Plastic Enterprises’ stockholders’ equity account is as follows: Common stock (280,000 shares at $3.50 par) $980,000 Paid-in capital in excess of par $900,000 Retained earnings $1,200,000 Total stockholders’ equity $3,080,000 The earnings available for the common stockholders are $280,000 and are included as part of the $1,200,000 retained earnings.Calculate the maximum dividend per share that the firm can pay if the legal capital includes all paid-in capital.Calculate the maximum dividend per share that the firm can pay if the legal capital includes only the value of the common stock.If Plastic Enterprises has $25,000 in cash, what is the largest per-share dividend it can pay without borrowing, assuming legal capital includes all paid-in capital?What the purpose of capital impairment restrictions when developing a dividend policy?

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Answered: Plastic Enterprises’ stockholders’…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 5MCQ

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Plastic Enterprises’ stockholders’ equity account is as follows:

Common stock (280,000 shares at $3.50 par) $980,000

Paid-in capital in excess of par $900,000

Retained earnings $1,200,000

Total stockholders’ equity $3,080,000

The earnings available for the common stockholders are $280,000 and are included as part of the $1,200,000 retained earnings.

Calculate the maximum dividend per share that the firm can pay if the legal capital includes all paid-in capital.
Calculate the maximum dividend per share that the firm can pay if the legal capital includes only the value of the common stock.
If Plastic Enterprises has $25,000 in cash, what is the largest per-share dividend it can pay without borrowing, assuming legal capital includes all paid-in capital?
What the purpose of capital impairment restrictions when developing a dividend policy?

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