Question

Assume that Lawson Company has retained earnings of $16 million, paid-in capital of $48 million, and treasury stock at a cost of $12 million.
1. Tabulate the effects of cash dividend payments of (a) $8 million, and (b) $2 million on retained earnings and total stockholders’ equity.
2. Why do many states forbid the payment of dividends if retained earnings do not exceed the cost of any treasury stock on hand? Explain, using the numbers from your answer to requirement 1.



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  • CreatedFebruary 20, 2015
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