Problem

The following information is necessary to compute the net assets (stockholder’s equity) an...

The following information is necessary to compute the net assets (stockholder’s equity) and book value per share of common stock for Rothchild Corporation:

8% cumulative preferred stock, $100 par

$200,000

Common stock, $5 par, authorized 100,000 shares, issued 60.000 shares ....

300,000

Additional paid-in capital

452,800

Deficit (negative amount in retained earnings)

146,800

Dividends in arrears on preferred stock, 1 full year

16,000

a. compute the amount of net assets (stockholder’s equity).


b. Compute the book value per share of common stock.


c. Is book value per share (answer to part b) the amount common stockholders should expect to receive if Rothchild Corporation were to cease operations and liquidate? Explain.

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