Share dividends Mr. Singh BAT4M.

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Presentation transcript:

Share dividends Mr. Singh BAT4M

Share dividends Dividend given to shareholders in the form of shares rather than cash Corporations are able to retain cash and reduce the need to finance activities through borrowing Share dividends reduce retained earnings Total assets, liabilities, and equity remain unchanged

Share dividends Sherbrooke Corporation declares a 10% share dividend to common shareholders. Declared on December 15, 2015 payable to shareholders of record on December 20, 2015 Share dividend is distributed on January 10, 2016 At the time of the dividend declaration, the shares were trading on the stock exchange at $4 per share and the equity of the corporation consisted of the following:

Share dividends The 10% share dividend equals 500 shares (calculated as 5,000 outstanding shares x 10% share dividend) The market price on the date of declaration is used to record a share dividend OR

Share dividends On the share dividend distribution date, the following entry is recorded: The effect of these entries is to transfer $2,000 from retained earnings to share capital. No assets are paid by the corporation when the additional shares are issued as a share dividend, and therefore the total equity remains unchanged