Retained Earnings Mrs. Paz Castro

Liquidating Dividends

• Returns of capital to the investing shareholders.
• This type of dividend can be legally paid only under either of the following circumstances:

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When the corporation is under dissolution and liquidation, or
When the corporation is engaged in the exploration of natural resources.
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Share Splits

• Corporations reduce the par or stated value of its share capital and issues additional shares to its shareholders through the practice referred to as share splits.
• The par or stated value per share will decrease with a corresponding increase in the number of authorized, issued and outstanding shares. In effect, there is not change in the balances of the shareholders’ equity accounts.

□ The following are some reasons behind a share split:
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To adjust the market price of the company’s shares to a level where more individuals can afford to invest in the stock.
To spread the shareholder base by increasing the number of outstanding shares.
To benefit existing shareholders by allowing them to take advantage of an imperfect adjustment following the split.
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□ When shares are selling below a desired price or when management wishes to take control of the company, the corporation may consider a reverse split that can be accomplished by increasing the par or stated value of its share and reducing the shares outstanding. There will be no entry required; a memo entry is sufficient.
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Ex.: The International School of Business and Sciences, Inc. has 10,000 P10 par value ordinary shares issued and outstanding when the board of directors decided to split the share 5-for-1. this means that a shareholder would receive 5 shares with a new par value of P20 for each share held.
Ordinary shares will remain unchanged at P1,000,000. the issued and outstanding shares
will now be 50,000 and the par value reduced to P20 per share.