Dividends and Journal Entries Problems may be encountered in accounting for transactions involving the stockholders’ equity section of the balance sheet. Required 1. Explain the significance of the three dates that are important in accounting for cash dividends to stockholders. State the journal entry, if any, needed at each date. 2. Assume retained earnings can be used for stock dividends distributable in shares. What is the effect of an ordinary 10% common stock dividend on retained earnings and total stockholders’ equity?

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Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.