Klingon Corporation has only one class of shares,its common shares.Klingon has assets of $200,000 and liabilities of $160,000.It has $40,000 of excess liquidity that it does not need to pay its currently maturing obligations.What is the maximum property dividend that Klingon may pay to its common shareholders?
A)$60,000
B)$10,000
C)$40,000
D)$30,000

Question

Quizplus · Accepted Answer

Klingon Corporation has excess assets of $40,000 ($200,000 assets - $160,000 liabilities).As such,it can give a maximum property dividend of $40,000 to its common shareholders.Since it also has $40,000 of excess liquidity,payment of this dividend will eliminate all of Klingon Corporation's excess assets and excess solvency.

Klingon Corporation Has Only One Class of Shares,its Common Shares