Q40PGA_2 - Horngren'S Financial And Managerial Accounting

Question

A Identifying sources of equity, stock issuance, and dividends

Voyage Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:

Preferred Stock—7%, ? Par Value; 625,000 shares

 authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders’ Equity \) 17,640,000

Common Stock—$1 Par Value; 3,000,000 shares 

 authorized, 1,340,000 shares issued and outstanding

Requirements

2. What is the par value per share of Voyage Comfort Specialists’ preferred stock?

Step-by-Step Solution

Answer

The par value per share of the corporation’s preferred stock is $5

Step 1: Basic Introduction-

$\begin{array}{c}\text{Price of preffered stock}=\frac{\text{Paid-in capital}}{\text{Shares isuued}}\\ =\frac{\$1,400,000}{280,000}\\ =\$5\end{array}$

$\begin{array}{c}\text{Preferred stock}=\text{Shares issued}\times \text{Price}\\ =280,000\times \$5\\ =\$1,400,000\end{array}$

Step 2: Par value of preferred stock

Preferred Stock—7%, $5 Par Value; 625,000 shares were authorized out of which 280,000 shares issued and outstanding.