OPERATIONS, DIVIDENDS, BOOK VALUE PER SHARE, EARNINGS PER SHARE

ACCOUNTING CYCLE

Worksheet Financial Statements Statement of financial Position Statement of Comprehensive Income Statement of changes in shareholders’ equity Statement of cash flowsAdjusting entriesClosing entries

SHAREHOLDERS’ EQUITY

•Contributed capital Share capital Share premium•Retained Earnings Appropriated Unappropriated

DIVIDENDS, BOOK VALUE AND

EARNINGS PER SHARE

•Dividends Cash Scrip Property Share•Book value per share One class of shares Two classes of shares•Earnings per share One class of shares Two classes of shares

DIVIDENDSDISTRIBUTION TO SHAREHOLDERS OF

CORPORATE EARNINGS IN PROPORTION TO THE NUMBER OF SHARES HELD BY THEM

DIVIDENDS ARE PAID OUT OF ACCUMULATED PROFITS

LIQUIDATING DIVIDEND – A RETURN OF SHAREHOLDERS’ INVESTMENT

DATES RELATED TO DIVIDENDS

FORMS OF DIVIDENDS

Par value of P10 and cash dividend rate of 10%.Date of declaration – Jan 15 Journal EntryOutstanding shares 10,000Par value / share P10 -------- P100,000Dividend rate .10 -----------Dividend P 10,000 ======

Accumulated Profits 10,000 Cash dividends payable 10,000

Date of Record – February 15

Date of payment – March 15

No journal entry Cash dividends payable 10,000 Cash 10,000

No par value shares and dividend is P1.50 per shareDate of declaration – Jan.20

Date of payment - -March 20Cash dividends payable 15,000 Cash 15,000Payment of cash dividend

Accumulated profits 15,000 Cash dividends payable15,000Cash dividend of P1.50 /share was declared

SHARE DIVIDENDS

(100,000 SHARES X P4) X 10%Date of declaration –

Date of payment Share dividends Distributable 10,000 Share capital 10,000 Issuance of sharedividends

Accumulated profits 40,000 Share dividends distributable

10,000 Share premium

30,000A 10% share dividendWas declared

(100,000 SHARES X P1) X 30%Date of declaration –

Date of payment Share dividends Distributable 30,000 Share capital 30,000 Issuance of sharedividends

Accumulated profits 30,000 Share dividends distributable

30,000A 30% share dividendWas declared

DIVIDENDS FOR TWO CLASSES OF SHARES

CUMULATIVE NON-CUMULATIVEA PREFERENCE SHARE

IS ENTITLED TO DIVIDENDS EVERY YEAR

IF DIVIDENDS ARE NOT DECLARED AND PAID DUE TO LACK OF RRESOURCES, DIVIDENDS IN ARREARS ARE ACCUMULATED.

A PREFERENCE SHARE IS ENTITLED TO DIIDENDS FOR THE CURRENT YEAR ONLY.

DIVIDENDS IN ARREARS ARE NOT ACCUMULATED IN THE SUCCEDING YEARS

DIVIDENDS FOR TWO CLASSES OF SHARES

NON PARTICIPATING PARTICIPATINGAFTER DIVIDENDS

ARE ALLOCATED TO PREFERENCE SHARES, THE REMAINING AMOUNT OF DIVIDENDS ARE ALLOCATED TO ORDINARY SHARES

PREFERENCE SHARES PARTICIPATE ON THE REMAINING AMOUNT OF DIVIDENDS AFTER ALLOCATIONS ARE MADE TO BOTH PREFERENCE AND ORDINARY

Preference share capital is non-cumulative and non-participating

PREFERENCE

ORDINARY

Total

P100,000 X 5%

P5,000 P 5,000

Remainder : P28,000 – P5,000

P23,000

23,000

Total P5,000 P23,000 P28,000Dividends per share

P.5/share P.575/share

Accumulated profits 28,000 Cash dividends payable – preference 5,000 Cash dividends payable - ordinary 23,000

Preference share capital is cumulative and non-participating

PREFERENCE

ORDINARY

Total

P100,000 X 5% x 3 P15,000

P15,000

Remainder : P28,000 – P15,000

P13,000

13,000Total P15,000 P13,000 P28,000Dividends/share P1.50/

shareP.325/share

Accumulated profits 28,000 Cash dividends payable – preference 15,000 Cash dividends payable - ordinary 13,000

Preference share is non-cumulative and fully participating

PREFERENCE

ORDINARY Total

P100,000 X 5% P5,000

P 5,000

P200,000 x 5%

P10,000 10,00

P13,000 x 1/3

13,000 x 2/3

4,333.338,666.67

13,000

Total P9,333.33 P18,666.67 P28,000Dividend/share P.933/

shareP.467/share

Accumulated profits 28,000 Cash dividends payable – preference

9.333.33

Cash dividends payable - ordinary

18,666.67

Preference share capital is cumulative and fully participating

PREFERENCE

ORDINARY Total

P100,000 X 5% x 3 years P15,000

P 15,000

P200,000 x 5%

P10,000 10,00

P3,000 x 1/33,000 x 2/3

1,0002,000 3,000

Total P16,000 P12,000 P28,000Dividend per share P1.60/

shareP.30/share

Accumulated profits 28,000 Cash dividends payable – preference

16,000

Cash dividends payable - ordinary

12,000

10-7aPREFEREN

CEORDINARY Total

P300,000 X 10% x 2 years

P60,000P 60,000

Remainder P31,000 31,000

Total P60,000 P31,000 P28,000Dividend per share P20/share P.4.005/share

Accumulated profits 91,,000 Cash dividends payable – preference

60,000

Cash dividends payable - ordinary

31,000

10-7bPREFEREN

CEORDINARY Total

P300,000 X 10% x 2 years

P60,000P 60,000

(7,740 x P50)x10% = 38,700

P31,000Only P31,000

is the remainder

31,000

Total P60,000 P31,000 P28,000Dividend per share P20/share P.4.005/share

Accumulated profits 91,,000 Cash dividends payable – preference

60,000

Cash dividends payable - ordinary

31,000

10-7 – Computation of the ordinary shares entitled to dividends

Par value/No. of Amount cost shares

Share capital P 312,000 50 6,240 Subscribed share capital 80,000 50 1,600 Treasury shares 6,000 60 (100) Ordinary shares entitled to dividends 7,740

Problem 10-1 Miguel Corporation

Preference Ordinary Totala P190,000 x 10% P 19,000.0 P P 20,000.0

Remainder 60,000.0 60,000.0 19,000.0 60,000.0 P 80,000.0

No. of shares 1,900.0 30,000.0 Dividends/share P 10.0 P 2.0

b P190,000 x 10% x 3 P 57,000.0 P P 57,000.0 P300,000 x 10% 23,000.0 23,000.0

57,000.0 23,000.0 P 80,000.0 No. of shares 1,900.0 30,000.0 Dividends/share P 30.0 P 0.8

Problem 10-1 Miguel Corporation

Preference Ordinary Totalc P190,000 x 10% x 2 P 38,000.0 P P 38,000.0

P300,000 x10% 30,000.0 30,000.0 P12,000 x 19/49 4,653.1 7,346.9 12,000.0

42,653.1 37,346.9 P 80,000.0 No. of shares 1,900.0 30,000.0 Dividends/share P 22.4 P 1.2 92,000.0

d 190,000 x 10% 19,000.0 P P 19,000.0 P300,000 x 10% 30,000.0 30,000.0 P31,000 x 19/49 12,020.4 18,979.6 31,000.0

31,020.4 48,979.6 80,000.0 No. of shares 1,900.0 30,000.0 Dividends/share P 16.3 P 1.6

Problem 10-2 Maxine Corporation

No. of shares issued 40,000No. of shares in the treasury 5,000No. of shares outstanding 35.000Dividends per share P5 ----------Decrease in accumulated profits P175,000 ======Accumulated profits 175,000

Cash dividends payable 175,000

C. Cash dividends payable 175,000 Cash 175,000Payment of cash dividends declared

Cash dividends decrease total assets byP175,000 due to the decrease in cash

Charity CorporationPREFERENCE ORDINARY TOTAL

P1,000,000 X 6%

P60,000 P60,000

Remainder: P150,00-60,000

P90,000 90,000

Total 60,000 90,000 150,000No. of shares 10,000 20,000Dividends per

shareP6.00 P4.50

Olivia CorporationNo. of outstanding shares 80,000Par value P 5.00Total share capital P400,000Share dividend rate 20%Amount debited to Accumulated profits P80,000

=====

Problem 10-5 Gabriel Corporation

PAR VALUE/AMONT COST PREFERENCE ORDNARY

Share capital 2,000,000 100 20,000 1,000,000 20 50,000

Share capital subscribed 500,000 100 5,000 400,000 20 20,000

Treasury shares 120,000 120 (1,000) 60,000 30 (2,000)

Shares entitled to dividends 24,000 68,000

Problem 10-6 Mikhail Corporation

Accumulated profits, Jan. 1, 2011 P 1,500,000 Net income 300,000 Cash dividends declared Dec. 1,2011 P 490,000 Cash dividends declared Nov. 20, 2011 370,000 (860,000) Accumulated profits, Dec. 31, 2011 P 940,000

Problem 10-8 Carlo Corporation

Accumulated profits, Dec. 31, 2011 P 250,000 Net income (125,000) Dividend declaration 10,000 Accumulated profits, Jan. 1, 2011 P 135,000