Blueprint Problem: Cash Dividends
Dividends
If you are the owner of a company, you expect to be able to take part of the company's profits. If you own shares of stock of a corporation, you own part of that company. A dividend is a distribution of a company's accumulated profits to its owners, the stockholders. These distributions are usually in the form of cash dividends, but they may also be in the form of stock dividends or even noncash assets, which can be distributed to the owners. The decision to pay any dividend is made by the company's board of directors, not by the management of the company. When the board announces that the company will pay a dividend, there are three dates specified: the declaration date, the date of record, and the payment date.
It is important to understand which shares are eligible to receive dividends. A company classifies its stock as authorized, issued, and outstanding. Only outstanding shares, that is, shares held by someone other than the issuing company, are eligible to receive dividends.
Consider the following and determine the number of outstanding shares at each date:
Outstanding shares:
January 1: Moore Company's balance sheet reveals that it is authorized to sell 500,000 shares of stock; 320,000 shares are issued and outstanding.
May 3: Moore issued an additional 22,000 shares of stock.
November 12: Moore Company's board of directors declared a dividend of $763,875 to be paid on December 15 to shareholders on record on December 3.
December 1: Moore purchased 15,000 shares of its own stock to be available for employee purchase.
December 3: Moore gathered the necessary data for all outstanding stockholders as of this date.
December 14: Moore Company sold 12,500 of its shares of treasury stock.
December 15: Moore paid the $763,875 dividend.
Calculate the dividend per share to be paid to each common stockholder, rounded to the nearest cent.
$ = $ per share
shares
Now, assume that the December 1 and December 14 transactions did not occur. Calculate the dividend per share in this case.
$ = $ per share