Question

Please answer A, B, C, and D. thank you!

Dividend constraints The Howe Company's stockholders' equity account is as follows: been included as part of the $1.5 million retained earnings The earnings available for common stockholders from this period's operations are $100,000, which have a. What is the maximum dividend per share that the firm can pay? (Assume that legal capital includes al paid in capital) b. the firm has $200,000 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 of the firm pays the dividends indicated in parts a and b. d. Indicate the effects of an $80,000 cash dividend on stockholders' equity The maximum dividend per share that the firm caniss R ound to the nearest cent) Data Table S4 pary Common stock (800,000 shares Paid in capital in excess of par Retained earnings Total stockholders' equity $3200,000 4.000.000 1.500.000 Print Done

Answer 1

1. Maximum dividend: $1,500,000 / 800,000 = $1.875 per share
2. Largest dividend without borrowing: $200,000 / 800,000 = $0.25 per share
3. In (a), cash and retained earnings each decrease by $1,500,000. In (b), cash and retained earnings each decrease by $ 200,000.
4. Retained earnings (and hence stockholders’ equity) decrease by $80,000.