Splish Inc. began operations in January 2015 and reported the following results for each of its...

Splish Inc. began operations in January 2015 and reported the following results for each of its 3 years of operations. 2015 $284,000 net loss 2016 $40,000 net loss 2017 $869,000 net income At December 31, 2017, Splish Inc. capital accounts were as follows. 7% cumulative preferred stock, par value $100; authorized, issued, and outstanding 5,100 shares $510,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 721,000 shares $721,000 Splish Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Splish began operations. The state law permits dividends only from retained earnings. (a) Compute the book value of the common stock at December 31, 2017. (Round answers to 2 decimal places, e.g. $38.50.) Book value per share $ Entry field with correct answer (b) Compute the book value of the common stock at December 31, 2017, assuming that the preferred stock has a liquidating value of $108 per share. (Round answers to 2 decimal places, e.g. $38.50.) Book value per share $

I have part A calculated correclty, but my calculation of 1.50 for part B book value is not correct. Help please

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Expert Solution

Total Retained earnings : -284000 loss + (-40000)loss + 869000 income

= -284000-40000 +869000

= $ 545000

Total stockholders equity : Common stock +preferred stock +retained earnings

= 721000+510000 + 545000

= $ 1776000

common stock per share =[Total stockholders equity -preferred stock liqudity value ]/number of common shares outstanding

=[ 1,776,000- (5100*108)]/721000

= 1,776,000- 550,800]/721000

= 1,225,200/721000

= $ 1.70 per share

ekkarill92 answered 1 year ago

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