Calculation of Reserve for Year 2020 | |||||||||
Profit for 3 years | A | $ 1,00,000.00 | |||||||
(765000 - 400000 - 265000) | |||||||||
Less: Cumulative Preferred Interest | B | $ 1,00,000.00 | |||||||
((500000 * 8% *3 Years) or Profit, whichever is less) | |||||||||
Reserve | (A-B) | $ - | |||||||
a) Book value of common stock at Dec 2020 | $ 1.00 | ||||||||
Since the reserves have zero value, the common stock would have the same book value as much as paid up capital. | |||||||||
b) Book value of common stock at Dec 2020, Assuming Preference share value as $105. | |||||||||
Preference Share Value | |||||||||
(105*5000) | A | $ 5,25,000.00 | |||||||
Paid Up value - Preference Stock | B | $ 5,00,000.00 | |||||||
Interest | (A-B) | $ 25,000.00 | |||||||
Profit available for Common Stock | C | $ 75,000.00 | |||||||
(100000 - 25000) | |||||||||
Paid up capital - Common Stock | D | $ 6,82,000.00 | |||||||
Total Value for Common Stock | (C-D) | $ 7,57,000.00 | |||||||
No of stocks | E | $ 6,82,000.00 | |||||||
Book Value | (C-D)/E | $ 1.11 | |||||||
Larkspur Inc. began operations in January 2018 and reported the following results for each of its...
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Martinez Inc. began operations in January 2018 and reported the
following results for each of its 3 years of operations.
2018
$268,000 net loss
2019
$38,000 net loss
2020
$775,000 net income
At December 31, 2020, Martinez Inc. capital accounts were as
follows.
8% cumulative preferred stock, par value $100; authorized,
issued,
and outstanding 4,500 shares
$450,000
Common stock, par value $1.00; authorized 1,000,000
shares;
issued and outstanding 741,000
shares
$741,000
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