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Stockholders' equity: Capital stock: 7% cumulative preferred stock, $100 par value $ 15,000,000 Common stock, $5...

Stockholders' equity: Capital stock: 7% cumulative preferred stock, $100 par value $ 15,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,400,000 shares issued and outstanding 22,000,000 Additional paid-in capital: Common stock 42,000,000 Retained earnings 64,450,000 Total stockholders’ equity $ 143,450,000 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?

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Answer #1

a.Number of shares of preferred stock that have been issued = Total Capital/Par value per Stock

= $15,000,000/$100

= 150,000 shares

b. The total amount of the annual dividends to which preferred stockholders are entitled = 7%*15,000,000

= $1,050,000

c. The average issuance price per share of common stock = (Par Value + Additional paid in Capital)/Number of shares issued

= (22,000,000+42,000,000)/4,400,000

= $14.55(approx.)

d.Total paid in capital = Par value + Additional paid in capital

= $15,000,000 + 22,000,000+42,000,000

= $79,000,000

e. book value per share of common stock, assuming no dividends in arrears = (Par value + Additional paid in capital + retained earnings)/ Number of shares issued

= (22,000,000+ 42,000,000+ 64,450,000)/4,400,000

= $29.19

f.No, it’s not possible to determine the fair market value per share of common stock from the stockholders' equity section above

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