Liquidating dividend example

This mainly occurs during voluntary liquidations of solvent corporations.A liquidating dividend is used when a corporation is dissolving and it needs to distribute its assets to its shareholders.When you receive a liquidating dividend, the amount will be reported to you on a 1099-DIV form, in either box 8 or 9.Only the amount that exceeds the taxpayer's basis in the stock is capital; this is taxed as a capital gain.They are treated as a reduction of contributed capital, either additional paid-in-capital or a special contracontributed capital account, designated as “Contributed Capital Distributed” as a “Liquidating Dividend”. Common Stock Dividend Distributable = 300,000 At the time of distribution the following journal entry is required: [Debit].

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.

The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.

The former target stockholders get their acquirer stock from a liquidating dividend.

The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.

Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.

Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.

The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.

The former target stockholders get their acquirer stock from a liquidating dividend.

The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.

Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.

Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

||

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.The former target stockholders get their acquirer stock from a liquidating dividend.The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.

The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.

The former target stockholders get their acquirer stock from a liquidating dividend.

The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.

Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.

Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

||

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.The former target stockholders get their acquirer stock from a liquidating dividend.The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity =

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.

The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.

The former target stockholders get their acquirer stock from a liquidating dividend.

The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.

Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.

Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

||

This means that the business sells off not just any inventory it may have, but its tools of production, building and any other assets it may have.The result is that the acquirer takes over the target and the former stockholders of the target company now become stockholders in the acquirer.The former target stockholders get their acquirer stock from a liquidating dividend.The purpose of this exercise is to gain the money necessary to pay off its debts and then to distribute the remainder to its shareholders through a liquidating dividend.Often a liquidation is overseen by a receiver, or a chosen representative of the shareholders, who oversees the process to ensure that it runs smoothly and that the corporation maximizes the return from the sale of its assets.Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of $1 per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [$1 x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, $20 par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, $20 par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = $1,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

You must have an account to comment. Please register or login here!