Q1) Howe Company's stockholders' equity account follows:
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Common stock (400,000 shares at $4 par)
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$1,600,000
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Paid-in-capital in excess of par
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1,000,000
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Retained earnings
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1,900,000
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Total stockholders' equity
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$4,500,000
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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.