Question

12. Raphael Corporation’s common stock is currently selling on a stock exchange at $171 per share, and its current balance sheet shows the following stockholders’ equity section:

Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding	$	80,000
Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding		100,000
Retained earnings		320,000
Total stockholders' equity	$	500,000

Problem 13-5A Part 4

4. If two years’ preferred dividends are in arrears, what is the book value per share of common stock?

Answer 1

Ans.	Book value per share of common stock =   (Total stockholder's equity - Preferred stock - Preferred dividend) / No. of common shares outstanding
				($500000 - $80000 - $8000) /4000
				$412000 / 4000
				$103	per share
	*Preferred dividends (for 2 years) = Preferred stock * dividend rate * 2 years
			$80000 * 5% * 2
			$8,000