Uzi Company received a charter granting the right to issue 200,000 shares of $1.
ID: 2488295 • Letter: U
Question
Uzi Company received a charter granting the right to issue 200,000 shares of $1.00 par value common stock and 10,000 shares of 8% cumulative and nonparticipating, $50.00 par value preferred stock that is callable at $80.00 per share. Selected transactions are presented below.
Feb.
19
Issued 45,000 shares of common stock at par for cash.
22
Gave the corporation’s promoters 30,000 shares of common stock for their services in getting the corporation organized. The directors valued the services at $50,000.
Mar
30
Exchanged 100,000 shares of common stock for the following assets at fair market values: land, $25,000; building, $100,000; and machinery, $125,000.
Dec.
31
Closed the Income Summary account. A $25,000 loss was incurred.
20X2
Jan.
12
Issued 1,000 shares of preferred stock at $75 per share.
Dec.
15
The board of directors declared an 8% dividend on preferred shares and $0.10 per share on outstanding common shares, payable on January 31 to the January 17 stockholders of record.
31
Closed the Income Summary account. A $69,000 net income was earned.
20X3
Jan.
31
Paid the previously declared dividends.
Determine the book value per preferred share and per common stock as of December 31, 20X2.
20X1Feb.
19
Issued 45,000 shares of common stock at par for cash.
22
Gave the corporation’s promoters 30,000 shares of common stock for their services in getting the corporation organized. The directors valued the services at $50,000.
Mar
30
Exchanged 100,000 shares of common stock for the following assets at fair market values: land, $25,000; building, $100,000; and machinery, $125,000.
Dec.
31
Closed the Income Summary account. A $25,000 loss was incurred.
20X2
Jan.
12
Issued 1,000 shares of preferred stock at $75 per share.
Dec.
15
The board of directors declared an 8% dividend on preferred shares and $0.10 per share on outstanding common shares, payable on January 31 to the January 17 stockholders of record.
31
Closed the Income Summary account. A $69,000 net income was earned.
20X3
Jan.
31
Paid the previously declared dividends.
Explanation / Answer
3.Book value per preferred share = call value (or par value if stock does not have a call value) plus any dividends in arrears if cumulative stock. There are no dividends in arrears.
Book value per preferred share = $80.
Book value per common share = (Total equity less equity applicable to preferred stock) divided by number of shares of common stock outstanding.
Book value per common share = ($442,500 - $80,000) / 175,000 = $2.07* Rounded
1 Journal Entries Date Accounts Debit$ Credit$ 2011 Feb. 19 Cash 45000 Common Stock 45000 22 Organization Expenses 50000 Common Stock 30000 Paid-In Capital in Excess of Par 20000 Value, Common Stock Mar. 30 Land 25000 Buildings 100000 Machinery 125000 Common Stock 100000 Paid-In Capital in Excess of Par 150000 Value, Common Stock Dec. 31 Retained Earnings 25000 Income Summary 25000 2012 Jan. 12 Cash 75000 Preferred Stock 50000 Paid-In Capital in Excess of Par 25000 Value, Preferred Stock Dec. 15 Retained Earnings 21500 Common Dividend Payable 17500 Preferred Dividend Payable 4000 31 Income Summary 69000 Retained Earnings 69000 2013 Jan. 31 Preferred Dividend Payable 4000 Common Dividend Payable 17500 Cash 21500Related Questions
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