The following stockholders’ equity accounts arranged alphabetically are in the ledger
of McGrath Corporation at December 31, 2011.
Common Stock ($10 stated value) $1,500,000
Paid-in Capital from Treasury Stock 6,000
Paid-in Capital in Excess of Stated Value—Common Stock 690,000
Paid-in Capital in Excess of Par Value—Preferred Stock 288,400
Preferred Stock (8%, $100 par, noncumulative) 400,000
Retained Earnings 776,000
Treasury Stock—Common (8,000 shares) 88,000
Instructions
(a) Prepare a stockholders’ equity section at December 31, 2011.
(b) Compute the book value per share of the common stock, assuming the preferred stock has a
call price of $110 per share.
this is an example of whats going to be on test trying to ffigure it out to practice but cant
20.67
$34.50
To prepare the stockholders' equity section at December 31, 2011, we need to organize the given information into the appropriate categories. Let's break it down step by step:
(a) Stockholders' Equity Section at December 31, 2011:
1. Common Stock ($10 stated value):
- Number of common shares: $1,500,000 / $10 = 150,000 shares
- Common Stock Value: $150,000 shares x $10 par value = $1,500,000
2. Paid-in Capital from Treasury Stock:
- Amount from Treasury Stock: $6,000
3. Paid-in Capital in Excess of Stated Value—Common Stock:
- Amount in Excess of Stated Value: $690,000
4. Paid-in Capital in Excess of Par Value—Preferred Stock:
- Amount in Excess of Par Value: $288,400
5. Preferred Stock (8%, $100 par, noncumulative):
- Number of preferred shares: $400,000 / $100 = 4,000 shares
- Preferred Stock Value: $400,000
6. Retained Earnings: $776,000
7. Treasury Stock—Common:
- Number of common shares: 8,000 shares
- Value of Treasury Stock: $88,000
Now, let's summarize the information in the stockholders' equity section:
Stockholders' Equity:
Common Stock ($10 stated value) $1,500,000
Paid-in Capital from Treasury Stock $6,000
Paid-in Capital in Excess of Stated Value—Common Stock $690,000
Paid-in Capital in Excess of Par Value—Preferred Stock $288,400
Preferred Stock (8%, $100 par, noncumulative) $400,000
Retained Earnings $776,000
Treasury Stock—Common (8,000 shares) ($88,000)
(b) To compute the book value per share of the common stock, assuming the preferred stock has a call price of $110 per share, follow these steps:
1. Calculate the Preferred Stock value to determine the total value of preferred stock:
Preferred Stock value = Number of preferred shares x Par value = 4,000 shares x $100 = $400,000
2. Subtract the Preferred Stock value from the total stockholders' equity:
Common Stockholders' Equity = Total Stockholders' Equity - Preferred Stock value
Common Stockholders' Equity = $1,500,000 + $6,000 + $690,000 + $288,400 + $776,000 - $400,000
3. Calculate the Book Value per share of common stock:
Book Value per share = Common Stockholders' Equity / Number of common shares
Book Value per share = Common Stockholders' Equity / 150,000 shares
Now, you can use the above information to fill in the missing sections and calculate the book value per share of the common stock using the formulas provided.