Decrease in retained earnings follows the distribution of dividends. Let’s assume that the Lie Dharma Corporation, on March 15, 2009, declared a cash dividend of per share on 2,000,000 shares payable June 1, 2009, to all stockholders of record April 15. At the date of distribution, the firm debits the note payable or scrip payable, and the related interest expense and credit cash. Notes Payable to Stockholders [Scrip Dividends Payable] = 3,000,000 [ x 3,000,000] 2. No corporate assets are distributed; the value of the total stockholder’s equity remains unchanged as well as each stockholder’s percentage ownership in the firm. Common Stock, par = 120,000 Following the issuance the stockholder’s equity is as follows: Common Stock, par [36,000 shares issued and outstanding] = $ 720,000 Additional Paid-in-Capital = 330,000 Total Stockholders’ Equity = ,500,000 Let’s now assume that the firm issued instead a 50% stock dividend.

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