1 / 9

Understanding Preferred Stock Cumulative Dividends and Book Value Analysis

Learn about cumulative preferred stock dividends, book value calculations for common stock, and how to analyze stockholder equity. Explore various scenarios and understand the impact on shareholders' returns.

maitland
Download Presentation

Understanding Preferred Stock Cumulative Dividends and Book Value Analysis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 13 Homework Part II

  2. E13-8 Preferred stock is cumulative because it is not specifically designated as noncumulative. Preferred dividends per year: .08 x $10 x 20,000 = $16,000 • : Preferred stockholders receive all $15,000. Dividends on arrears of $1,000 carry forward. • : PreferredCommon $1,000 in arrears 16,000 current year $50,000 – 17,000 = $33,000 $17,000

  3. E13-10 Book value per share on common: Total stockholders’ equity $227,000 Attributable to preferred: $50 par x 100 shares (5,000) Attributable to common $222,000 Per share: $222,000 / 10,000 = $22.20

  4. E13-11 Book value per share on common: Total stockholders’ equity $227,000 Attributable to preferred: Dividends in arrears ($5,000 x 6% x 3 years) (900) $50 par x 100 shares (5,000) Attributable to common $221,100 Per share: $221,100 / 10,000 = $22.11

  5. Problem 13-7A Req. 1a (Preferred stock is noncumulative)

  6. Problem 13-7A Req. 1b (Preferred stock is cumulative)

  7. Req. 2

  8. Problem 13-8A • Req. 1 • The preferred stock is cumulative because it is not labeled otherwise. Also, the note refers to dividends in arrears, which apply only to cumulative preferred stock. • Req. 2 • Annual preferred dividend: $24,000 (8,000  $3.00) • Req. 3 • The common stockholders control the company because the preferred stock is nonvoting. • Req. 4 • Total paid-in capital is $605,000 ($320,000 + $45,000 + $240,000). • Req. 5 • Total market value of the common stock: $300,000 • 30,000 shares  $10 per share = $300,000

  9. Req. 6 (Book value per share of common stock)

More Related