The Howe Company\'s stockholders\' equity account is as follows: The earnings av

Question

The Howe Company's stockholders' equity account is as follows: The earnings available for common stockholders from this period's operations are $100,000, which have been included as part of the $2.1 million retained earnings. What is the maximum dividend per share that the firm can pay? (Assume that legal capital includes all paid-in capital.) If the firm has $170,000 in cash, what is the largest per-share dividend it can pay without borrowing? Indicate the accounts and changes, if any, that will result if the firm pays the dividends indicated in parts a and b. Indicate the effects of an S80.000 cash dividend on stockholders' equity.

Explanation / Answer

Dividend a m No Of Outstanding Common Stock                  600,000 n Maximum Dividend that can be paid considering Legal Capital Restrcition=Retaine Earning amt               2,100,000 o Maximum Dividend per share=n/m= $                     3.50 b p Cash Available                  170,000 q No Of Outstanding Common Stock                  600,000 r Largest per share dividend without borrowing =p/q= $                     0.28 c Account and changes in transaction a. Retained Earning & Cash each will be reduced by $2,100,000 In transaction b. Retained Earning & Cash each will be reduced by $170,000 d If Cash dividend is $80,000 , then the Retained earning And to tal stock holders equity amount will be reduced by $80,000 Retained Earning               2,020,000 Total Stock Holder's Equity               9,220,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.