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Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value,...

Raphael Corporation’s balance sheet shows the following stockholders’ equity section. Preferred stock—5% cumulative, $___ par value, 1,000 shares authorized, issued, and outstanding $ 70,000 Common stock—$___ par value, 4,000 shares authorized, issued, and outstanding 180,000 Retained earnings 370,000 Total stockholders' equity $ 620,000 1. What are the par values of the corporation’s preferred stock and its common stock?  If no dividends are in arrears at the current date, what is the book value per share of common stock?  If two years’ preferred dividends are in arrears at the current date, what is the book value per share of common stock? If two years’ preferred dividends are in arrears at the current date and the board of directors declares cash dividends of $21,700, what total amount will be paid to the preferred and to the common shareholders?

Solutions

Expert Solution

Solution 1:
Current market value (price) of this corporation’s common stock = $ 181 per share
Current market value (Total) = $181* common shares outstanding = $181 * 4000 = $724,000
Solution 2:
Par Value of Corporation's Common preferred stock = $70000 / 1000 shares = $70
Par Value of corporations Common stock = $180000 / 4000 shares = $45
Solution 3:
Book value per share of common stock = (Common Stock +retained earning) / number of common shares
= ($180000+ $370000) / 4000 = $137.50
Solution 4:
Preferred dividend arrears for 2 years = $70000*5% * 2 = $7000
Book value per share for common shares = (180000 + 370000 -7000) / 4000 = $ 135.75 per share
Solution 5
Preferred dividend= 2 years arrears dividend + Current year dividend = $70000*5%*3 = $10,500
Common stock dividend = $21700 - $10500 = $11,200

ekkarill92 answered 1 year ago
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