Question:
the equity section of cyril corporation's balance sheet shows the following:

preferred stock: 4% cumulative, $25 par value, $30 call price, 10,000 shares issued and outstanding $250,000
common stock: $10 par value, 35,000 shares issued and outstanding 350,000
retained earnings 267,500
total stockholders' equity $867,500
determine the book value per share of the preferred and common stock under two separate situations:

1. no preferred dividends are in arrears.
2. three years of preferred dividends are in arrears.

Part 1:

Part 2:

Explanation:

Part 1: (the book value per share of the preferred and common stock under No preferred dividends are in arrears)

Book value per share of the preferred :

In our case Cumulative dividends=0

Book value per share of the common stock:In our case Cumulative dividends=0

Part 2:

Annual Preferred Dividend=4%*$25*10,000=$10,000

Three years of preferred dividends are in arrears= 3*Annual Preferred Dividend

Three years of preferred dividends are in arrears= 3*$10000=$30,000

Formula for  the book value per share of the preferred is same as above,so we will direct calculate:

In our case Cumulative dividends=$30,000

Book value per share of the preferred :

Book value per share of the common stock:

Formula for  the book value per share of the common stock is same as above,so we will direct calculate:

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