Reference no: EM132971130
Problem - On October 1of the current year, Olivia Corporation wanted to declare dividends. The corporation was thinking of declaring a 20% share dividend. The market value of Olivia Corporation's shares on the date of declaration was P10 per share. On the other hand, the corporation was also considering a P2.50 cash dividends per share.
On October 1, Olivia Corporation had 80,000 outstanding ordinary shares with a P5 par value.
Required -
a. What amount will be debited to Accumulated Profits on the date of declaration if the corporation decides on the 20% share dividends?
b. How many shares are needed for the 20% share dividends?
c. What is the effect of the share dividends on total assets and total shareholders' equity? State the amount and the direction of effect.
d. What amount will be debited to Accumulated Profits on the date of declaration if the corporation decides on the P2.50 cash dividends?
e. How much cash is needed for the P2.50 cash dividend?
f. What is the effect of the cash dividends on total assets and total shareholders' equity? State the amount and the direction of effect.
g. Which type of dividend will you recommend?
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