Dividend payment procedures At the quarterly dividend meeting, Wood Shoes declar

Question

Dividend payment procedures At the quarterly dividend meeting, Wood Shoes declared a cash dividend of $0.73 per share for holders of record on Monday, July 10. The firm has 250,000 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: Show the entries after the meeting adjourned. When is the ex-dividend date? What values would the key accounts have after the July 31 payment date What effect, if any, will the dividend have on the firm's total assets 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

Ans a -

Retained Earnings A/c Debit $182500

To Dividends Payable A/c Credit $182500

Ans b - Monday July 10

Ans c - Cash - $500,000, Dividends Payable - $182500, Retained Earnings - $2717500

Ans d - The dividends payable / declared will have no effect on the total assets however when the dividend is actually paid the assets will decrease by $182500

Ans e - After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.

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