Recording Dividends
proctor&Gamble is a well-known consumer products company that owns a variety of popular brands A recent news article contained following information:
CINCINNATI, March 9 /PRNewswire-FirstCall/—The Procter&Gamble Company (NYSE: PG) m today said that earnings per share for the January through March quarter as well as the fiscal year is expected to exceed current consensus estimates by $0.01 to $0.02. The increased earnings are being driven by continued strong organic volume growth.
Stock Dividend
The company also announced today that its board of directors approved a 10% stock dividend to shareholders of record on May 21. This move does not change the proportionate interest a shareholder maintains in the company. The additional shares will be distributed on June 18. In a separate action, the board declared an increase in the annual rate of its common stock dividend from $ 1.82 to $2.00 per share.
Required:
1. Prepare any journal entries that P&G should make as the result of information in the preceding report. Assume that the company has 2,500 million shares outstanding, the par value is $1.00 per share, and the market value is $50 per share.
2. What do you think happened to the company’s stock price after the announcement?
3. What factors did the board of directors consider in making this decision?
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