Question

netpass company had 400000 shares of common stock authorized, 360000 shares issued and 160000 shares of treasury stock. the companys board of directors declares a dividend of 2.00 per share of common stock. what is the total amount of the dividend that will be paid

Answer 1

Answer: $400,000

Explanation:

Only stock that are ISSUED are to be paid dividends on NOT those Authorized.

Even after that, we would still have to remove the Treasury stock because Treasury Stock is stock that was PREVIOUSLY outstanding but was repurchased by the company and so Dividends will not be paid on them.

So now we calculate the Shares Outstanding that are liable for Dividend payment.

That would be,

= 360,000 - 160,000(Treasury Stock)

= 200,000 shares will have dividends paid to them.

Since the dividends are $2.00 per share we then have,

= 200,000 * 2

= $400,000

$400,000 is the total amount of the dividend that will be paid.