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Cash and Stock Dividends and Earned Revenues

Question E 8.16.

Calculate stock dividend shares and cash dividend amounts, Assume that you own 600 shares of Kay Inc, common stock and that you currently receive cash dividend of 0.42 per share per year.

a) If Kay Inc declared a 5% stock dividend, how many shares of common stock would you receive as a dividend?
b) Calculate the cash dividend per share amount to be paid after the stock dividend that would result in the same total cash dividend as was received before the stock dividend.
c) If the cash dividend remained at $0.042 per share after the stock dividend, what per share cash dividend amount without a stock dividend would have accomplished the same total cash dividend?
d) Why would a company have a dividend policy of paying a $ 0.10 per share cash dividend and issuing a 5% stock dividend every year?

Question E 9.2.

Calculate earned revenues. Kirkland Theater sells seasons ticket for six events at a price of 120. In pricing the tickets the planners assigned the lead off event a value of $30 because the program was an expensive symphony orchestra . The last five events were priced equally.1,200 season tickets were sold for the 2008 season.

a) Calculate the theater's earned revenue after the first three events have been presented.
b) About 95% of the season ticket holders attended the first event. Subsequent events were attended by about 80% of the season ticket holders. To what extent, if any should the attendance data impact revenue recognition? Explain your answer.

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Question E 8.16.

Calculate stock dividend shares and cash dividend amounts, Assume that you own 600 shares of Kay Inc. common stock and that you currently receive cash dividend of $0.42 per share per year.

a) If Kay Inc. declared a 5% stock dividend how many shares of common stock would you receive as dividend?
Shares before stock dividend 600
Stock dividend 30 (600*.05)
Shares after stock dividend 630 (600+30)

b) Calculate the cash dividend per share amount to be paid after the stock dividend that would result in the same total cash dividend as was received before the stock dividend.
Shares before stock dividend 600
Cash dividend per share x $.42
Total cash dividend $252 (600*$.42)
Shares after stock dividend 630
Equivalent dividend after stock div. $.40 ($252/630)

c) If the cash dividend remained at $0.42 per share after the stock dividend, what per share ...

Solution Summary

This solution answers two questions. First, given the number of shares owned and current cash dividend received, it illustrates how to compute (a) the number of shares received if a stock dividend is declared, (b) the cash dividend per share amount to be paid after the stock dividend that would result in the same total cash dividend as was received before the stock dividend, and (c) the per share cash dividend amount without a stock dividend would have accomplished the same total cash dividend. It also discusses why a company would have a dividend policy of paying a $ 0.10 per share cash dividend and issuing a 5% stock dividend every year.

Given the number of tickets sold for a set number of events and a price per event, this solution illustrates how to compute the theater's earned revenue after a certain number of events have been presented. It also discusses to what extent attendance data will impact revenue recognition.

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