The stockholders' equity section of a corporation's balance sheet follows: Preferred stock, $25 par value, 6%, cumulative, 10,000 shares authorized, 5,000 shares issued and outstanding …………..$125,000Common stock, $5 par value, 50,000 shares authorized, 20,000 shares issued and outstanding.…………………….. 100,000Paid-in capital in excess of par value, Common stock ……… 90,000Retained earnings ………………………………………. 95,000Total stockholders' equity ……………………………….$410,000 (1) Assuming that no dividends are in arrears, compute the book values per preferred share and per common share.(2) Assuming that one year of cumulative preferred dividends is in arrears, compute the book value per common share.
What will be an ideal response?
| (1) | Book value per preferred share | ? | ? |
| ? | ($125,000/5,000 shares) | $25.00 | ? |
| ? | ? | ? | ? |
| ? | Book value per common share | ? | ? |
| ? | [($410,000 - $125,000)/20,000 shares] | $14.25 | ? |
| ? | ? | ? | ? |
| (2) | ? | ? | ? |
| ? | Total stockholders' equity | ? | $410,000 |
| ? | Less equity applicable to preferred shares: | ? | ? |
| ? | ? | $125,000 | ? |
| ? | Cumulative dividends in arrears (6% * 125,000) | 7,500 | 132,500 |
| ? | Equity applicable to common shares | ? | $277,500 |
| ? | Book value per common share ($277,500/20,000 shares) $13.88 |
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