Question

Kate purchased 500 shares of Fast Deliveries stock on Wednesday, July 7th. Ted purchased 100 shares of Fast Deliveries stock on Thursday, July 8th. Fast Deliveries declared a dividend on June 20th to shareholders of record on July 12th and payable on August 1st. Which one of the following statements concerning the dividend paid on August 1st is correct given this information?
a. Kate is entitled to the dividend but Ted is not.
b. Ted is entitled to the dividend but Kate is not.
c. Both Ted and Kate are entitled to one-half of the dividend amount.
d. Both Ted and Kate are entitled to the dividend.

Answer 1

Answer:

d. Both Ted and Kate are entitled to the dividend.

Explanation:

There are 3 important dates when a corporation declares a dividend:

1. The declaration date: in this case June 20th. It is the date when the corporation declares that it will pay a certain cash dividend.
2. The date of record: the date of record is one day after the ex-dividend date, which means that the stockholders that the stock until the ex-dividend date will be entitled to receive the dividend. The stockholders that purchase the stock on the record date or any date after the ex-dividend date, will not be entitled to receive the dividend. In this case, the ex-dividend date was July 11th, and both Ted and Kate purchased the stocks before that date.
3. The date of payment: the actual date when the dividends are distributed, in this case, August 1st.