Question

Exercise 14-19 a-b

At December 31, Pharoah Corporation has total stockhoiders' equity of $ 3,100,000. Included in this total are preferred stock $ 750,000 and paid-in capital in excess of par-preferred stock $ 49,800. There are 15,000 shares of $ 50 par value, 79 cumulative preferred stock outstanding. At year-end, 250,000 shares of common stock are outstanding.

Compute the book value per share of common stock under each of the following assumptions. (Round answers to 2 . decimal places, e.g. 15.25.)

(a) There are no preferred dividends in arrears, and the preferred stock does not have a call price.

(b) Preferred dividends are one year in arrears, and the preferred stock has a call price of $ 60 per share.

Answer 1

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Pharaoh Corporation
Calculation of arrear Preferred dividend		Note
Preferred Stock value	750,000.00	A
Dividend rate	7%	B
Arrear Dividend	52,500.00	C=A*B
Calculation of excess payment in case of redemption of Preferred Shares
Call value per share	60.00	D
Par Value	50.00	E
Difference	10.00	F=D-E
Number of Preferred Shares	15,000.00	G
Total value	150,000.00	H=F*G
Less: Paid in capital in excess of Par Preferred Stock	49,800.00	I
Excess payment upon redemption of Preferred Shares	100,200.00	J=H-I
Calculation of Book Value per share
	Amount $
Total Equity	3,100,000.00
Less:
Preferred Stock value	750,000.00
Paid in capital in excess of par Preferred Stock	49,800.00
Arrear Dividend	52,500.00	See C
Excess payment upon redemption of Preferred Shares	100,200.00	See J
Total value	2,147,500.00	K
Number of Common Shares outstanding	250,000.00	L
Book Value per share	8.59	M=K/L
So book value per share is $ 8.59.