Solution a:
Retained earnings on December 31, 2017 = $812,000 - $277,000 - $40,000 = $495,000
Retained earnings for common shareholders = Total retained earnings - Preferred dividend for 3 years
= $495,000 - ($550,000*8%*3) = $363,000
Book value per share of common stock = ($708,000 + $363,000) / 708000 = $1.51 per share
Solution b:
Book value per share = ($708,000 + $363,000 - $550,000*6%) / 708000 = $1.47 per share
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