Retained Earnings (2‚000‚000 X $1) 2‚000‚000 Dividends Payable 2‚000‚000 Aug. 15 No entry. Sep. 9 Dividends Payable 2‚000‚000 Cash 2‚000‚000 BRIEF EXERCISE 15-13 Declaration Date. Retained Earnings 1‚300‚000 Ordinary Share Dividend Distributable 200‚000 Share Premium—Ordinary 1‚100‚000 (20‚000* X $65 = $1‚300‚000; ( 20‚000 X $10 = $200‚000) *400‚000 shares X 5% Distribution Date. Ordinary Share Dividend Distributable 200‚000 Share Capital—Ordinary
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of frozen foods that are sold under its own brand name to retailers. Rae is considering if a dividend discount mode would be appropriate for valuing Tasty Foods. He has complied the information in the following table for the company’s EPS and DPS during the last five years. The quarterly dividends paid by the company have been added to arrive at the annual dividends. Rae has also computed the dividend payout ratio for each year as DPS/EPS and the growth rates in EPS and DPS. Year EPS ($)
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issuance of preferred and common stocks and the declaration and payment of dividends. The board of directors must always authorize all dividends. A dividend distributes cash‚ assets‚ or the company’s stock. This is distributed to the company’s stakeholders. Before authorizing a dividend‚ a company must have sufficient retained earnings and cash (cash dividend) or sufficient authorized stock (stock dividend). Before cash dividends are issued to stockholders‚ the following conditions must exist: the board
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BBMF2023 PRINCIPLE OF INVESTMENT Tutorial 1: Introduction to Investment 1. “A risk-averse investor will not assume risk.” Agree or disagree with this statement‚ and explain your reasoning. Disagree. Risk-averse investors will assume risk if they expect to be adequately compensated for it. 2. Summarize the basic nature of the investment decision in one sentence. The basic nature of the investment decision for all investors is the upward-sloping tradeoff between expected return and risk that
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the investee. 3. The equity method is appropriate when an investor has the ability to exercise significant influence over the operating and financing decisions of an investee. Because dividends represent financing decisions‚ the investor may have the ability to influence the timing of the dividend. If dividends were recorded as income (cash basis of income recognition)‚ managers could affect reported income in a way that does not reflect actual performance. Therefore‚ in reflecting the close relationship
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THURSDAY 21 AUGUST 2014 This is a fictious case based on real world situations. Although the primary focus is the dividend policy decision the situation of the company has been influenced by its corporate strategy and this case offers the opportunity to also consider the behavioural‚ management‚ and general business issues. The case questions are: As a background to the dividend policy decision briefly evaluate the corporate strategy of Eastboro Machine Tools Corporation. What implications has
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Midterm Review Questions winter 2011 REVIEW 1 As the auditor of Mother Ltd. (Mother)‚ you have been asked to draft a memorandum to the president to explain the future deductibility of loss carryovers of a wholly-owned subsidiary‚ Childco Ltd. (Childco). Mother acquired Childco on January 1‚ 2011 when Childco was experiencing financial difficulties. Childco manufactures paper products‚ whereas Mother is a wholesaler of office supplies and equipment. Both companies are Canadian-controlled
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Ch 10: 3‚ 4‚ 5‚ 7; Ch 14: 4 3. Jersey mining earns $9.50 a share‚ sells for $90‚ and pays a $6 per share dividend? The stock is split two for one and a $3 per share cash dividend is declared. (a) What will be the new price of the stock? New Price: $90/2 = $45 (b) If the firm total earning do not change‚ what is the payout ratio before and after the stock split? Before: $6/9.50 = 63.16% After: $3/4.75 = 63.16% 4. Firm A had the following selected items on its balance sheet: Cash: 28‚000‚000
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to generate enough cash from operations to pay all of its capital expenditures? d. Did the cash flow from operations cover both the capital expenditures and dividend payments‚ if any? e. If it did‚ how did it invest the excess cash? f. If not‚ the sources of cash to pay for the capital expenditures and/or dividends. g. Were the working capital (current asset and current liability) accounts other than cash and cash equivalents primarily sources of cash‚ users of cash?
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permitted to stockholders and acceptable methods for retiring stock. h. Additional Taxes – A corporation must file taxes at a federal and state level where the taxes can sometimes amount to 40%. Also‚ stockholders are required to pay taxes on cash dividends‚ once at the corporate level and again at the personal level. The last three reasons (f‚ g & h) are a disadvantage for a corporation while the first five (5) (a‚ b‚ c‚ d & e) are an advantage to a corporation. There are four steps to follow
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