Hi, Else here.
And in the previous video, we issued shares,
and we showed how to do a cash dividend.
We're now going to focus on the stock dividend.
Notice that this is our T-accounts,
and they've already been updated for previous entries.
One of the pieces of information we need for a stock dividend,
is the total number of common shares
that are right now outstanding.
So let's just get that piece of information.
We have 296,450 shares outstanding right now,
common shares.
Let's go down and do the entries.
Previously we have already done the cash dividend,
but let's give ourselves a little bit more room, and start
with the stock dividend.
We need the number of shares.
We know that the stock dividend is 10%.
This will determine how many shares we're actually
going to issue, 29,645 shares.
Quite frequently, students will use this to do their entry.
Please do not make that mistake, this
is the number of shares we're going to issue.
We still have to determine what the value is.
We were given three values, a value
both at the date of declaration, the date of record,
as well as the date of issue, also called
the date of distribution.
The entry we have to make today is on the date of declaration,
so we have to use the value at the date of declaration,
which was $25.
We therefore take the number of shares
that we're going to issue, multiply them
times the value of the shares, and that
will give us the value of the stock dividend.
That's the amount of our entry.
Our entry is on August 1st.
What are we giving away?
We are actually giving away a dividend,
so we're going to use stock dividend.
We can also use simply a plain account called dividends.
Or, as I do, we can use retained earnings.
The other side of the entry.
Quite frequently, students use dividends payable,
but dividends payable is a liability account
and it indicates that we're going to give out cash goods
or services in the future, and we're not
giving up any of these.
Instead, what we need is something
similar to dividends payable, but not
in the liabilities category.
We need something in the equity category
that clearly indicates that we are reserving, or holding
back, a value in equity that eventually
will be converted into common shares, but it's not right now.
The account we use is called stock dividends distributable.
What's the amount?
$741,125.
And, of course, we're going to update our T-accounts.
First, I'm going to reflect in my common shares.
Wait a minute, I haven't issued any common shares as yet.
So I can't touch common shares.
Instead, I have to create a new T-account for stock dividend
distributable.
I'm going to use a short form.
How much is being held in that account?
$741,125.
In addition, remember that retained
earnings has to be decreased by the same amount.
All right let's move on.
It's now August 14th, the date of record, no entry.
Again, we know at this date, all that's happening
is we're listening down everyone's name
who will receive the stock dividend.
Next entry, September 1st.
We're now going to issue, or distribute, the stock dividend.
So what's going to happen?
The first thing that's going to happen
is my stock dividend distributable, my holding
account, is going to disappear, because I
am issuing the shares.
In addition I'm issuing the shares,
so common shares are going to go up.
The amount's going to be the same.
I have to reflect it in my T-accounts.
First, stock dividend distributable
is going to have a debit in order to make it a zero.
In addition, my common stocks are going to go up.
And the number of shares are going to go up.
Keep in mind that you have to always update
the number of shares.
Let's quickly do the next entries
which are these semi annual, preferred share dividend
for the end of the year.
On December 1st, it's the date of declaration.
I have to recognize that the dividend will
be paid in the future, and that the declaration of the dividend
will affect either the cash dividend, dividend,
or retained earnings account.
I'm going to use a short form for retained earnings, RE.
The amount is going to be the same.
Next December 20th, date of record.
No entry because we're listing down everyone's name.
December 31st, we're going to pay the dividend.
The defense table will disappear because I no longer
owe the shareholders anything.
In addition, on giving away cash,
so my cash is going to decrease.
The amount will be the same, and now I'm
going to reflect these entries in my T-accounts.
There are no other changes in my T-accounts.
Now what I want to do is add up all my accounts,
so that I can create the statement of changes
in shareholders' equity, also called the statement of equity,
or the statement of shareholders' equity.
The information from the statement
of changes in shareholders' equity,
will be used to create the equity
section of the statement of financial position,
also called the balance sheet.
Preferred shares have stayed at 700,000, number issued 4,400.
Common shares have now been updated.
The total value is $7,366,147.
In addition, the number of shares outstanding
contributed surplus remains at 50,000.
Stock dividend distributable is zero.
For retained earnings, we have to reflect the net income,
also called profit.
So let's put profit through retained earnings.
That was 245,800 The entries for this are the closing entries,
and I'm not covering that in this video.
Total amount updated for retained earnings
is $2,906,845.
In the next video, we'll be using this information in order
to create the statement of changes in equity,
and also, the shareholders' equity section
of the statement of financial position, also
called the balance sheet under ASPE.
See you in the next video.