Question

Gannon, Inc., had 100,000 shares of common stock outstanding. During the current year, the company distributed a 10 percent stock dividend and subsequently paid a $0.50 per share cash dividend. a. Calculate the number of shares outstanding at the time of the cash dividend. b. Calculate the amount of cash required to fund the cash dividend.

Answer 1

The number of shares outstanding at the time of the cash dividend is 110,000 shares

The cash required to fund dividend payment is $55,000

Step-by-step explanation:

The number of shares outstanding at the time of the cash dividends is the number of common stock held at the beginning of the year, 100,000 shares plus the additional ones issued as stock dividend

Number of shares outstanding=100000+(100000*10%)

=1000000+10000

=110,000shares

The amount of cash required to fund the cash dividend is the number of shares outstanding of 110,000 multiplied by dividend per share of $0.50

Cash required to fund dividends=110,000*$0.50

cash required to fund dividends=$55,000