Liquidating Dividends

This topic contains 2 replies, has 2 voices, and was last updated by  TNTTN 1 week, 6 days ago.

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  • #2398248

    TNTTN
    Participant

    Hi all, can anyone tell me why liquidating does not affect RE in Q1, but it does in Q2? Thank you.

    Q1: A corporation declared a dividend, a portion of which was liquidating. How would this declaration affect each of the following?
    Answer: APIC – Decrease, RE – Decrease
    Q2: Ole Corp. declared and paid a liquidating dividend of $100,000. This distribution resulted in a decrease in Ole's:
    Answer: PIC – Yes, RE – No

    #2398770

    c
    Participant

    Regular dividends reduce RE. Liquidating dividends are a return of capital, so they reduce APIC.
    The key here is that Q1 is a portion liquidating (and presumably, a portion regular). Thus the liquidating portion reduced APIC while the regular portion reduces RE.
    The Q2 dividends is just liquidating. Thus it only reduces APIC, and not RE.

    #2399802

    TNTTN
    Participant

    Ahhhh… I see it now. Thank you Chandler.

    #2399805

    TNTTN
    Participant

    Ahhhh… I see it now. Thank you, Chandler.

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