The financial statement effects of dividend payments and buybacks
The following note is taken from The Walt Disney Company’s 2004 Annual Report:
The Company declared an annual dividend of $0.24 per share on December 1, 2004 related to fiscal 2004. The dividend is payable on January 6, 2005 to shareholders of record on December 10, 2004. The Company paid a $430 million dividend ($0.21 per share) during the first quarter of fiscal 2004.
During the fourth quarter of fiscal 2004, the Company repurchased 14.9 million shares of Disney common stock for approximately $335 million. As of September 30, 2004, the Company had authorization in place to repurchase approximately 315 million additional shares.
Based on the above note, answer the following:
(a) Explain what would be recorded on each of the dates relating to the $0.24/share dividend (i.e., provide the necessary journal entries).
(b) How would the $430 million dividend payment affect each of the three principal financial statements?
(c) How would the $335 million repurchase of Disney common stock affect each of the three principal financial statements?