Garber Corporation had 40,000 shares of $10 par common stock outstanding on January 1, Year 2. On June 1, Year 2, Garber purchased 5,000 shares of its own stock on the open market for $22 per share and held it as treasury stock. On October 1, Year 2, Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $24 per share on October 1, Year 2. Garber's board of directors declared and paid a cash dividend of $57,750 on December 15, Year 2. Required:a) What was the cash dividend per share that was paid on December 15?
What will be an ideal response?
a) $1.50
Shares outstanding on October 1 = 40,000 Shares outstanding on January 1 ? 5,000 Shares of treasury stock purchased on June 1 = 35,000
Shares distributed in stock dividend on October 1 = 35,000 Shares outstanding on October 1 × Stock dividend of 10% = 3,500
Shares outstanding on December 15 = 35,000 Shares outstanding on October 1 + 3,500 Shares issued in stock dividends on October 1 = 38,500 shares
Cash dividend per share on December 15 = Dividend of $57,750 dividend ÷ 38,500 Shares outstanding on December 15 = $1.50
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