The stockholders’ equity section of the balance sheet for Mann Equipment Co. at
ID: 2597128 • Letter: T
Question
The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, 2016, is as follows:
Stockholders’ Equity
Paid-in capital Preferred stock, ? par value, 5% cumulative,
230,000 shares authorized, 53,000 shares issued and outstanding $ 636,000
Common stock, $25 stated value, 280,000 shares
authorized, 53,000 shares issued and outstanding 1,325,000
Paid-in capital in excess of par—Preferred 43,000
Paid-in capital in excess of stated value—Common 159,000
Total paid-in capital 2,163,000
Retained earnings 380,000
Total stockholders’ equity $ 2,543,000
Note: The market value per share of the common stock is $44, and the market value per share of the preferred stock is $25.
Required
a. What is the par value per share of the preferred stock?
b. Whart is the divided per share on the prefered stock? (Round answer to 2 dicmal places.)
c. What was the average issue price per share (price for which the stock was issued) of the common stock? (Round answer to 2 dicmal places.)
d. If Mann declares a 2- for - 1 stock split on the common stock, how many shares will be outstanding after the split? What amount will be transferred from the retained earnings account because of the stock split? Theoretically, what will be the market price of the common stock immediately after the stock split?
Explanation / Answer
Solution:-
a) 53000 Preferred Stock issued for the Capital Amount Outstanding $ 636000
So Par Value per share is = 636000/53000= $12 Per share
b) Dividend Per Share on Preferred Stock
5% of Par Value per share
= 12*5% = $ 0.60 per share
c) Common Stock Capital Outstanding = $1325000
Paid in Capital in Excess of Stated Value of Common Stock = $159000
Total Money Received by issuing 53000 shares of common stock = $1484000
Average Issue Price = 1484000/53000 = $28 per share
d) If common Stock split in 2 share for 1 share, then outstanding common stock will be double
= 53000*2 = 106000 Shares
No changes need to be made in retained earnings as because of stock split, nothing has been changed except the number of shares outstanding and its par value. Hence no amount need to transfer from Retained earnings.
Market prciess will get half of the current market value because of split in 2 for 1.So MV will be 44/2 = $22 per share
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