The following selected financial information was extracted from the December 31, 2011, financial records of Cotter Company:

Question:

Debit Credit Cash Short-term investments (2,500 shares of Oreton Coгporation) 25,000 80,000 Common stock (S10 par value

The company's board of Directors is currently contemplating declaring a dividends. The company's common stock is presently selling for $40 par share.
Required
(a) Given the present financial position of Cotter Company, how large a cash dividend can the board of directors declare?
(b) How large a stock dividend can the board legally declare?
(c) Assume that the dividends are declared and issued on the same day. Prepare the journal entry to record the maximum dividend in each case above.
(d) If the company sold its short-term investments, how large a cash dividend could it declare and pay? The current selling price of Oreton Corporation is $50 pershare.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...