How would an investor account for the receipt of a cash dividend from Microsoft?

Photo of Microsoft logoMicrosoft Corp. announced its dividend for the first quarter of 2016 on December 2, 2015. The press announcement on December 2, 2015, read:

“Microsoft Corp. on Wednesday announced that its board of directors declared a quarterly dividend of $0.36 per share. The dividend is payable March 10, 2016, to shareholders of record on Feb. 18, 2016….”

Assume the following Microsoft investor activity:

  • Franklin Company purchased 100 shares on January 2, 2015, and sold those shares on January 29, 2016.
  • Strauss Corporation purchased 100 shares on February 14, 2014, and sold those shares on February 22, 2016.
  • Elway Inc. purchased 100 shares on February 19, 2016; it still owns those shares.

Questions

  1. Which of the investors will receive the dividend? Why?
  2. On what date does the dividend become Dividends Receivable for the investor? On what date would the investor receive the cash dividend?
  3. On what financial statement will that dividend appear for the investor who receives the dividend? How will the dividend be classified on that statement?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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