Financial Accounting
Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 13, Problem 4CP
To determine

Write a memo to the chairman of the board of Incorporation MD, explaining the factors before deciding whether to declare a cash dividend for the last quarter of 20Y8.

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Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly dividends. Unfortunately, sales dropped sharply in the fourth quarter of 20Y8 due to worsening economic conditions and increased competition. As a result, the board is uncertain as to whether it should declare a dividend for the last quarter of 20Y8. On October 1, 20Y8, Motion Designs Inc. borrowed $4,000,000 from Valley National Bank to use in modernizing its retail stores and to expand its product line in response to changes in its industry. The terms of the 10-year, 6% loan require Motion Designs to do the following: • Pay monthly interest on the last day of the month • Pay $400,000 of the principal each October 1, beginning in 20Y9 • Maintain a current ratio (current assets ÷ current…
Motion Designs Inc. has paid quarterly cash dividends since 20Y7. These dividends have steadily increased from $0.05 per share to the latest dividend declaration of $0.50 per share. The board of directors would like to continue this trend and is hesitant to suspend or decrease the amount of quarterly dividends. Unfortunately, sales dropped sharply in the fourth quarter of 20Y8 due to worsening economic conditions and increased competition. As a result, the board is uncertain as to whether it should declare a dividend for the last quarter of 20Y8.On October 1, 20Y8, Motion Designs Inc. borrowed $4,000,000 from Valley National Bank to use in modernizing its retail stores and to expand its product line in response to changes in its industry. The terms of the 10-year, 6% loan require Motion Designs to do the following:• Pay monthly interest on the last day of the month• Pay $400,000 of the principal each October 1, beginning in 20Y9• Maintain a current ratio (current assets ÷ current…
Blanket Company has paid quarterly dividends every quarter for the past 15 years. Lately, slowing sales have created a cash crunch for the company. While the company still has positive retained earnings, the retained earnings balance is close to zero. Should the company borrow to continue to pay dividends? Why or why not? a. Yes – discontinuing a previously regular dividend is very bad for public relations. b. Yes – best to keep stockholders happy and prevent a sell-off. c. No – borrowing will involve interest expense and will have to be repaid. d. No – it is illegal to pay a dividend that makes retained earnings negative.

Chapter 13 Solutions

Financial Accounting

Ch. 13 - Dividends per share Reinhardt Furniture Company...Ch. 13 - Prob. 1PEBCh. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Pro-Builders...Ch. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Prob. 5PEACh. 13 - Prob. 5PEBCh. 13 - Prob. 6PEACh. 13 - Prob. 6PEBCh. 13 - Prob. 7PEACh. 13 - Prob. 7PEBCh. 13 - Prob. 8PEACh. 13 - Prob. 8PEBCh. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Entries for issuing par stock On October 31,...Ch. 13 - Entries for issuing no-par stock On February 12,...Ch. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Prob. 6ECh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Senior Life Co. is an...Ch. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Selected dividend transactions, stock split...Ch. 13 - Treasury stock transactions Lava Lake Inc. bottles...Ch. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Treasury stock transactions Biscayne Bay Water...Ch. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders Equity section of balance sheet The...Ch. 13 - Stockholders Equity section of balance sheet...Ch. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Stockholders Equity section of balance sheet List...Ch. 13 - Prob. 22ECh. 13 - EPS Junkyard Arts, Inc., had earnings of 316,000...Ch. 13 - EPS Pacific Gas and Electric Company is a large...Ch. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Dividends on preferred and common stock Pecan...Ch. 13 - Stock transactions for corporate expansion On...Ch. 13 - Selected stock transactions The following selected...Ch. 13 - Prob. 4PACh. 13 - Entries for selected corporate transactions...Ch. 13 - Dividends on preferred and common stock Yosemite...Ch. 13 - Prob. 2PBCh. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions Nav-Go...Ch. 13 - Prob. 5PBCh. 13 - Ethics in Action Tommy Gunn is a division manager...Ch. 13 - Prob. 2CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Issuing stock Epstein Engineering Inc. began...
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Dividend explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Wy7R-Gqfb6c;License: Standard Youtube License