Morgan Sondgeroth Inc. began operations in January 2018 and reported the following results for each of its

Question:

Morgan Sondgeroth Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations.

2018..................$260,000 net loss
2019..................$40,000 net loss
2020..................$800,000 net income


At December 31, 2020, Morgan Sondgeroth Inc. capital accounts were as follows.

8% cumulative preferred stock, par value $100; authorized,
issued, and outstanding 5,000 shares......................................................$500,000
Common stock, par value $1.00; authorized 1,000,000 shares;
issued and outstanding 750,000 shares...................................................$750,000


Morgan Sondgeroth Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Sondgeroth began operations. The state law permits dividends only from retained earnings.


Instructions

a. Compute the book value of the common stock at December 31, 2020.

b. Compute the book value of the common stock at December 31, 2020, assuming that the preferred stock has a liquidating value of $106 per share.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1119503668

17th edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel

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