At year end, Tangshan China Company balance sheet showed total assets of $60 million, total liabilities (including preferred stock) of $45 million, and 1,000,000 shares of common stock outstanding. If Tangshan could sell its assets for $52.5 million, Tangshan's liquidation value per share of common stock is ________.

Question

Quizplus · Accepted Answer

To calculate the liquidation value per share of common stock, we need to subtract the total liabilities from the total assets and divide by the number of shares outstanding.

Liquidation Value per Share = (Total Assets - Total Liabilities) / Number of Shares Outstanding

= ($60 million - $45 million) / 1,000,000

= $15 million / 1,000,000

= $15 per share

However, since Tangshan can sell its assets for $52.5 million, we use this amount for the calculation instead:

Liquidation Value per Share = ($52.5 million - $45 million) / 1,000,000

= $7.5 per share

Therefore, the answer is B) $7.50.

At Year End, Tangshan China Company Balance Sheet Showed Total