Question

Carla Inc. began operations in January 2015 and reported the following results for each of its 3 years of operations 2015 $284,000 net loss 2016 $40,000 net loss 2017 $360,000 net income At December 31, 2017, Carla Inc, capital accounts were as follows 7% cumulative preferred stock, par value $100; authorized, issued, and outstanding 5,100 shares $510,000 Common stock, par value $1.00; authorized 1,000,000 shares; Issued and outstanding 721,000 shares $721,000 Carla Inc, has never paid a cash or stock dividend. There has been no change in the capital accounts since Carta began operations. The state law permits dividends only from retaine earnings (a) Compute the book value of the common stock at December 31, 2017. (Round answers to 2 decimal places, .. $38.50.) Book value per share (b) Compute the book value of the common stock at December 31, 2017, assuming that the preferred stock has a liquidating value of $10 per share. (Round answers to 2 decimal places, S350) Book value per share Click if you would like to show Work for this question: Open Show Work

Answer 1

solution Retained earnings balance Amount 2015 - 284000 2016 2017 - 40000 869000 Lesse prefered Divedend I Available to common stock holder 545000 -107100 [ 437900

a) Compute the book value of common stock at December 31, 2017 510000 preferred stock 721000 Common stock 107100 Retained earnings presored devidend for 3 years (510000 X7%¥3) Devidend to common stock holders 437900 1158900 721000 a. Balance in common stock (721000 +437900) b. | Number of Common stock sharez outstanding Book value of per common stock share (a/b) 1.607 Retained earnings balance Amount 2015 - 284000 2016 - 40000 2017 869000 545000 Less: Lequid premium | to preferred stock (5100x8) 40800 504200 107100 Preferred devidend Avallable to common stock holders 397100

B) compute the book value of common stock at Dec 31, 2017 Assuming the preferred stock has Lequedating value of 108. preferred stock 510000 Common stock 721000 Retained preferred 1o7loo earnings devedend for 3 years (510000 x 74 x3] to common stock holder 397100 Dividend a. 1118100 721000 b. Balance in common stock (721000 +397100] Number of Common stock shares outstanding Book value of per common stock (alb) 1.550