2) A corporation reports the following stockholders\' equity as of December 31,

Question

2) A corporation reports the following stockholders' equity as of December 31, 2008. Preferred stock, $50 par, 10% cumulative, 100,000 shares authorized, 90,000 shares issued Paid-in capital in excess of par commorn Common stock, $10 par, 200,000 shares authorized, $ 4,500,000 945,000 200,000 shares issued Paid-in capital in excess of par- common Total paid-in capital Retained earnings Total stockholders' equity 2,000,000 800,000 8,245,000 400,000 $11.645,000 a. What was the average issue price per share of common stock? b. What was the average issue price per share of preferred stock? c. The board of directors declares dividends of $1,900,000 in 2008. No dividends were declared in 2007 and there were no dividends in arrears prior to 2007. What is the amount per share each class of stock will receive?

Explanation / Answer

a. Average issue price per common share = (2000000+800000) / 200000 = $14per share b. Average issue price per preferred share = (4500000+945000) / 90000 = $60.50 per preferred share c. preferred dividend = 4500000*10% = 450000 cash dividend to common share = 1900000 - 450000 = 1450000 or 14500000 / 200000 = $7.25 per common share

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