Question

The following stockholders' equity accounts were taken from the balance sheet of LAH Corporation as of December 31, 2019 Common stock, $10 par value, 1,000,000 shares authorized, 400,000 shares issued and outstanding $4,000,000 Preferred stock, $100 par value, 7% cumulative, 50,000 authorized, ________? shares issued and outstanding 3,000,000 Paid in capital in excess of par - common 840,000 Paid in capital in excess of par - preferred 150,000 Retained earnings 4,260,000 Dividends in arrears $105,000 Answer the following questions: 1. How many shares of preferred stock are issued and outstanding? 2. What is the average issue price per share of the common stock? What is the book value per share of the common stock as of 12/31/19? If LAH declares dividends totaling $450,000 next year how much of the dividend will be paid to common stockholders?

Answer 1

1) 30,000 shares issued

2) Common stock average price: 12.1 dollars

book value: $ 22.49

3) 135,000 dividends to common stockholders

Step-by-step explanation:

1) preferred stock equity $ 3,000,000 / $ 100 par value = 30,000 shares issued

2)

common stock: 400,000 issued x $10 face value : 4,000,000

additional paid-in in excess of par value: 840,000

total paid-in 4,840,000

average common stock price: $ 4,840,000/400,000 shares = 12.1

on average common stock were issued at 12.1 dollars

common stock book value:

(common stock + retained earnings - preferred stock)/outstanding shares

(4,840,000 + 4,260,000 - 105,000)/ 400,000 = 22.4875

3) if 450,000 dividends are distributed:

the compamy will first pay the preferred stocks:

30,000 x $ 100 x 7% = 210,000

dividends in arrears: 105,000

total preferred stock 315,000

bond to common stock:

450,000 declared - 315,000 preferred stock: 135,000 for common stock