Ask Experts Questions for FREE Help !
Ask
    smokedetector's Avatar
    smokedetector Posts: 368, Reputation: 56
    Full Member
     
    #1

    Jun 26, 2008, 03:30 PM
    Dividends and par/non par stock
    When applying dividends to outstanding stock, does that include stock in the treasury, since it is still issued stock? Also, what is the difference between par stock and non par stock? I doesn't have anything to do with preferred and common stock, right?
    Criado's Avatar
    Criado Posts: 142, Reputation: 15
    Junior Member
     
    #2

    Jul 1, 2008, 04:43 AM
    No; Treasury stock should not receive dividends.

    Par Stock is valued using its Par Value. Non Par is valued based on how much you sold it for. Preferred and common stock are different issues. ;)
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
     
    #3

    Jul 2, 2008, 07:30 PM
    As an added note, treasury stock isn't outstanding. Yes, it's still issued because the stock still exists. But outstanding is what the company is not holding itself, so treasury stock isn't outstanding.

    Par stock is not "valued" using its par. There isn't any "value" about it. The par is "legal capital," i.e. the amount that cannot be given out as dividends. It's value could be anything. That may have been a "value" when it was first issued, but as time goes by its value changes. Think of the companies with penny par. Is its value only a penny? Non par simply means it has no par. It might have a stated value instead which can be used the same way par is used.
    smokedetector's Avatar
    smokedetector Posts: 368, Reputation: 56
    Full Member
     
    #4

    Jul 3, 2008, 03:47 AM
    So if you were to buy par stock, you would pay the current value, but the company would record it at the par value?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
     
    #5

    Jul 4, 2008, 12:53 PM
    The company would record it at the price paid for it, but it's split up between the par and the amount over par. (Assuming it has a par or stated value.) If you ever see something like "additional paid-in (contributed) capital" or something like that on there, that may partially be what that is -- the extra over par it was sold for. So it's just split up is all. They can't not record money they get, and the total equity is still there. (Additional paid-in capital can come from selling treasury stock over cost also.)

    This is all assuming, of course, that you're buying newly issued stock.
    tegegn's Avatar
    tegegn Posts: 1, Reputation: 1
    New Member
     
    #6

    Dec 2, 2010, 10:36 PM
    Can dividends be paid out of additional paid in capital?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
    Ultra Member
     
    #7

    Dec 3, 2010, 05:27 PM

    No, dividends are paid out of income earned during the year.

    Additional Paid-In Capital is the difference between the par value or stated value of a stock and the purchase price of stock that is purchased by an investor. For example I buy one share of common stock of a company for $100 and the par value is $5, then the journal entry by the company will be: Debit Cash for 100 (the amount of cash received, Credit Common Stock for 5 (par value) and Credit Additional Paid-in Capital - Common for 95 (the difference). Stock and Additional Paid-in capital is not affected by a cash dividends at all!!

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

How to calculate stock dividends shares and cash dividends amounts [ 5 Answers ]

You owe 600 shares of Blueco, Inc. common stock and that you currently receive cash dividends of $.42 per share per year A. If Blueco Inc declared a 5% stock dividend, how many shares of commons stock would you receive as a dividend? B. Calculate the cash dividend per share amount to be paid...

Stock splits and stock dividends on EPS [ 1 Answers ]

Here are my questions and what I came up with. Please let me know if this is correct or point me in the right direction, thanks. a. For the year ended December 31, 2005, Finco, Inc. reported an earnings per share of $3.12. During 2006 the company had a 3-for-1 stock split. Calculate the 2005...


View more questions Search