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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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SOLUTION TO EXERCISE 11-13

(a) The book value per share of preferred stock is $105—the call price per share.

Explanation: The preferred stock equity per share consists of the call price of the stock plus any dividends in arrears. If the preferred stock does not have a call price, the book value of one share of preferred is equal to the preferred's par value plus any dividends in arrears.

TIP: Notice that none of the paid-in capital in excess of par value arising from the issuance of preferred stock at a price above par ($120,000) is directly allocated to preferred stock in the book value per share of preferred stock computation.

TIP: There is no mention of any dividends in arrears for this entity at the specified balance sheet date.

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TIP: If only one class of stock is outstanding, the book value of common is computed simply by dividing total stockholders' equity by the total number of shares outstanding.

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