The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?

Question

Quizplus · Accepted Answer

The number of outstanding shares is calculated as follows:

Outstanding shares = Original issued shares - Reacquired shares
Outstanding shares = 60,000 - 5,000
Outstanding shares = 55,000

Therefore, the total amount of cash dividends to be paid is:

Cash dividends = Dividend per share x Outstanding shares
Cash dividends = $1 x 55,000
Cash dividends = $55,000

Thus, the best choice is D, $55,000, as it reflects the correct calculation.

The Charter of a Corporation Provides for the Issuance of 100,000