Page 514 - Accounting Principles (A Business Perspective)

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Problem F The common stock of Lang Corporation is selling on a stock exchange for USD 90 per share. The
stockholders' equity of the corporation at 2009 December 31, consists of:
Stockholders' equity:
Paid-in capital: $ 360,000
Preferred stock—9% cumulative,
$120 par value, $120 liquidation value,
3,000 shares authorized, issued, and
outstanding
Common stock—$72 par value, 30,000 shares 2,160,000
authorized, issued
and outstanding
Total paid-in capital $2,520,000
Retained earnings 354,000
Total stockholders' equity $2,874,000
Assume that in liquidation the preferred stock is entitled to par value plus cumulative unpaid dividends.
a. What is the total market value of all of the corporation's common stock?
b. If all dividends have been paid on the preferred stock as of 2009 December 31, what are the book values of the
preferred stock and the common stock?
c. If two years' dividends were due on the preferred stock as of 2009 December 31, what are the book values of
the preferred stock and common stock?
Problem G Haft Corporation has an agreement with each of its 15 preferred and 30 common stockholders that

in the event of the death of a stockholder, it will purchase at book value from the stockholder's estate or heirs the
shares of Haft Corporation stock held by the deceased at the time of death. The book value is to be computed in
accordance with generally accepted accounting principles.
Following is the stockholders' equity section of the Haft Corporation's 2009 December 31, balance sheet.
Stockholders' equity:
Paid-in capital:
Preferred stock—without par value, $50 stated value, $15 $ 150,000
cumulative; 3,000 shares authorized, issued, and outstanding
Common stock—$62.50 par value, 60,000 shares authorized, 3,750,000
issued and outstanding
Paid-in capital in excess of stated value—preferred 840,000
Paid-in capital in excess of par value—common 30,000
Total paid-in capital $4,770,000
Retained earnings 1,800,000
Total stockholders' equity $6,570,000
The preferred stock is cumulative and entitled to USD 300 per share plus cumulative dividends in liquidation.
No dividends have been paid for 1 year.
A stockholder who owned 100 shares of preferred stock and 1,000 shares of common stock died on 2009
December 31. You have been employed by the stockholder's executor to compute the book value of each class of

stock and to determine the price to be paid for the stock held by her late husband.
Prepare a schedule showing the computation of the amount to be paid for the deceased stockholder's preferred
and common stock.
Alternate problems
Alternate problem A On 2005 January 1, the retained earnings of Quigley Company were USD 432,000. Net
income for the succeeding five years was as follows:

2005 $288,000
2006 216,000
2007 4,800
2008 48,000
2009 264,000

Accounting Principles: A Business Perspective 515 A Global Text