On February 12, Quality Carpet Inc., a carpet wholesaler, issued for cash 736,000 shares of no-par common stock (with a stated value of $1.20) at $3.10, and on August 3, it issued for cash 15,600 shares of preferred stock, $45 par at $64.

On February 12, Quality Carpet Inc., a carpet wholesaler, issued for cash 736,000 shares of no-par common stock (with a stated value of $1.20) at $3.10, and on August 3, it issued for cash 15,600 shares of preferred stock, $45 par at $64.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 5MCQ

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Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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