Garnett Corporation's balance sheet reflects total assets of $500,000 as of December 31, 2016 and total liabilities of $150,000. Garnett's balance sheet also reflects $50,000 of preferred stock outstanding on December 31, 2016. In the early 1990's, when Garnett was formed, it issued 50,000 shares of no-par common stock, a one-time event that accounted for its entire contributed capital, other than the preferred stock. Garnett had repurchased 15,000 shares of its common stock in 2015 from a retiring shareholder, which is now treasury stock. As of December 31, 2016 the book value of each outstanding share of Garnett's common stock is:

Question

Quizplus · Accepted Answer

The book value of common stock is calculated as (Total Assets - Total Liabilities - Preferred Stock) divided by the number of outstanding common shares. Here, it is ($500,000 - $150,000 - $50,000) / (50,000 - 15,000) = $8.57 per share.

Garnett Corporation's Balance Sheet Reflects Total Assets of $500,000 as of December