Question

The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared

Answer 1

The amount of cash dividends to be paid if a $2 per share dividend is declared is $80,000

Total number of shares issued

= 45,000

Shares reacquired

= 5,000

Total number of outstanding shares

= 45,000 - 5,000

= 40,000

Then,

Cash dividends to be paid

= Total number of outstanding shares * Share dividend declared

= 40,000 * $2

= $80,000

Therefore, the amount of cash dividends to be paid if a $2 per share dividend is declared is $80,000

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