Chapter 13 Homework

1. Chapter 13 Homework Part II

2. E13-8 Preferred stock is cumulative because it is not specifically designated as noncumulative. Preferred dividends per year: .08 x $10 x 20,000 = $16,000 • : Preferred stockholders receive all $15,000. Dividends on arrears of $1,000 carry forward. • : PreferredCommon $1,000 in arrears 16,000 current year $50,000 – 17,000 = $33,000 $17,000

3. E13-10 Book value per share on common: Total stockholders’ equity $227,000 Attributable to preferred: $50 par x 100 shares (5,000) Attributable to common $222,000 Per share: $222,000 / 10,000 = $22.20

4. E13-11 Book value per share on common: Total stockholders’ equity $227,000 Attributable to preferred: Dividends in arrears ($5,000 x 6% x 3 years) (900) $50 par x 100 shares (5,000) Attributable to common $221,100 Per share: $221,100 / 10,000 = $22.11

5. Problem 13-7A Req. 1a (Preferred stock is noncumulative)

6. Problem 13-7A Req. 1b (Preferred stock is cumulative)

7. Req. 2

8. Problem 13-8A • Req. 1 • The preferred stock is cumulative because it is not labeled otherwise. Also, the note refers to dividends in arrears, which apply only to cumulative preferred stock. • Req. 2 • Annual preferred dividend: $24,000 (8,000  $3.00) • Req. 3 • The common stockholders control the company because the preferred stock is nonvoting. • Req. 4 • Total paid-in capital is $605,000 ($320,000 + $45,000 + $240,000). • Req. 5 • Total market value of the common stock: $300,000 • 30,000 shares  $10 per share = $300,000

9. Req. 6 (Book value per share of common stock)