Problem 11-5A Computation of book values and dividend allocations LO C2, A4 [The following information applies…
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Question “Problem 11-5A Computation of book values and dividend allocations LO C2, A4 [The following information applies…”
Problem 11-5A Computation of book values and dividend allocations LO C2, A4 [The following information applies to the questions displayed below.] Raphael Corporation’s common stock is currently selling on a stock exchange at $198 per share, and its current balance sheet shows the following stockholders’ equity section: Preferred stock-5% cumulative, $ authorized, issued, and outstanding Common stock-$__par value, 4,000 shares authorized, issued and outstanding Retained earnings par value, 1,000 shares $ 60,000 180,000 370,000 Total stockholders’ equity $610,000
Problem 11-5A Part 1 Required: 1. What is the current market value (price) of this corporation’s common stock? Market price per share
Problem 11-5A Part 2 2. What are the par values of the corporation’s preferred stock and its common stock? Par Value Corporation’s preferred stock Corporation’s common stock
Problem 11-5A Part 3 3. If no dividends are in arrears, what are the book valuess per share of the preferred stock and the common stock? Book Value Per Preferred Share Choose Numerator: Choose Denominator: Book Value Per Preferred Share Book value per preferred share Book Value Per Common Share Choose Numerator: Choose Denominator: Book Value Per Common Share Book value per common share
Problem 11-5A Part 4 4. If two years’ preferred dividends are in arrears, what are the book values per share of the preferred stock and the common stock? Book Value Per Preferred Share /Choose Denominator: Choose Numerator: Book Value Per Preferred Share Book value per preferred share / / Book Value Per Common Share /Choose Denominator: Choose Numerator: Book Value Per Common Share / Book value per common share III
Problem 11-5A Part 5 5. If two years’ preferred dividends are in arrears and the preferred stock is callable at $70 per share, what are the book values per share of the preferred stock and the common stock? Book Value Per Preferred Share IChoose Denominator: Choose Numerator: Book Value Per Preferred Share / Book value per preferred share Book Value Per Common Share IChoose Denominator: Choose Numerator: Book Value Per Common Share / Book value per common share / III
Problem 11-5A Part 6 6.1 If two years’ preferred dividends are in arrears and the board of directors declares cash dividends of $21,600, what total amount will be paid to the preferred and to the common shareholders? Total amount paid to the preferred shareholders Total amount paid to the common shareholders 6.2 What is the amount of dividends per share for the common stock? (Round your answer to two decimal places.) Dividend per share
Answer
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1. Market price (current stock exchange price given) | $ 198 | ||
2. Computation of par values of stock | |||
Preferred: | Paid-in amount/Number of shares = $60,000/1000 | ||
Common: | Paid-in amount/Number of shares = $180,000/4,000 | ||
3. Book values with no dividends in arrears | |||
Book value per preferred stock | Par value (when not calledable) | ||
Common stock | |||
Total equity | $ 610,000 | ||
Preferentialed: Less equity | $ -60,000 | ||
Common stock equity | $ 550,000 | ||
Number of outstanding shares | 4,000 | ||
Book value per common share | $ 137.50 | ||
4. Book values with two years’ dividends in arrears | |||
Preferred stock | |||
Preferred stock par value | $ 60,000 | ||
Plus two years of dividends in arrears (60,000*5%*2 Year) | $ 6,000 | ||
Equity Preferred | $ 66,000 | ||
Number of outstanding shares | 1,000 | ||
Book value per preferred stock | $ 66 | ||
Common stock | |||
Total equity | $ 610,000 | ||
Preferentialed: Less equity | $ -66,000 | ||
Common stock equity | $ 544,000 | ||
Number of outstanding shares | 4,000 | ||
Book value per common share | $ 136.00 | ||
5. Book values with call price and two years’ dividends in arrears | |||
Preferred stock | |||
Price of a preferred stock call (1,000 x $70). | $ 70,000 | ||
Plus two years of dividends in arrears (60,000*5%*2 Year) | $ 6,000 | ||
Equity Preferred | $ 76,000 | ||
Number of outstanding shares | 1,000 | ||
Book value per preferred stock | $ 76 | ||
Common stock | |||
Total equity | $ 610,000 | ||
Preferentialed: Less equity | $ -76,000 | ||
Common stock equity | $ 534,000 | ||
Number of outstanding shares | 4,000 | ||
Book value per common share | $ 133.50 | ||
6. Dividend allocation in total | |||
Preferred | Common | Total | |
Dividends for arrears of 2 years | $ 6,000 | $ – | $ 6,000 |
Dividends for the current year | $ 3,000 | $ – | $ 3,000 |
Rest to common | . | $ 12,600 | $ 12,600 |
Totals |
$strongTag16$nbsp; 9,000 | $strongTag17$nbsp; 12,600 | $strongTag18$nbsp; 21,600 |
Dividends per share of the common stock | $ 3.15 | ||
($12,600/4,000) |
Conclusion
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