Chapter 11: Q14QS (page 517)
Murray Company reports net income of $770,000 for the year. It has no preferred stock, and its weightedaverage common shares outstanding is 280,000 shares. Compute its basic earnings per share.
Basic earnings per share equals $2.75 per share
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What is the difference between the market value per share and the par value per share.
What are organization expenses? Provide examples.
Question:
Raphael Corporation’s common stock is currently selling on a stock exchange at \(85 per share, and its current balance sheet shows the following stockholders’ equity section:
Preferred stock—5% cumulative, \)___ par value, 1,000 shares
authorized, issued, and outstanding . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 50,000
Common stock—\)___ par value, 4,000 shares authorized, issued,
and outstanding . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Retained earnings . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Total stockholders’ equity . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(280,000
Required
Required
1. What is the current market value (price) of this corporation’s common stock?
2. What are the par values of the corporation’s preferred stock and its common stock?
3. If no dividends are in arrears, what is the book value per share of common stock? (Round per share value to the nearest cent.)
4. If two years’ preferred dividends are in arrears, what is the book value per share of common stock? (Round per share value to the nearest cent.)
5. If two years’ preferred dividends are in arrears and the board of directors declares cash dividends of \)11,500, what total amount will be paid to the preferred and to the common shareholders?
What is the amount of dividends per share for the common stock? (Round per share value to the nearest cent.)
Analysis Component
6. What are some factors that can contribute to a difference between the book value of common stock and its market value (price)?
What is the difference between a stock dividend and a stock split?
For each of the following statements regarding dividends, indicate whether it is true or false.
1. Cash and stock dividends reduce retained earnings.
2. Dividends payable is recorded at the time a cash dividend is declared.
3. The date of record refers to the date a cash dividend is paid to stockholders.
4. Stock dividends are a mechanism to keep the market price of stock affordable
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