Dividend Policy Paper 4

1

The policy decision that by itself is least likely to affect the value of the firm is the






2

Which of the following types of dividends do not reduce equity in the corporation?






3

A company has 1,000 shares of $10 par value common stock and $5,000 of retained earnings. Two proposals are under consideration. The first is a stock split giving each shareholder two new shares for each share formerly held. The second is to declare and distribute a 50% split-up effected in the form of a dividend. The stock split proposal will earnings per share by than will the proposal for a split-up effected in the form of a dividend. List A List B






4

A company has 1,000 shares of $10 par value common stock and $5,000 of retained earnings. Two proposals are under consideration. The first is a stock split giving each shareholder two new shares for each share formerly held. The second is to declare and distribute a 50% split-up effected in the form of a dividend. Under the , the par value per outstanding share will . List A List B






5

A company declares and pays both a $200,000 cash dividend and a 10% stock dividend. The effect of the dividend is to . List A List B






6

The purchase of treasury stock with a firm’s surplus cash






7

Jensen Corporation’s board of directors met on June 3 and declared a regular quarterly cash dividend of $.40 per share for a total value of $200,000. The dividend is payable on June 24 to all stockholders of record as of June 17. Excerpts from the statement of financial position for Jensen Corporation as of May 31 are presented as follows.
Cash 400,000
Accounts receivable (net) 800,000
Inventories $1,200,000
Total current assets 2,400,000
Total current liabilities $1,000,000
Assume that the only transactions to affect Jensen Corporation during June are the dividend transactions. Jensen’s total stockholders’ equity would be






8

Jensen Corporation’s board of directors met on June 3 and declared a regular quarterly cash dividend of $.40 per share for a total value of $200,000. The dividend is payable on June 24 to all stockholders of record as of June 17. Excerpts from the statement of financial position for Jensen Corporation as of May 31 are presented as follows.
Cash 400,000
Accounts receivable (net) 800,000
Inventories $1,200,000
Total current assets 2,400,000
Total current liabilities $1,000,000
Assume that the only transactions to affect Jensen Corporation during June are the dividend transactions. If the dividend declared by Jensen Corporation had been a 10% stock dividend instead of a cash dividend, Jensen’s current liabilities would have been






9

Excerpts from the statement of financial position for Landau Corporation as of September 30 of the current year are presented as follows.
Cash $ 950,000
Accounts receivable (net) 1,675,000
Inventories 2,806,000
Total current assets 5,43 ,000
Accounts payable 1,004,000
Accrued liabilities 785,000
Total current liabilities 1,789,000
The board of directors of Landau Corporation met on October 4 of the current year and declared the regular quarterly cash dividend amounting to $750,000 ($.60 per share). The dividend is payable on October 25 of the current year to all shareholders of record as of October 12 of the current year. Assume that the only transactions to affect Landau Corporation during October of the current year are the dividend transactions and that the closing entries have been made. Landau Corporation’s total equity was






10

Excerpts from the statement of financial position for Landau Corporation as of September 30 of the current year are presented as follows.
Cash $ 950,000
Accounts receivable (net) 1,675,000
Inventories 2,806,000
Total current assets 5,43 ,000
Accounts payable 1,004,000
Accrued liabilities 785,000
Total current liabilities 1,789,000
The board of directors of Landau Corporation met on October 4 of the current year and declared the regular quarterly cash dividend amounting to $750,000 ($.60 per share). The dividend is payable on October 25 of the current year to all shareholders of record as of October 12 of the current year. Assume that the only transactions to affect Landau Corporation during October of the current year are the dividend transactions and that the closing entries have been made. If the dividend declared by Landau Corporation had been a 10% stock dividend instead of a cash dividend, Landau’s current liabilities would have been






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