The following selected financial information was extracted from the December 31, 2024, financial records of Fidani Corporation:

The company’s board of directors is considering declaring a dividend. The company’s common shares are currently selling for $40 per share.

Required 

a. Given the present financial position of Fidani 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 of parts (a) and (b) above.

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Cash Short-term investments (2,500 shares of Martineau Corporation) Common shares (500,000 shares authorized, 100,000 issued) Retained earnings (before closing entries) Net income for 2024 Debit $ 75,000 100,000 Credit $1,000,000 490,000 100,000