The stockholders’ equity section of the balance sheet for Mann Equipment Co. at

Question

The stockholders’ equity section of the balance sheet for Mann Equipment Co. at December 31, 2018, is as follows.

Note: The market value per share of the common stock is $42, and the market value per share of the preferred stock is $26.

Required

a. What is the par value per share of the preferred stock?

b. What is the dividend per share on the preferred stock?

c. What is the number of common stock shares outstanding?

d. What was the average issue price per share (price for which the stock was issued) of the common stock?

f. If Mann Equipment Company declared 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?

Stockholders' Equity Paid-in capital Preferred stock? par value, 6% cumulative, 100,000 shares authorized, 10,000 shares issued and $ 200,000 outstanding Common stock, $10 stated value, 200,000 shares authorized, 100,000 shares issued and?? shares 1,000,000 25,000 500,000 outstanding Paid-in capital in excess of par-Preferred Paid-in capital in excess of stated value-Common Total paid-in capital Retained earnings Treasury stock, 1,000 shares Total stockholders' equity 1,725,000 420,000 13,090) $2,132,000

Explanation / Answer

Solution:-

a) Par Value of Prefered Stock per Share = (100000/10000)= $10 Per Share

b) Dividend Per share on Prefered Stock = 6% of $10 = $0.60 Per Share

c) Total No. of Common Stock Outstanding:-

100000 Shares of Common Stock outstanding out of 200000 Shares of Authorised Capital.

d) Average Issue Price of Common Stock:-

(Outstanding Common Stock Capital + Paid in Capital in Excess for Common Stock)/Total Number of Outstanding Common Stock

= (1000000+500000)/100000 = $15 Per Share

f) if Share Split in 2 for 1,

Shares Outstanding will be = 100000*2/1 = 200000 Shares

Market Price = 42/2 = $21 Per Share

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