The following information is necessary to compute the net assets (stockholders' equity) and book value per share of common stock for Rothchild Corporation.
8% cumulative preferred stock, $100 par................................................................$200,000
Common stock, $5 par, authorized 100,000 shares, issued 60,000 shares ...............300,000
Additional paid-in capital .........................................................................................460,000
Deficit (negative amount in retained earnings) ........................................................146,800
Dividends in arrears on preferred stock, 1 full year ...................................................16,000
a. Compute the amount of net assets (stockholders' equity).
b. Compute the book value per share of common stock.
c. Is book value per share (answer to part b) the amount common stockholders should expect to receive if Rothchild Corporation were to cease operations and liquidate? Explain.