Cash Dividend: Dividend is the amount that earns the shareholders in return of the investment invested by them. The company’s board of director declares the dividend of the company. When the dividend paid in cash it is known as cash dividend. To identify: The correct option. Explanation: Option e The correct option is e As the M company receive dividend in cash so cash account will increase by $50,000 and cash account will be debited in the books of accounts. Option a Credit to investment revenue for $50,000, this is incorrect option, as the company receive dividend in cash so investment revenue account will not credited in the books of accounts. Option b Credit to long term investment for $17,500, this is an incorrect option as by credit to long term investment account it means that the balance of long term investment decrease but the company receive dividend in cash so it is incorrect option Option c Credit to cash for $17,500, this is incorrect option as company not pay the amount but receive dividend in cash so this is incorrect. Option d Debit to long term investment for $17,500; this is an incorrect option as the company will not purchase any long term investment, as debit itself means purchase of investment, so this is incorrect option. Thus, the correct option is e.

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Chapter C, Problem 3MCQ

To determine

Cash Dividend:

Dividend is the amount that earns the shareholders in return of the investment invested by them. The company’s board of director declares the dividend of the company. When the dividend paid in cash it is known as cash dividend.

To identify: The correct option.

Explanation:

Option e

The correct option is e

As the M company receive dividend in cash so cash account will increase by $50,000 and cash account will be debited in the books of accounts.

Option a

Credit to investment revenue for $50,000, this is incorrect option, as the company receive dividend in cash so investment revenue account will not credited in the books of accounts.

Option b

Credit to long term investment for $17,500, this is an incorrect option as by credit to long term investment account it means that the balance of long term investment decrease but the company receive dividend in cash so it is incorrect option

Option c

Credit to cash for $17,500, this is incorrect option as company not pay the amount but receive dividend in cash so this is incorrect.

Option d

Debit to long term investment for $17,500; this is an incorrect option as the company will not purchase any long term investment, as debit itself means purchase of investment, so this is incorrect option.

Thus, the correct option is e.

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ABC is an all-equity firm that has 44,200 shares of stock outstanding at a market price of $14.70 per share. The firm is considering a capital structure with 53% debt at a rate of 5% and use the proceeds to repurchase shares. Determine the shares outstanding once the debt is issued.