Question

Indigo Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations.

2018

$240,000 net loss

2019

$37,000 net loss

2020

$765,000 net income

At December 31, 2020, Indigo Inc. capital accounts were as follows.

8% cumulative preferred stock, par value $100; authorized, issued,
and outstanding 4,800 shares		$480,000
Common stock, par value $1.00; authorized 1,000,000 shares;
issued and outstanding 756,000 shares		$756,000

Indigo Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Indigo began operations. The state law permits dividends only from retained earnings.

(a) Compute the book value of the common stock at December 31, 2020. (Round answers to 2 decimal places, e.g. $38.50.)

Book value per share

(b) Compute the book value of the common stock at December 31, 2020, assuming that the preferred stock has a liquidating value of $105 per share. (Round answers to 2 decimal places, e.g. $38.50.)

Book value per share

Answer 1

a. Computation of shareholder's equity Particulare Amount (1) 81. Cumulative preferred stock $4480.000 Common stock $79.000 Retained Earnings $ 488,000 ($ 769,000 - $37000-$240,000) Total Staré holdeis equity + $14,24,000 $ ),15,200 Computation of Book Value Per share Pasticulate Amante Total Share holder's equity $ 17,94,000 les: value of 8.1. Cumulative pref.stock Preferred dividend for years (44800x410 XB4X3 liquidity value of Pref. Stock ($ 480,000) Equity available for Common stock $ Hace.coo 1, ja 8, 800 No Of Common shares 756,000 Shares Book value Pee share $):49

b. Computation of Book Value Pes shape. fastiglose Amount Total slate Kiolder's equly $17.940,000 les87. Cemulative Aef-stock Preferred dividend for 3 years C4800*100 x81.83) Prep. Stelle value CHSCOX105) $180.000 $ 619,200) equity Avail for pref-stock Equily Available for common.slock No. of Common shares 756,000 Shau $ 1.461 Book Value Per share $115, 900 504,000 $1104800 x х Please do like... Happy Chegging