Question: Dividend constraints The Howe? Company's stockholders' equity account is as? follows:
Common stock (600,000 shares at $4 par) $2,400,000
Paid-in capital in excess of par 3,000,000
Retained earnings 1,700,000
Total? stockholders' equity $7,100,000
The earnings available for common stockholders from this? period's operations are? $100,000, which have been included as part of the ?$1.71 million retained earnings.
a. What is the maximum dividend per share that the firm can? pay? ? (Assume that legal capital includes all? paid-in capital.)
b. If the firm has ?$180,000 in? cash, what is the largest? per-share dividend it can pay without? borrowing?
c. Indicate the accounts and? changes, if? any, that will result if the firm pays the dividends indicated in parts a and b.
d. Indicate the effects of an $80,000 cash dividend on? stockholders' equity.