[The following information applies to the questions displayed below.]
The stockholders' equity section of the balance sheet of Crammond Corporation at December 31,appears as follows:

-What was the average issue price per share of preferred stock?

Question

[The following information applies to the questions displayed below.]
The stockholders' equity section of the balance sheet of Crammond Corporation at December 31,appears as follows:
 
-What was the average issue price per share of preferred stock?

Quizplus · Accepted Answer

The preferred stock has a par value of $100 and a total amount of $1,000,000. Therefore, there are 10,000 shares of preferred stock outstanding. The total amount paid in for the preferred stock is $1,400,000. To calculate the average issue price per share, divide $1,400,000 by 10,000 shares: $1,400,000 ÷ 10,000 = $140 per share. However, the stock was issued at a 10% premium, so the average issue price per share of preferred stock is: $140 x 1.10 = $154. Therefore, the answer is B, $125.71 is incorrect because it is not calculated using the 10% premium. $175.50 and $300.00 are both far above the calculated average issue price per share.

[The Following Information Applies to the Questions Displayed Below