Question

Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend,...

Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend, an accumulated but undeclared dividend on cumulative preferred stock, and a stock dividend distributable.

Homework Answers

Answer #1

In case of declared dividend but unpaid cash dividend :

Cash dividend declared would be debited to Retained earnings and as the dividend is unpaid amount would be credited to Dividend payable account.

In case of an accumulated but undeclared dividend on cumulative preferred stock :

An accumulated but undeclared dividend on cumulative preferred stock should be disclosed either by a footnote to the balancesheet or in the capital stock section until declared by the board.

A stock Dividend Distributable :

As it represent retained earnings in the process of transfer to paid-in Capital, it is generally reported in the stockholder’s Equity section, they does not appear as liability because the stock dividend does not require future outlays of assets or services and is recoverable by board prior to issuance.

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