Question

Accounting for Dividends

Stanley Black & Decker is a leading global manufacturer and marketer of power tools, hardware, and home improvement products. A press release contained the following announcement:

At the time of the press release, the company had 300 million shares authorized and 155 million outstanding. The par value for the company’s stock is $2.50 per share.

Required:

1. Prepare journal entries as appropriate for each of the three dates mentioned above.

2. Assuming no other dividends were declared during the year, prepare the closing entry.

Answer 1

Book-keeping Treatment for Dividends

Dividends are payments to shareholders that can be made frequently (monthly, quarterly or annually) or infrequently. Corporations are not obligated to issue a bonus to their common shareholders. Corporations may have a responsibility to issue a bonus to favored shareholders. A corporation's board of directors must approve of a dividend before it can be acknowledged and distributed.

1.

The journal entries for the transaction on the three dates are given below:

Date	Transaction	Amount ($)	Amount ($)
Feb 18, 2014	Dividends Dr.	77,500,000
	Dividends Payable		77,500,000
	(To dividends declared)

There is no need of journal entry for March 5, 2014.

Date	Transaction	Amount ($)	Amount ($)
Mar 18, 2014	Dividends Payable Dr.	77,500,000
	Cash		77,500,000
	(To dividends paid)

2.

The journal entry for the closing the dividends are given below:

Date	Transaction	Amount ($)	Amount ($)
	Retained earnings Dr.	77,500,000
	Dividends		77,500,000
	(To dividends closed as retained earnings)