A company had the following during the year: cost of goods sold = $120,000, investment income = $1,800, sales = $235,000, operating expense = $53,000, interest expense = $4,800, dividends = $8,400, tax rate = 35 percent, and 20,000 shares outstanding. What was the dividend per share?

Question

Quizplus · Accepted Answer

First, we need to find the net income:
Net income = (Sales - Cost of goods sold - Operating expenses - Interest expenses) × (1 - Tax rate)
Net income = ($235,000 - $120,000 - $53,000 - $4,800) × (1 - 0.35) = $36,025
Then, we can find the total amount of dividends paid: 
Total dividends = Dividend per share × Number of shares outstanding
Total dividends = Dividend per share × 20,000
We know that Total dividends = $8,400, so we can rearrange the equation to find the dividend per share: 
Dividend per share = Total dividends/Number of shares outstanding
Dividend per share = $8,400/20,000 = $0.42
Therefore, the dividend per share was $0.42.

A Company Had the Following During the Year: Cost of Goods