock, recorded at
fair market value) *

 Large stock dividend (greater than 20–25%

of issued stock, recorded at par value)
* This accounting is based on the assumption that a small
stock dividend will have little effect on the market price of
the outstanding shares.
 Dividendos
HH Inc. has 5,000 shares issued and outstanding. The per share par
value is $1, book value $32 and market value is $40.

10% stock dividend is declared

Retained earnings (5,000 x 10% x $40) 20,000
Common stock dividends distributable 500
Additional paid-in capital 19,500

Stock issued
Common stock div. distributable 500
Common stock (5,000 x 10% x $1) 500
 Dividendos
Stockholders’ Equity with Dividends
Distributable

HH Inc.
Balance Sheet (partial)
Stockholders' equity
Paid-in capital
Common stock, $1 par, 5,000 issued
and outstanding $ 5,000
Common stock dividends distributable 500
Paid-in capital in excess of par 64,500
Retained earnings 90,000
Total stockholders' equity $ 160,000
 Dividendos
Efectos de “Stock Dividends”
HH Inc. Before After Net
Dividend Dividend Change
Stockholders' equity
Paid-in capital
Common stock, $1 par, 5,000 issued
and outstanding $ 5,000 $ 5,500 $ 500
Paid-in capital in excess of par 45,000 64,500 19,500
Retained earnings 110,000 90,000 (20,000)
Total stockholders' equity $ 160,000 $ 160,000 $
0
Outstanding shares 5,000 5,500
Book value per share $ 32 $ 29
 Dividendos

Which of the following statements about small stock

dividends is true?
a. A debit to Retained Earnings for the par value of
the shares issued should be made.
b. A small stock dividend decreases total
stockholders’ equity.
c. Market value per share should be assigned to the
dividend shares.
d. A small stock dividend ordinarily will have no
effect on book value per share of stock.
 Dividendos

In the stockholders’ equity section, Common Stock Dividends

Distributable is reported as a(n):
a. deduction from total paid-in capital and retained earnings.
b. current liability.
c. deduction from retained earnings.
d. addition to capital stock.
 Dividendos
“Stock Split”
Reduce el valor en el mercado de la acción.

Para el “stock split” no hay que hacer

entrada de jornal.

Disminuye el valor par y aumenta el numero

de acciones.
 Dividendos
HH Inc. has 5,000 shares issued and outstanding.
The per share par value is $1, book value $32 and
market value is $40.

2 for 1 Stock Split

No Entry -- Disclosure that par is now $.50 and shares
outstanding are 10,000.
 Dividendos
Effects of Stock Dividends
HH Inc. Before After Net
Split Split Change
Stockholders' equity
Paid-in capital
Common stock $ 5,000 $ 5,000 $ -
Paid-in capital in excess of par 45,000 45,000 -
Retained earnings 110,000 110,000 -
Total stockholders' equity $ 160,000 $ 160,000 $ -

Outstanding shares 5,000 10,000

Book value per share $ 32 $ 16
 Retained Earnings
 “Retained earnings” es la ganancia
retenida es la ganancia neta que la
coporación retiene para el uso.
 La ganacia neta aumenta el “Retained Earnings” y
la pérdida neta disminuye el “Retained Earnings”.

 Retained earnings es parte de la reclamación de

los accionistas del total de los activos (assets)
de la corporación corporation.

 Si el “retained earnings está en débito se

llama déficit.
 Restriciones “Retained
Earnings”
Restrictions can result from:
1. Legal restrictions.

2. Contractual restrictions.

3. Voluntary restrictions.

Companies generally disclose retained earnings restrictions in the notes

to the financial statements.
 Prior Period Adjustments
Corrections of Errors
Result from:
 mathematical mistakes
 mistakes in application of accounting principles
 oversight or misuse of facts

• Corrections treated as prior period adjustments

• Adjustment made to the beginning balance of retained earnings
 Prior Period Adjustments
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2008

Balance, January 1 $ 1,050,000

Net income 360,000
Dividends (300,000)
Balance, December 31 $ 1,110,000

Before issuing the report for the year ended December 31, 2008, you
discover a $50,000 error (net of tax) that caused the 2007 inventory
to be overstated (overstated inventory caused COGS to be lower and
thus net income to be higher in 2007. Would this discovery have any
impact on the reporting of the Statement of Retained Earnings for
2008?
 Retained Earnings
Statement
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2008

Balance, January 1, as previously reported $ 1,050,000

Prior period adjustment - error correction (50,000)
Balance, January 1, as restated 1,000,000
Net income 360,000
Dividends (300,000)
Balance, December 31 $ 1,060,000
Retained Earnings
Statement
The company prepares the statement from the
Retained Earnings account.
Retained Earnings
Statement

All but one of the following is reported in a retained earnings

statement. The exception is:
a. cash and stock dividends.
b. net income and net loss.
c. some disposals of treasury stock below cost.
d. sales of treasury stock above cost.
Statement Analysis and Presentation
 Statement Analysis and Presentation

Stockholders’ Equity Analysis

Return on Common Net Income Available to Common Stockholders

Stockholders’
Equity =
Average Common Stockholders’ Equity

This ratio shows how many dollars of net income the company earned
for each dollar invested by the stockholders.
 Statement Analysis and Presentation

Income
Statement
Presentation
 Statement Analysis and Presentation

Income Statement Analysis

Net Income minus Preferred Dividends

Earnings Per
Share =
Weighted-Average Common Shares Outstanding

This ratio indicates the net income earned by each share of outstanding
common stock.
Statement Analysis and Presentation

The income statement for Nadeen, Inc. shows income before income
taxes $700,000, income tax expense $210,000, and net income
$490,000. If Nadeen has 100,000 shares of common stock outstanding
throughout the year, earnings per share is:
a. $7.00.
b. $4.90.
c. $2.10.
d. No correct answer is given.

($490,000 / 100,000 = $4.90)