Question

Farmer’s, Inc., has 1,000 shares of $100 par value preferred stock outstanding, 50,000 shares of common stock outstanding, and its total stockholders' equity equals $5,000,000. The preferred stock does not have a call provision and the company has $50,000 of cumulative dividends in arrears. The book value per preferred share is _____.

Answer 1

$150 per share

Step-by-step explanation:

The computation of the book value per preferred share is shown below:

= (Par value + Dividend in Arrears) ÷ (Number of Preferred Stock)

= ($100,000 + $50,000) ÷ (1,000 shares)

= ($150,000) ÷ (1,000 shares)

= $150 per share

The par value is computed below:

= Number of shares × price per share

= 1,000 shares × $100

= $100,000