ADAMSON UNIVERSITY

COLLEGE OF BUSINESS ADMINISTRATION

ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS

A. The records of Algae Corporation showed the following data:

Ordinary Share Capital, P100 par value, authorized – 200,000 shares; issued
and outstanding – 50,000 shares P5,000,000
Share Premium 230,000
Retained Earnings 2,300,000

From the following independent cases, journalize the dividend declaration and the dividend
payment.
1. The Board of Directors declared a 10% cash dividend
Retained Earnings 500,000
Cash Dividends Payable 500,000
To record declaration of cash dividends
1 share X P100 par value = P100; P100 X 10% = P10; P10 X 50,000 shares = P500,000
OR
50,000 shares X P100 X 10% = P500,000

Cash Dividends Payable 500,000

Cash 500,000
To record payment of cash dividends

2. The Board of Directors declared a P5.00 per share cash dividend

Retained Earnings 250,000
Cash Dividends Payable 250,000
To record declaration of cash dividends
50,000 shares X P5 = P250,000

Cash Dividends Payable 250,000

Cash 250,000
To record payment of cash dividends
 ADAMSON UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION
ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS
3. The Board of Directors declared a 10% share (stock) dividend
Retained Earnings 500,000
Share Dividends Payable 500,000
To record declaration of share (stock) dividends
50,000 shares X 10% = 5,000 shares
5,000 shares X P100 par value = P500,000

Share Dividends Payable 500,000

Share Capital - Ordinary 500,000
To record issuance of share (stock) dividends 5,000 shares

4. The Board of Directors declared a 1 share (stock) dividend for every 10 shares (stock) held
Retained Earnings 500,000
Share Dividends Payable 500,000
To record declaration of share (stock) dividends
50,000 shares / 10 shares = 5,000 shares
5,000 shares X P100 par value = P500,000

Share Dividends Payable 500,000

Share Capital - Ordinary 500,000
To record issuance of share (stock) dividends 5,000 shares
 ADAMSON UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION
ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS
B. The following is the abstract of the Stockholders’ Equity of Orchid Corporation before the declaration of
cash dividends:
15% Preference Share Capital, par value P20, 150,000 shares all issued and outstanding P3,000,000
Ordinary Share Capital, par value P10, 100,000 shares all issued and outstanding 1,000,000
Retained Earnings 5,500,000

DETERMINE HOW MUCH DIVIDENDS THE PREFERENCE AND ORDINARY SHARES WILL RECEIVE GIVEN THE
FOLLOWING INDEPENDENT SITUATIONS:
1. The Board of Directors declared cash dividends of P900,000. No cash dividends were distributed last
year. The preference share is non-cumulative and non-participating
Preference Ordinary Total
Interest
Current Year: P3,000,000 X 15% X 1 year P450,000 P 0 P450,000
Remainder – to Ordinary (P900,000 – 450,000) 0 450,000 450,000
------------- ------------- -------------
Total P450,000 P450,000 P900,000
======== ======== ========
Dividend per Share
P450,000 / 150,000 shares P3
P450,000 / 100,000 shares P 4.50
 ADAMSON UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION
ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS
2. The Board of Directors declared cash dividends of P1,500,000. No cash dividends were distributed last
year. The preference share is cumulative and non-participating;
Preference Ordinary Total
Interest
Current Year: P3,000,000 X 15% X 1 year P450,000 P 0 P450,000
Last Year: P3,000,000 X 15% X 1 year 450,000 450,000
Remainder – to Ordinary (P1,500,000 – 450,000 – 450,000) 0 600,000 600,000
--------------- --------------- ---------------
Total P900,000 P600,000 P1.500,000
========= ========= =========
Dividend per Share
P900,000 / 150,000 shares P6
P600,000 / 100,000 shares P6
 ADAMSON UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION
ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS
3. The Board of Directors declared cash dividends of P1,500,000. No cash dividends were distributed last
year. The preference share is both cumulative and participating;
Preference Ordinary Total
Interest PREFERENCE
Current Year: P3,000,000 X 15% X 1 year P450,000 P 0 P450,000
Last Year: P3,000,000 X 15% X 1 year 450,000 450,000

Interest ORDINARY
Current Year: P1,000,000 X 15% X 1 year 150,000 150,000
--------------- --------------- ---------------
Total P900,000 P150,000 P1,050,000
Remainder P1,500,000 – 1.050,000 = P450,000
To PREFERENCE (P450,00 X 3,000,000 / 4,000,000) 337,500 337,500
To ORDINARY (P450,00 X 1,000,000 / 4,000,000) 112,500 112,500
--------------- --------------- ---------------
Total P1,237,500 P262,500 P1,500,000
========= ========= =========
Dividend per Share
P1,237,500 / 150,000 shares P 8.250
P262,500 / 100,000 shares P 2.625
 ADAMSON UNIVERSITY
COLLEGE OF BUSINESS ADMINISTRATION
ACCOUNTANCY DEPARTMENT
ANSWERS - DIVIDENDS
4. The Board of Directors declared cash dividends of P900,000. No cash dividends were distributed last
year. The preference share is non-cumulative and participating;
Preference Ordinary Total
Interest PREFERENCE
Current Year: P3,000,000 X 15% X 1 year P450,000 P 0 P450,000

Interest ORDINARY
Current Year: P1,000,000 X 15% X 1 year 150,000 150,000
------------- ------------- -------------
Total P450,000 P150,000 P600,000
Remainder P900,000 – 600,000 = P300,000
To PREFERENCE (P300,00 X 3,000,000 / 4,000,000) 225,000 225,000
To ORDINARY (P300,00 X 1,000,000 / 4,000,000) 75,000 75,000
------------- ------------- -------------
Total P675,000 P225,000 P900,000
======== ======== ========
Dividend per Share
P675,000 / 150,000 shares P 4.50
P225,000 / 100,000 shares P 2.25