Question

The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, Year...

The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, Year 1, is as follows:

Stockholders’ Equity
Paid-in capital
Preferred stock, ? par value, 5% cumulative,
140,000 shares authorized, 44,000 shares issued and outstanding
$ 440,000
Common stock, $20 stated value, 190,000 shares
authorized, 44,000 shares issued and outstanding
880,000
Paid-in capital in excess of par—Preferred 34,000
Paid-in capital in excess of stated value—Common 66,000
Total paid-in capital 1,420,000
Retained earnings 290,000
Total stockholders’ equity $ 1,710,000


Note: The market value per share of the common stock is $36, and the market value per share of the preferred stock is $16.

Required
a. What is the par value per share of the preferred stock?
b. What is the dividend per share on the preferred stock? (Round your answer to 2 decimal places.)
c. What was the average issue price per share (price for which the stock was issued) of the common stock? (Round your answer to 2 decimal places.)
e. 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?

a. Par value per share
b. Dividend per share
c. Average issue price per share
e. Shares outstanding after the split
Amount transferred form retained earnings
Market price of common stock after split

Homework Answers

Answer #1

Solution a:

Par worth per share of preferred shares = preferred shares value / preferred stock issued

= $440000/44000 = $10 per share

Solution b:

Dividend per share on preferred shares = value per share * five-hitter = $10*5% = $0.50 per share

Solution c:

Average issue worth per common share = (common stock + paid in capital in far more than explicit worth common stock) / ordinary shares issued

= ($880000+ $66000) / 44000 = $21.50 per share

Solution e:

Outstanding shares once split = outstanding shares *2 = 44000*2 = eighty eight,000 shares

Amount transferred from preserved earnings account = $0 (because solely value is halved and shares ar ar doubled, No modification in total value)

Market price of stock = $36/ two = $18

Please upvote ,comment incase any doubt , feel free to comment ,thank you.....

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