Andrews Corporation has 25,000 common shares authorized and 20,000 shares were issued and outstanding at year end. During the year, the corporation's net income after taxes was $42,000. The policy of the corporation has been to declare dividends equal to 20% of its net income. What is the per share amount to be distributed to the common stockholders?

Question

Quizplus · Accepted Answer

The corporation declares dividends equal to 20% of its net income. Therefore, the total dividends to be distributed is 20% of $42,000, which is $8,400. With 20,000 shares outstanding, the per share dividend is $8,400 / 20,000 = $0.42 per share.

Andrews Corporation Has 25,000 Common Shares Authorized and 20,000 Shares