Question

Problem 13-5A Computing book values and dividend allocations LO C2, A4 [The following information applies to the questions displayed below.] Raphael Corporation's balance sheet shows the following stockholders' equity section. $ 55,000 Preferred stock-5% cumulative, $ par value, 1,000 shares authorized, issued, and outstanding Common stock-$_ par value, 4,000 shares authorized, issued, and outstanding Retained earnings Total stockholders' equity 140,000 310,000 $ 505,000 Problem 13-5A Part 1 1. What are the par values of the corporation's preferred stock and its common stock? Par Value Corporation's preferred stock Corporation's common stock

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Answer 1

Answers

• Requirement 1

>Corporation’s preferred stock Par Value = $ 55000 / 1000 shares issued = $ 55
>Corporation’s common stock Par Value = $ 140000 / 4000 shares = $ 35

• Requirement 2
  Note: 1 year Preferred stock dividend = $ 55000 x 5% = $ 2750

>Total amount paid to preferred stockholders = (2750 x 2 years) dividend in arrears + $ 2750 current year dividend = 5500 + 2750 = $ 8,250
>Total amount paid to common stockholders = $ 16900 total dividend - $ 8250 preferred dividend = $ 8,650