Chapter 11

Corporations:
Organization, Share
Transactions, Dividends,
and Retained Earnings
Financial Accounting, IFRS Edition
Weygandt Kimmel Kieso
Slide
11-1
 Study
Study Objectives
Objectives

1. Mengidentifikasi karakteristik utama sebuah perseroan.

2. Mencatat penerbitan saham biasa (treasury shares).
3. Menjelaskan akuntansi untuk treasury shares.
4. Membedakan preference shares dengan ordinary shares.
5. Membuat ayat jurnal untuk transaksi cash dividends and
share dividends.
6. Mengidentifikasi transaksi-transaksi yang dilaporkan dalam
retained earnings statement.
7. Menyiapkan dan menganalisis bagian comprehensive
equity.
Slide
11-2
 Corporations:
Corporations: Organization,
Organization, Share
Share Transactions,
Transactions,
Dividends,
Dividends, and
and Retained
Retained Earnings
Earnings

Corporate
Statement
Organization and Retained
Dividends Presentation and
Share Earnings
Analysis
Transactions

Corporate form of Cash dividends Retained earnings Presentation

organization Share dividends restrictions Analysis
Ordinary share Share splits Prior period
issues adjustments
Treasury shares Retained earnings
Preference shares statement

Slide
11-3
 Dividends
Dividends

Penyaluran kas atau saham perseroan kepada para

pemegang saham secara proporsional (pro rata,
sebanding dengan kepemilikan).
Types of Dividends:
1. Cash dividends 3. Scrip (note)
2. Property dividends 4. Shares

Dividends expressed: (1) as a percentage of the par or

stated value, or (2) as a dollar amount per share.

Slide
11-4
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Cash Dividends

For a corporation to pay a cash dividend, it must have:

1. Retained earnings - Payment of cash dividends from

retained earnings is legal in all jurisdictions.

2. Adequate cash.

3. A declaration of dividends by the Board of Directors.

Slide
11-5
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Tiga tanggal penting:

Illustration 11-12

Slide
11-6
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends
Illustration: On Dec. 1, the directors of Media General
declare a 50¢ per share cash dividend on 100,000 shares of
$10 par value common share. The dividend is payable on Jan.
20 to shareholders of record on Dec. 22?

December 1 (Declaration Date)

Cash dividends 50,000
Dividends payable 50,000

December 22 (Date of Record) No entry

January 20 (Payment Date)

Dividends payable 50,000
Cash 50,000
Slide
11-7
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Mengalokasikan Dividen Tunai Diantara

Saham Preferen dan Saham Biasa

Pemegang saham preferen kumulatif akan menerima

pembayaran dividen tahun sebelumnya yang belum
dibayarkan serta dividen tahun berjalan terlebih dahulu
sebelum pemegang saham biasa menerima dividen.

Slide
11-8
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Illustration: On December 31, 2011, IBR Inc. has 1,000 shares

of 8%, $100 par value cumulative preference share. It also has
50,000 shares of $10 par value ordinary shares outstanding. At
December 31, 2011, the directors declare a $6,000 cash
dividend. Prepare the entry to record the declaration of the
dividend.

Cash dividends 6,000

Dividends payable 6,000

Dividends: 1,000 shares x $100 par x 8% = $8,000

Slide
11-9
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Illustration: At December 31, 2012, IBR declares a $50,000

cash dividend. Show the allocation of dividends to each class of
share.
2011 2012

Dividends declared $ 6,000 $ 50,000

Dividends in arrears 2,000 **

Allocation to preference 6,000 8,000 *
Remainder to ordinary $ - $ 40,000

* 1,000 shares x $100 par x 8% = $8,000

** 2011 Pfd. dividends $8,000 – declared $6,000 = $2,000
Slide
11-10
SO 5 Prepare the entries for cash dividends and share dividends.
 Cash
Cash Dividends
Dividends

Illustration: At December 31, 2012, IBR declares a $50,000

cash dividend. Prepare the entry to record the declaration of the
dividend.

Cash dividends 50,000

Dividends payable 50,000

Slide
11-11
SO 5 Prepare the entries for cash dividends and share dividends.
Slide
11-12 Answer on notes page
 Share
Share Dividends
Dividends

Share Dividends Illustration 11-14

Adalah pembagian saham perseroan secara pro rata bagi para pemegang
sahamnya.

Results in decrease in retained earnings and increase share capital and share premium.

Slide
11-13
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Share Dividends
Alasan perusahaan mengeluarkan share dividends:
1. Untuk memenuhi kewajiban pembagian dividen kepada
para pemegang saham tanpa mengeluarkan uang tunai.
2. Untuk meningkatkan harga pasar saham perseroan.
3. Untuk menekankan bahwa sebagian ekuitas telah
diinvestasikan kembali secara permanen ke dalam bisnis
(dan tidak tersedia untuk dividen tunai).

Slide
11-14
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Size of share Dividends

Small share dividend (less than 20–25% of the

corporation’s issued shares, recorded at fair market
value) *

Large share dividend (greater than 20–25% of

issued shares, recorded at par value)

* This accounting is based on the assumption that a small share

dividend will have little effect on the market price of the
outstanding shares.
Slide
11-15
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Illustration: Medland Corp. has 50,000 shares issued and

outstanding. The par value is $10 per share and market
value is $15 per share.

10% share dividend is declared

Share dividends (50,000 x 10% x $15) 75,000
Ordinary share dividends distributable 50,000
Share premium - ordinary 25,000

Shares issued
Ordinary share dividends distributable 50,000
Share capital - ordinary 50,000

Slide
11-16
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Statement Presentation
Illustration 11-15

Slide
11-17
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Effects of Share Dividends

Illustration 11-16

Slide
11-18
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Dividends
Dividends

Question
Which of the following statements about small share
dividends is true?
a. A debit to Share Dividends for the par value of the
shares issued should be made.
b. A small share dividend decreases total shareholders’
equity.
c. Market value per share should be assigned to the
dividend shares.
d. A small share dividend ordinarily will have no effect on
book value per share of share.

Slide
11-19
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Splits
Splits

Share Split
Menghasilkan pengurangan nilai nominal atau nilai
per lembar saham.

Perusahaan tidak perlu membuat jurnal atas

pemecahan saham.

Tujuannya untuk meningkatkan nilai pasar saham

dengan menurunkan harga pasar per saham.

Slide
11-20
SO 5 Prepare the entries for cash dividends and share dividends.
 Share
Share Splits
Splits

Illustration: Assume Medland Corporation splits its 50,000

shares of common share on a 2-for-1 basis.
Illustration 11-17

Results in a reduction of the par or stated value per share.

Slide
11-21
SO 5 Prepare the entries for cash dividends and share dividends.
 Retained
Retained Earnings
Earnings

Retained earnings adalah laba neto yang dipertahankan

perusahaan untuk menjalankan bisnisnya.

Net income increases retained earnings and a net loss

decreases retained earnings.

Retained earnings is part of the shareholders’ claim on

the total assets of the corporation.

A debit balance in retained earnings is identified as a

deficit.

Slide
11-22
SO 6 Identify the items that are reported in a retained earnings statement.
 Retained
Retained Earnings
Earnings Restrictions
Restrictions

Pembatasan saldo laba disebabkan oleh:

1. Pembatasan hukum.

2. Pembatasan kontrak.

3. Pembatasan sukarela.
Illustration 11-22

Slide
11-23
SO 6 Identify the items that are reported in a retained earnings statement.
 Prior
Prior Period
Period Adjustments
Adjustments

Corrections of Errors
Result from:
 mathematical mistakes
 mistakes in application of accounting principles
 oversight or misuse of facts

Corrections treated as prior period adjustments

Adjustment made to the beginning balance of

retained earnings

Slide
11-24
SO 6 Identify the items that are reported in a retained earnings statement.
 Prior
Prior Period
Period Adjustments
Adjustments
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2011

Balance, January 1 $ 1,050,000

Net income 360,000
Dividends (300,000)
Balance, December 31 $ 1,110,000

Before issuing the report for the year ended December 31, 2011, you discover a
$50,000 error (net of tax) that caused the 2010 inventory to be overstated
(overstated inventory caused COGS to be lower and thus net income to be higher in
2010). Would this discovery have any impact on the reporting of the Statement of
Retained Earnings for 2011?

Slide
11-25
SO 6 Identify the items that are reported in a retained earnings statement.
 Prior
Prior Period
Period Adjustments
Adjustments
Woods, Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2011

Balance, January 1, as previously reported $ 1,050,000

Prior period adjustment - error correction (50,000)
Balance, January 1, as restated 1,000,000
Net income 360,000
Dividends (300,000)
Balance, December 31 $ 1,060,000

Slide
11-26
SO 6 Identify the items that are reported in a retained earnings statement.
 Retained
Retained Earnings
Earnings Statement
Statement

Transactions the Affect Retained Earnings

Illustration 11-24

Slide
11-27
SO 6 Identify the items that are reported in a retained earnings statement.
 Retained
Retained Earnings
Earnings Statement
Statement
Illustration 11-25

Slide
11-28
SO 6 Identify the items that are reported in a retained earnings statement.
 Retained
Retained Earnings
Earnings Statement
Statement

Question
All but one of the following is reported in a retained
earnings statement. The exception is:
a. cash and share dividends.
b. net income and net loss.
c. some disposals of treasury shares below cost.
d. sales of treasury shares above cost.

Slide
11-29
SO 6 Identify the items that are reported in a retained earnings statement.
 Statement
Statement Presentation
Presentation and
and Analysis
Analysis
Illustration 11-26

Slide
11-30
SO 7 Prepare and analyze a comprehensive equity section.
 Statement
Statement Analysis
Analysis and
and Presentation
Presentation

Analysis

Return on Net Income minus Preference

Ordinary Dividends
=
Shareholders’ Average Ordinary Shareholders’
Equity Equity

This ratio shows how many dollars of net income the

company earned for each dollar invested by the
shareholders.

Slide
11-31
SO 7 Prepare and analyze a comprehensive equity section.
 Statement
Statement Analysis
Analysis and
and Presentation
Presentation

Analysis

Illustration 11-28

Slide Solution on
11-32 notes page
SO 7 Prepare and analyze a comprehensive equity section.