Question

Autumnâ Services, Inc. acquired 124 comma 000 shares of Springâ Metals, Inc. on Januaryâ 1, 2018. Spring declares a cash dividend of $ 0.75 per share on Februaryâ 15, 2019 and pays the cash dividend on Marchâ 2, 2019. With the currentâ investment, Autumnâ Services, Inc. holds 12â% ofâ Spring's voting stock.
Prepare journal entry for the day when the dividend payment is madeâ (March 2,â 2019).

Answer 1

Answer:

Shareholders for dividends $93,000 (debit)

Cash $93,000 (credit)

Explanation:

Autumnâ Services, Inc holds a 12 % voting stock in  Springâ Metals therefore it does not have control in terms of IFRS 10 and no consolidated statements must be produced.

The Acquisition of shares is thus a Financial Asset for Autumnâ Services, Inc.

February 15, 2019

When dividend is declared, recognize an equity item  and a Liability in Spring Metals

Dividend $93,000 (debit)

Shareholders for dividends $93,000 (credit)

Dividend = 124,000×$ 0.75 per share

               = $93,000

March 2, 2019

De-recognise the liability and de-recognise the cash asset in Spring Metals

Shareholders for dividends $93,000 (debit)

Cash $93,000 (credit)