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Raven Instant Messaging (RIM) Company declared cash dividends of $0.25 per share. RIM has 3,000,000 shares...

Raven Instant Messaging (RIM) Company declared cash dividends of $0.25 per share. RIM has 3,000,000 shares of common stock authorized, 800,000 shares issued, and 500,000 shares outstanding. What amount should RIM record for the dividends?
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Answer #1

Answer:

Normally dividends are only paid on outstanding shares (ie, issued shares of common stock minus treasury stock). Therefore here it is clearly given in the question that outstanding shares of common stock and also it is assumed that the same is net of treasury stock if any.

Where treasury stock means the stock which was previously outstanding but which was bought back by the issuing company. Therefore it should be educed from issued shares of common stock to get actual number of common stock outstanding.

Hence based on the above condition, Raven Instant Messaging (RIM) Company should record dividend for an amount of  $125,000 ($0.25 x 500,000 shares)

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