Chapter 15, Problem 11P

To determine

Stock and cash dividends: Dividend is the reward or return that a company gives to its shareholders on their investment. Dividends can be cash or otherwise. Dividends are usually based on retained earnings. When the dividends are not paid out of retained earnings but are based on paid-in capital, they are referred to as liquidating dividends. When a company pays a liquidating dividend, a clear statement of the same has to be made and such statements should accompany the dividend check.

Stock dividend: Dividend is the reward or return that a company gives to its shareholders on their investment. When stock dividends are declared, the company actually does not pay out assets or incur any liability. There is no change in the amount of the shareholders’ equity. However, the number of shares increases. When stock dividends are issued, the shareholders retain the same amount of interest in the growth of the company.

To record: To record the journal entry for dividend.