Royal company is currently considering declaring a dividend to its common shareholders, according to one of the
Question:
Royal company is currently considering declaring a dividend to its common shareholders, according to one of the following plans:
1. Declare a cash dividend of $15 per share.
2. Declare a 10 percent stock dividend. Royal Company would distribute one share of common stock for every 10 shares of common stock currently held. The company’s common stock is currently selling for $50 per share.
Royal Company is authorized to issued 100,000 shares of $10 par value common stock. To date, the company has issued 55,000 shares and is currently holding 8,000 shares in treasury stock.
Required
(a) how many shares of common stock are eligible to received a dividend?
(b) prepare the entries necessary on the date of declaration, date of record, and date of payment for the cash dividend.
(c) Prepare the entry to record the stock dividend, assuming that the dividend is declared and issued on the same date.
(d) Describe how each dividend would affect Royal’s debt/equity ratio.
(e) Which of the two dividends would you, as a shareholder, prefer to received? Why?
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
Step by Step Answer:
a Dividends are paid only on the shares that are both issued and outstanding In this case 55000 shares have been issued but 8000 of these shares are h...View the full answer
