Redemption of Shares

and Cash Dividend

Kimberly Hall and
Thyann Alexander
 Engagement Redemption of
Activity Shares

Sinking Funds Cash Dividend

Agenda
Journalizing

Presentation Title
Presentation title 2
Engagement
Activity
SACH DIENDVID

DEMEERBALE

HSASRE

KIGSNIN UDNF

Presentation title 3
Engagement
Activity

Cash Dividend

Redeemable

Shares

Sinking Fund

Presentation title 4
  Redeemable shares are shares that a company has
agreed it will, or may, redeem (in other words buy
back) at some future date.
 Subject to the articles of organization or any
shareholders' agreements, the shareholder may
still sell or transfer the shares.
WHAT IS  A type of preference share that offers some sort of
preferred privileges over common shares is called
REDEEMABLE a redeemable share.
SHARES?  This preference might be the receipt of dividends,
the return of money, or in rare cases, the
opportunity to vote.
 Redeemable shares don't have to be preferred
shares, though.
 The redemption conditions will have been
outlined in the share issuance paperwork, the
required share information, and perhaps even the
company's bylaws.
 Make Postings
Click icon to add picture
Students will post their interpretation to
redeemable preference shares on padlet. This
Click icon to add picture
will be shared with the class after postings are
made. Students will be given five (5) Minutes
to make their postings and present.
https://padlet.com/kimberlyhall096/mb97sb4tjf
thchkv

Click icon to add picture

This Photo by Unknown Author is licensed under CC BY

 WHAT IS
REDEEMABLE
PREFERENCE
SHARES?
 Examples of Redeemable
Preference Shares

On 1st January 2012, The company decided to

redeem 10000 7% redeemable preference shares
at $ 13 which had issued at $ 10 each were fully
paid up. Pass the journal entry of transferring
same capital and premium to shareholder's
account.
Solution
7% Redeemable Preference Share capital
account Dr. 1,00,000
Premium on Redemption Account Dr. 30000
7% Redeemable Preference Shareholders'
Account Cr. 1,30,000

Presentation title 8

This Photo by
 True of False
Shares can only be redeemed at Par Value. Select the
correct answer.

TRUE FALSE
Correct

Incorrect

This Photo by Unknown Author is licensed under CC BY-NC

 Sinking Funds
 A sinking fund is a specific
kind of fund that is
established with the
intention of paying off debt.
 The account holder
routinely sets aside a
specified sum of money and
utilizes it solely for that
reason.
 Corporations frequently
utilize it for bonds and
deposit funds to purchase
issued bonds or portions of
bonds before the maturity
date.
 Using the fund to persuade
investors that the issuer
won't stop making payments
is another strategy to attract
investors.
10
 • A cash dividend is a payment made by a company to its
Cash Dividend stockholders in the form of periodic distributions of
cash (as opposed to in stock or any other form)
• Cash dividends are often paid on a regular basis, such as
monthly or quarterly, but are sometimes one-time-only
payouts, such as after a settlement.

Accounting Treatment of Cash Dividends

• Cash dividends do not affect a company's income

statement. However, they shrink a company's
shareholders' equity and cash balance by the
same amount. Firms must report any cash
dividend as payments in the financing activity
section of their cash flow statement.
• Most brokers offer a choice to accept or reinvest
11
cash dividends.
 Continuation….
Date of Declaration
The date of declaration is the date when the company's board of directors decide to pay a cash dividend.

Date of Record

The date of record is how the company determines which shareholders are entitled to the dividend.

Date of Payment
This is the last date to remember for dividends because the date of payment is when you actually
receives the cash dividend.

Presentation title 12
 Understanding Cash Dividends Dates
On March 28, QPR company declared paying
the regular cash dividend of $0.5 per share. It
further mentions the holder of record date
shall be April 27 and the payment date of May
20.
The time frame between March 28 and April
24 is when the shares are trading cum
dividend. If any new shareholder joins till
April 24, they are eligible for a dividend
facility.

25 Apr. 20 May

28 Mar. 28 Mar. and 24 Apr.

The ex-dividend date will be April 25, is the payment date on which QPR will
indicating any new shareholders hereon are dispatch the cheques to holders of record.
not eligible for the dividend. It covers up the
T+2 aspect.

Presentation title 13
 Example

For example, on December 14, 2020, the company ABC declares a cash
dividend of $0.5 per share to its shareholders with the record date of December
31, 2020. The payment of the cash dividend will be made on January 8, 2021.
The company ABC has a total of 100,000 shares of common stock.
What is the journal entry for the cash dividend?

• on December 14, 2020, when the company declares the cash dividend
• on January 8, 2021, when the company pay the cash dividend

CC BY-NC
Author is licensed under
This Photo by Unknown

Presentation title 15
References
Banton . (2022, June 20). What Is a Cash Dividend? Investopedia. Retrieved October
12, 2022, from
https://www.investopedia.com/terms/c/cashdividend.asp#:~:text=Key%20Takeaways%
201%20A%20cash%20dividend%20is%20a,to%20accept%20or%20reinvest%20cash
%20dividends.%20More%20items

Corporate Finance Institute. (2020, February 14). Sinking Fund. Retrieved

October 11, 2022, from
https://corporatefinanceinstitute.com/resources/knowledge/finance/sinkin
g-fund/

Newman, P. (2022, January 11). Redemption of shares - redeemable shares and how to
redeem them. Inform Direct. Retrieved October 11, 2022, from
https://www.informdirect.co.uk/shares/share-redemptions-explained/

Oghoorian. (2014, May 31). 3 Dates to Remember if You Want A Cash Dividend - ACap
Advisors & Accountants. ACap Advisors & Accountants. Retrieved October 12, 2022,
from
https://www.acapam.com/diversification/3-dates-to-remember-if-you-want-a-cash-divid
end/#:~:text=The%20date%20of%20declaration%20is%20when%20the%20company
%E2%80%99s,the%20date%20of%20record%20and%20date%20of%20payment
.

Srivastav, A. K. (2022, September 7). Redeemable Preference Shares.

WallStreetMojo.
Presentation title Retrieved October 11, 2022, from 16
https://www.wallstreetmojo.com/redeemable-preference-shares/
Thank you
Mirjam Nilsson
mirjam@contoso.com
www.contoso.com