A company has 500 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $60 per share. It also has 20,000 shares of common stock outstanding, and the total value of its stockholders' equity is $680,000. The company's book value per common share equals:

Question

Quizplus · Accepted Answer

First, we need to calculate the total value of the preferred stock outstanding: 
500 shares x $50 par value = $25,000 
To call in the preferred stock, the company would need to pay: 
500 shares x $60 call price = $30,000

Subtracting this call value from the total value of stockholders' equity gives us the value of the common stock: 
$680,000 - $30,000 = $650,000

To calculate the book value per common share, we divide the value of the common stock by the number of common shares outstanding: 
$650,000 / 20,000 = $32.50 per share

Therefore, the best choice is C.

A Company Has 500 Shares of $50 Par Value Preferred