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Q1) Howe Company's stockholders' equity account follows:

Common stock (400,000 shares at $4 par)

$1,600,000

Paid-in-capital in excess of par

1,000,000

Retained earnings

1,900,000

Total stockholders' equity

$4,500,000

Earnings available for common stockholders from this period's operations are $100,000, which have been included as part of $1.9 million retained earnings.

a) Determine maximum dividend per share that firm can pay? (Suppose that legal capital includes all paid-in-capital.)

b) If firm has $160,000 in cash, determine the largest per-share dividend it can pay without borrowing?

c) Point out the accounts and changes, if any, that will result if firm pays dividends indicated in parts a and b.

d) Point to effects of $80,000 cash dividend on stockholders' equity.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M917338

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