Pratt Corporation's balance sheet for 2017 reveals total shareholders' equity of $2,500,000.There are 10,000 shares of cumulative,$10 preferred shares outstanding and 50,000 common shares outstanding.To date,dividends in arrears for the preferred shares amount to $25,000.The liquidation value of the preferred shares is $105 per share.Book value per share of common shares is:

Question

Quizplus · Accepted Answer

First, we need to calculate the total value of the preferred shares:
10,000 shares x $105 per share = $1,050,000

Then, we need to subtract the dividends in arrears from the shareholders' equity:
$2,500,000 - $25,000 = $2,475,000

Next, we need to subtract the preferred shares' value from the total shareholders' equity to find the value attributable to common shares:
$2,475,000 - $1,050,000 = $1,425,000

Finally, we divide the value attributable to common shares by the number of common shares outstanding to find the book value per share:
$1,425,000 / 50,000 shares = $28.50 per share

Therefore, the best choice is option C, with a book value per share of $28.50.

Pratt Corporation's Balance Sheet for 2017 Reveals Total Shareholders' Equity