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    Dividend constraints and effects on stockholders' equity

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    The Howe Company's stockholders' equity account is attached.

    The earning available for common stckholders from the period's operation are $100,000, which have been included as part of the $1.9 million retained earnings.

    a) what is the maximum dividend per share that the firm can pay? (Assume that legal capital include all paid-in capital)

    b) if the firm has $160,000 in cash, what is the largest 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.

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    https://brainmass.com/business/dividend-yield/dividend-constraints-and-effects-on-stockholders-equity-205089

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    a) What is the maximum dividend per share that the firm can pay? (Assume that legal capital include all paid-in capital)

    Since the legal capital (capital from which dividends cannot be paid) includes all paid-in capital, only the retained earnings amount is available for payment of dividends. The total retained earnings are $1,900,000 ...

    Solution Summary

    The solution explains how to calculate the maximum amount of dividends that can be paid and the effect of dividend payment on stockholders equity

    $2.19

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