The Howe Co. stockholders equity account follows: Common stock (400,00 shares at
ID: 2687784 • Letter: T
Question
The Howe Co. stockholders equity account follows: Common stock (400,00 shares at $4par) $1,600,000 Paid in capital in excess in par 1,000,000 Retained earnings 1,900,000 Total stockholders equity $4,500,000 The earnings available for common stockholdes from this periods operations are $100,000,which have been included as part of the $1,9 million retained earnings. A. what is the maximun dividend per share that the firm can pay?(assume that legal capital includes all paid-in-capital) B. If the firm has $160,000 in cash, what is the largst per-share dividend it can pay without borrowing? C. Indicate the accounts and changes,if any,that will result if the firm pays the dividends indicated in parts A and B? D. Indicate the effects of an $80,000 cash dividend on stockholders equity.Explanation / Answer
The Howe Co. stockholders equity account follows: Common stock (400,00 shares at $4par) $1,600,000 Paid in capital in excess in par 1,000,000 Retained earnings 1,900,000 Total stockholders equity $4,500,000 The earnings available for common stockholdes from this periods operations are $100,000,which have been included as part of the $1,9 million retained earnings.
A. what is the maximun dividend per share that the firm can pay?(assume that legal capital includes all paid-in-capital)
=1,900,000 /400,00 shares =$ 4.75 per share
B. If the firm has $160,000 in cash, what is the largst per-share dividend it can pay without borrowing?
=$160,000 /400,00 shares =$ 0.4 per share
C. Indicate the accounts and changes,if any,that will result if the firm pays the dividends indicated in parts A and B?
In a, cash and retained earnings each decreased by $1,900,000.
In b, cash and retained earnings each decreased by $160,000.
D. Indicate the effects of an $80,000 cash dividend on stockholders equity.
Retained earnings (and hence stockholders' equity) decrease by $80,000.
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