Chapter 14- corporations, dividends

Profits earned or losses incurred by the corporation. Profits retained belong to the common shareholders and the share value increases accordingly.

Issue: Have the directors of the company breached their duties mainly related to the company’s insolvent trading.

A corporation that distributes property that has appreciated in value must recognize a gain at the time of distribution. The corporation is treated as if it had sold the property. The gain equals the property 's fair market value less its adjusted basis. Code Sec. (b). However, the corporation does not recognize a loss if the property had declined in value. Also, the corporation recognizes no gain or loss if t distributes its own stock rights to its shareholders. Code Sec. (a). The character of the recognized gain depends on the property distributed; thus it may be ordinary income, capital gain, or Section 1231 gain.

3) Molly sells her car, valued at $30,000, to her nephew Todd for $18,000. Molly has made a taxable gift.

Record all transactions on the appropriate dates for cash dividends. (If no entry is required, select "No journal entry required" in the account field and enter zero (0) in the amount field. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

[LO 2] {Research} Jerry is a self-employed rock star and this year he expended $1,000 on special “flashy” clothes and outfits. Jerry would like to deduct the cost of these clothes as work-related because the clothes are not acceptable to Jerry’s sense of fashion. Under what circumstances can Jerry deduct the cost of these work clothes?

• The balance in Prepaid Rent relates to the 12 month period from 1 January 2014 to 31 December 2014. • An ageing analysis shows that $4,000 of Accounts Receivable is estimated to be uncollectible. • On 30 June 2014, the directors declared a dividend of $5,000, which the shareholders authorised. The dividend is to be paid on 15 September 2014.

While the Income Share Agreements confront the problem of student debt, the ISAs ignores the affordability problem. The affordability issue not only applies to the rising tuition rates caused by less state funding but also by the sluggish growth in middle class incomes. The middle class, which makes up the majority of the nation’s population cannot afford to pay for a college degree without turning to student loans or other alternatives such as ISAs as a supplement. The stagnation in middle class income as precipitated by low wages, along with rising standards of living, simply cannot keep up with the surges in college tuition rates. While ISAs provide the means of access to a college education, it does not acknowledge the fact that college

Dividends are calculated on the Average Daily Balance and paid monthly (dividend rates are determined by the board of directors each month)

The retained earnings general ledger account is adjusted every time a journal entry is made to an income or expense account

4) The firm will pay the dividend to all shareholders of record on a specific date, set by the board, called the ________ date.

Block 12 is the final pay period ending date and it should be the Saturday of the week that the last day for which pay is reported in Block 11.

The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—

In practice, dividend policy will be affected by taxes as tax rates for different categories of investors will differ. Also, a firm’s dividend policy is perceived by the financial markets to be a signaling mechanism. A cut back in dividends may signify that the firm perceives tough

A dividend is a usually distributed in cash form to stock holders of a corporation approved by the board of director. It may also include stock dividend or other forms of payment. A stock dividend represents a distribution of additional shares to common stockholders. Dividends are only cash payments regularly made by corporations to their stockholders.