Chapter 14 - Book Value Per Share
Chapter 14 - Book Value Per Share
Chapter 14 - Book Value Per Share
Chapter 14
Book Value per Share
1. Which of the following is incorrect when computing for preference shareholders’ equity?
a. The liquidation value, or in the absence thereof, the aggregate par value, is allocated to the
preference shareholders’ equity.
b. If the preference shares are cumulative, all dividends in arrears are allocated.
c. If the preference shares are noncumulative, only the current year dividend is allocated.
d. If there are no dividends in arrears, only one-year dividends are allocated to the preference
shareholders’ equity.
4. Which of the following is excluded when computing for the number of shares outstanding?
a. treasurer shares c. issued shares
b. subscribed but unpaid shares d. treasury shares
5. Which of the following is incorrect when computing for book value per share when there are
fully participating preference shares?
a. The ordinary shareholders’ equity is allocated one year dividend in arrears.
b. The amount subject to participation is allocated to participating preference shares and
ordinary shares based on aggregate par values of outstanding shares.
c. Only participating preference shares and ordinary shares share on the amount subject to
allocation.
d. The ordinary shareholders’ equity is allocated the aggregate par value before participation
by participating preference shares.
At December 31, 2008, Boe's book value per common share was
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7. Nova Corporation has an authorized capital of 10,000 shares of ₱100 par, 8% cumulative
preferred stock and 20,000 shares of ₱100 par common stock. The equity account balances at
December 31, 2008 are as follows:
Dividends on preferred stock are in arrears for 2007 and 2008. The book value of a share of common
stock at December 31, 2008 should be
a. 125 b. 191 c. 133 d. 141
8. Georgia, Inc. has an authorized capital of 1,000, ₱100 par, 8% cumulative preference shares and
100,000, ₱10 par, ordinary shares. The equity account balances at December 31, 20x1, are as
follows:
Dividends on preferred stock are in arrears for the year 20x1. The book value per ordinary share at
December 31, 20x1, should be
a. 11.78 b. 11.91 c. 12.22 d. 12.36
9. Hoyt Corp.’s current balance sheet reports the following stockholders’ equity:
Dividends in arrears on the preference share amount to ₱25,000. If Hoyt were to be liquidated, the
preference stockholders would receive par value plus a premium of ₱50,000. The book value per
ordinary share is
a. 7.75 b. 7.50 c. 7.25 d. 7.00
10. Maga Corp.'s shareholders' equity at December 31, 20x1, comprised the following:
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Dividends on preferred stock have been paid through 20x0 but have not been declared for 20x1. At
December 31, 20x1, Maga's book value per ordinary share was
a. 5.50 b. 6.25 c. 6.75 d. 7.50
“When you pass through the waters, I will be with you; and when you pass through the rivers, they will not
sweep over you. When you walk through the fire, you will not be burned; the flames will not set you ablaze.” -
(Isaiah 43:2)
- END -
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SOLUTIONS:
1. D
2. B
3. A
4. D
5. B
6. B
Solution:
Total shareholders' equity 4,950,000
Preference shareholders' equity:
Liquidation value (10,000 shares x ₱105) 1,050,000
Dividends in arrears - (1,050,000)
Ordinary shareholders' equity 3,900,000
7. C
Solution:
Total shareholders' equity 1,910,000
Preference shareholders' equity:
Aggregate par value 500,000
Dividends in arrears (500K x 8% x 2 yrs.) 80,000 (580,000)
Ordinary shareholders' equity 1,330,000
8. B
Solution:
Total shareholders' equity 160,000
Preference shareholders' equity:
Par value 50,000
Dividends in arrears (50,000 x 8%) 4,000 (54,000)
Ordinary shareholders' equity 106,000
Divide by: Ordinary shares outstanding* 8,900
Book value per share (Ordinary shares) 11.91
9. D
Solution:
Total shareholders' equity 1,025,000
Preference shareholders' equity:
Liquidation value (250K par x 50K premium) 300,000
Dividends in arrears 25,000 (325,000)
Ordinary shareholders' equity 700,000
Divide by: Ordinary shares outstanding (350K ÷ ₱3.50) 100,000
Book value per share (Ordinary shares) 7.00
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10. A
Solution:
Total shareholders' equity 8,000,000
Preference shareholders' equity:
Liquidation value (50,000 x ₱110) 5,500,000
Dividends in arrears (5,000,000 x 6%) 300,000 (5,800,000)
Ordinary shareholders' equity 2,200,000
Divide by: Ordinary shares outstanding (350K ÷ ₱3.50) 400,000
Book value per share (Ordinary shares) 5.50