Hot Lunch Delivery Service has always had a policy to pay stockholders annual dividends in an amount
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Hot Lunch Delivery Service has always had a policy to pay stockholders annual dividends in an amount exactly equal to net income for the year. Joe Alberg, the company’s president, is confused because the Cash balance has been consistently increasing ever since Hot Lunch began operations five years ago in spite of its faithful adherence to the dividend policy. Assuming no errors have been made in the bookkeeping process, explain why this situation might occur.
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...
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Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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