Question

A company's board of directors votes to declare a cash dividend of $1.55 per share of common stock. The company has 31,000 shares authorized, 26,000 issued, and 25,500 shares outstanding. The total amount of the cash dividend is:
$40,300.
$47,050.
$48,050.
$79,825.
$39,525.

Answer 1

Answer:

Total Amount of Cash Dividend = $39,525

Explanation:

We have the following details,

Issued shares are the number of shares issued by the company, it includes treasury stock that is shares purchased back by the company.

Outstanding shares = Issued shares - Treasury stock

Treasury stock does not have any right of dividend, as the shares are held by company itself, it will not pay dividend to itself.

Thus dividend to be paid = 25,500 $\times$ $1.55 per share = $39,525

Authorized shares just represent the number of maximum shares a company can issue.

Total Amount of Cash Dividend = $39,525