he year-end balance sheet of Columbus Products, Inc., includes the following stockholders’ equity section (with certain...

he year-end balance sheet of Columbus Products, Inc., includes the following stockholders’ equity section (with certain details omitted).


Stockholders' equity:
Capital stock:
7% cumulative preferred stock, $100 par value	$	13,000,000
Common stock, $5 par value, 5,000,000 shares authorized, 4,200,000 shares issued and outstanding		21,000,000
Additional paid-in capital:
Common stock		41,000,000
Retained earnings		64,450,000
Total stockholders’ equity	$	139,450,000

From this information, compute answers to the following questions.

a. How many shares of preferred stock have been issued?

b. What is the total amount of the annual dividends to which preferred stockholders are entitled?

c. What was the average issuance price per share of common stock?

d. What is the amount of legal capital and the amount of total paid-in capital?

e. What is the book value per share of common stock, assuming no dividends in arrears?

f. Is it possible to determine the fair market value per share of common stock from the stockholders' equity section above?

Solutions

Expert Solution

Answer a. No. of preferred stock have been issued = 130000 shares

calculated a No. of preferred stock = $13000000/100 = 130000

Answer b. Annual dividend preferred stockholders are entitled = $910000

Calculated as preferred dividend = $13000000*7% = $910000

Answer c. Average issue price per common share = $14.76 per share

issue price for common stock = ($21000000+$41000000)/4200000 = $14.79 per share

Answer d. Legal Capital = 34000000 and paid in capital = 75000000

Calculated as

Legal capital = par value of common shares + stated value of preferred shares = $21000000+13000000 = 34000000

Paid in capital = $21000000+13000000+41000000 = $75000000

Answer e Book value per common share = $30.11 per share

Calculated as

Book value per share = Total Shareholder equity - Preferred share value/No. of Common shares

= (139450000-13000000)/4200000 = $30.11 per share

Answer f. No its is not possible from equity section as it is determined by market due to effect of many other factors

ekkarill92 answered 1 year ago

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