Question

Please answer a,b,c,d,e. thank you!

Dividend payment procedures At the quarterly dividend meeting, Wood Shoes declared a cash dividend of $1.13 per share for holders of record on Monday, July 10. The firm has 400,000 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 $700,000 Dividends payable Retained eamings 2,600,000 a. Show the entries after the meeting adjouned. b. When is the ex-dividend date? e. What values would the key accounts have after the July 31 payment date? d. 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? a. Show the entries after the meeting adjouned. (Round to the nearest dolar) Cash Dividends payable Retained eamings

Answer 1

a. Journal entries

Jul 10 :

Retained Earning A/c Dr. $452000

To Dividend payable A/c $452000

(Being dividend declared)

Jul 31:

Dividend payable A/c Dr. $452000

to Bank A/c $452000

(Being dividend paid to shareholders)

b. the ex-dividend date is normally the one or two business day before the record date.

c. the value of key accounts on July 31 will be as follows:

	Cash A/c	Dividend Payable A/c	Retained Earning A/c
Before payment of dividend on Jul 31	700000	452000	2148000
After payment of Dividend on Jul 31	248000	0	2148000

d. As per Miller and Modigilani's Dividend approach, the dividend not affect the value of firm, therefore, there will be no change in the value of firm.

e. the value of stock will drop by $ 1.13 on ex-dividend date.

Entries after meeting adjourned on Jul 10:

Cash: $700000

Dividend payable: $ 452000

Retained Earning: $2148000