Problem:
The Mori Egg Noodle Company has the following equity accounts on its balance sheet:
Common stock ($10 par, 300,000 shares $ 3,000,000
Contributed capital in excess of par 1,500,000
Retained earnings 6,000,000
Total common stockholder's equity $10,500,000
Q1. What is the maximum amount of dividends that may be paid by the Mori Company if the capital impairment provisions of state law are limited to the following?
i. The par value of common stock
ii. The par value and the capital in excess of par accounts
Q2. What other factors may limit Mori's ability to pay dividends?