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Early in 2 0 2 0 , Herndon Industries was formed with authorization to issue 2 5 0 , 0 0 0 shares of $
Early in Herndon Industries was formed with authorization to issue shares of $ par value common stock and
shares of $ par value cumulative preferred stock. During all the preferred stock was issued at par, and
shares of common stock were sold for $ per share. The preferred stock is entitled to a dividend equal to
percent of its par value before any dividends are paid on the common stock.
During its first five years of business through the company earned income totaling $ and paid
dividends of cents per share each year on the common stock outstanding.
On January the company purchased shares of its own common stock in the open market for $ On
January it reissued shares of this treasury stock for $ The remaining were still held in
treasury at December
Required:
a Prepare the stockholders' equity section of the balance sheet for Herndon Industries at December
b As of December compute Herndon's book value per share of common stock. Hint: Book value per share is
computed only on the shares of stock outstanding.
c At December shares of the company's common stock were trading at $ What would have happened to the
market price per share had the company split its stock for at this date. What would have happened to the par value of
the common stock and to the number of common shares outstanding.
Complete this question by entering your answers in the tabs below.
Prepare the stockholders' equity section of the balance sheet for Herndon Industries at December
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