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 0000 $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.
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 0000 $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.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter10: Stockholder's Equity
Section: Chapter Questions
Problem 67E: Cash Dividends on Common and Preferred Stock Lemon Inc. has the following information regarding its...
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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 |
0000 |
$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
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.
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