ACCT 201 Principles of Financial Accounting Practice Final Exam Combined Chapters 9 - 12 Dr. Fred Barbee Solution to Short-Problem #3

Short Problem #3

A corporation reports the following year-end stockholders' equity:

Contributed Capital

Preferred Stock, 8%, 100,000 shares authorized, 50,000 shares issued	$2,500,000
Contributed capital in excess of par, Preferred	125,000
Common Stock, $10 par, 500,000 shares authorized, 400,000 shares issued	4,000,000
Contributed capital in excess of par, Common	1,200,000
Total Contributed Capital	$7,825,000
Retained Earnings	10,125,000
Total Stockholders' Equity	$17,950,000

Determine the following:

1. Par value for the preferred stock
2. Book value per share for both preferred stock and common stock assuming a call price per share of $55 for preferred and no dividends in arrears.

Solution

Par Value for the Preferred Stock

Preferred Stock Par Value = $2,500,000 / 50,000 shares = $50.00

Book Values Per Share

Total Stockholders' Equity	$17,950,000
Less Preferred Equity (50,000 shares x $55 call price)	2,750,000
Common Stockholders' Equity	$15,200,000
Book Value per Share of Preferred Stock ($2,750,000 / 50,000 shares)	$55.00
Book value per share of Common Stock ($15,200,000 / 400,000 shares)	$38.00