Dividend payment procedures- At the quarterly dividend meeting, Wood Shoes decla
ID: 2445080 • Letter: D
Question
Dividend payment procedures- At the quarterly dividend meeting, Wood Shoes declared a cash dividend of $1.10 per share for holders of record on Monday, July 10. The firm has 300,000 shares of common stock outstanding and has set a payment date of July 31. Prior to the dividend declaration, the firm’s key accounts were as follows:
Cash/$500,000/Dividends Payable $0/Retained earnings $2,500,000
a. Show the entries after the meeting adjourned.
b. when is the ex dividend date?
c. What valued would the key accounts have after the July 31 payment date?
d. What effects, if any will the dividend have on the firm’s total assets?
e. Ignoring general market fluctuations, what effect, if any will the dividend have on the firm’s stock price on the ex dividend date?
Explanation / Answer
When the dividend was announced $ 330000 was transferred from Retained earnings to Dividend Payable A/c
Retained Earnings A/c Dr $330000
To, Dividend Payable A/c $330000
The effect is
Dividend Payable a/c $330000
Retained Earning A/c $2170000
The Ex-Dividend date is Usually for days prior to the record date i.e Thursday July 6
After the July 31 Payment date
Cash A/c $170000
Retained Earnings $2170000
Dividend Payable A/c $0
The net effect of declaring and paying the dividend was to reduce the Firms total assets(and shareholder’s equity) by $ 330000
The stock price will reduce by $1.1 on the Ex-dividend date