The following information is necessary to compute the net assets (stockholders' equity) and book value per share of common stock for Rothchild Corporation:
8% cumulative preferred stock, $100 par
$
200,000
Common stock, $5 par, authorized 100,000 shares, issued 60,000 shares
300,000
Additional paid-in capital
452,800
Deficit (negative amount in retained earnings)
146,800
Dividends in arrears on preferred stock, 1 full year
16,000
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a.
Compute the amount of net assets (stockholders' equity). (Omit the "$" sign in your response.)
Amount of net assets
$
b.
Compute the book value per share of common stock. (Round your answer to two decimal places. Omit the "$" sign in your response.)
Book value per share
$
867
a. To compute the amount of net assets (stockholders' equity), we need to subtract the liabilities from the assets. In this case, there are no liabilities mentioned, so we can consider the total assets as the net assets.
Total assets = Preferred stock + Common stock + Additional paid-in capital + Deficit + Dividends in arrears on preferred stock
Total assets = $200,000 + $300,000 + $452,800 + $146,800 + $16,000
Total assets = $1,115,600
Therefore, the amount of net assets (stockholders' equity) is $1,115,600.
b. To compute the book value per share of common stock, we need to divide the net assets by the number of common shares issued.
Book value per share = Net assets / Number of common shares issued
Number of common shares issued = 60,000
Book value per share = $1,115,600 / 60,000
Book value per share = $18.59 (rounded to two decimal places)
Therefore, the book value per share of common stock is $18.59.
a. To compute the amount of net assets (stockholders' equity), we need to add up the different components:
1. Start with the preferred stock: $200,000
2. Add the common stock: $300,000
3. Add the additional paid-in capital: $452,800
4. Subtract the deficit (negative retained earnings): $146,800
5. Add the dividends in arrears on preferred stock: $16,000
Now, calculate the net assets by summing up these values:
Net assets = Preferred stock + Common stock + Additional paid-in capital - Deficit + Dividends in arrears
Net assets = $200,000 + $300,000 + $452,800 - $146,800 + $16,000
Calculate the sum to find the amount of net assets (stockholders' equity).
b. To compute the book value per share of common stock, we divide the net assets (stockholders' equity) by the number of issued shares of common stock.
Book value per share = Net assets / Number of issued shares of common stock.
In this case, the number of issued shares of common stock is given as 60,000.
Substitute the calculated net assets into the formula and divide by 60,000:
Book value per share = Net assets / 60,000
Calculate the division to find the book value per share of common stock.