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A corporation issued 30,000 ordinary shares, reacquired 10,000 as treasury shares, then resold 1,000 treasury shares. If it now declares a $2-per-share cash dividend, what is the total dividend?
A$42,000
B$60,000
C$40,000
D$38,000
Answer & Solution
Correct answer: A. $42,000
1. Dividends are paid only on shares outstanding, never on treasury shares.
2. Outstanding = issued − treasury held = $30{,}000 − 10{,}000 + 1{,}000 = 21{,}000$.
3. (Using all 30,000 gives $60,000, the trap in option B.)
4. Total dividend = $21{,}000 \times \$2 = \$42{,}000$.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.5 "Cash Dividends", p.254_
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