Liquidating Dividends

This topic contains 2 replies, has 2 voices, and was last updated by  TNTTN 2 months ago.

Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
  • #2398248


    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



    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.

    Chandler Priest

    Licensed TX CPA

    REG 01/27/18 - 98

    BEC 03/03/18 - 96

    AUD 04/07/18 - 91

    FAR 06/02/18 -96



    Ahhhh… I see it now. Thank you Chandler.



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

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic.

Would You Hate It If I Gave You $162.12 Of Free CPA Review Material That Will Help You…

1) Study Less

2) Avoid Common CPA Candidate Mistakes

3) Get Higher Scores

4) Spend More Time with Friends and Family

5) Finally Pass and Get On With Your Life?