The subscription account is left open until such time as it is closed by the payments credited. When a dividend is declared the entries are-- Surplus Dividends payable Being a dividend of----% declared by the board of directors on--------1909 payable--------1909. -------- Dividends payable Subscriptions Dividend applied to the payment of subscriptions. Another provision sometimes met with in the issue of stock to an employe is that in lieu of an increase in salary he shall receive, at the end of the year, a certain amount in stock. He is then permitted to subscribe for a stated amount of stock and to apply the bonus, or added salary, as a payment. The bonus is usually a stated per cent of sales or of net profits. When such a contingency arises the entry is-- Salaries John Jones ----% of sales as per agreement. John Jones Subscriptions Amt. due applied in payment of stock subscription. If he has no account, on the books the transaction may be recorded by one entry-- Salaries $1,500.00 Subscriptions $1,500.00 ------------ WHEN STOCK SUBSCRIPTIONS ARE NEVER FULLY PAID =43.= Corporations are sometimes organized with all capital stock subscribed but only paid for in part, and the balance of subscriptions never called for. T. C. Harris, John Alfred, and M. B. Hatch organize a company to conduct the business of buying, selling, and renting automobiles with a capital stock of $15,000.00, each subscribing for $5,000.00. A cash payment of 25% is made on the stock and the balance is to be paid in when called for. The entries stand on the books as follows-- Subscriptions $15,000.00 Capital stock $15,000.00 Cash 3,750.00 Subscriptions 3,750.00 The business prospers to such an extent that the profits provide sufficient money and it is not likely that the stockholders will be called upon for further payments. It is decided to reduce the stock to $5,000.00 and to declare a dividend to make this stock full paid. The entries for these transactions follow: Capital stock 10,000.00 Subscriptions 10,000.00 Capital stock reduced in accordance with resolution of board of directors passed Jan. 27, 1909. -------- Surplus 1,250.00 Dividends payable 1,250.00 Dividend declared by board of directors Jan. 27, 1909, payable immediately. -------- Dividends payable 1,250.00 Subscriptions 1,250.00 Dividends applied to the payment of stock subscriptions. The original stock certificates are now surrendered and new ones issued in their place. In the stock ledger the stockholders are debited and capital stock credited for the shares surrendered. Then, capital stock is debited and stockholders credited for the new shares issued.