BOOK VALUE AND PREFERENCE DIVIDENDS

Problem 27-3

Dix Company reported the following shareholder’s equity on December 31, 2015 :

8% cumulative preference share capital, P50 par,

Liquidating value P55 per share ;
Authorized, isuued and outsanding 20,00o shares 1,000,000
Ordinary share capital, P25 par; 200,000 share authorized;
100,000 shares issued and outstanding
2,500,000
Retained Earnings
400,000

Dividends on preference share have been paid though 2013 but have not declared for 2014 and
2015.

On December 31, 2015, what is the book value per ordinary share?

a. 25.00
b. 27.20
c. 26.40
d. 29.00

Solution :

Total equity
3,900,000
Preference shareholders equity :
Preference share capital 1,000,000
Liquidating premium (20,000 x 5) 100,000
Preference dividend in arrears
(1,000,000 x 8% x 2) 160,000 1,260,000
2,640,000
100,000
26.40

Problem 27-4

Boe Company reported the following shareholders’ equity on December 31, 2015 :

6% non cumulative preference share capital, P100, par

Liquidation value of P105 per share
 1,000,000
Ordinary Share capital, P100 par
Retained Earnings
950,000

Preference dividends have paid up to December 31,2015 what is the book value per ordinary
share ?

a. 131.70
b. 130.00
c. 129.70
d. 128.00

Solution:

Total shareholder’s Equity

4,950,000
Preference shareholders’ equity :
Preference Share Capital 1,000,000
Liquidation Premium (10,000x50) 50,000 1,050,000
Ordinary Shareholder’s equity
3,090,000
Divide by ordinary shares
30,000
Book value per ordinary share
130

Problem 27-5

Nike Company paid cash dividends of P600,000 and reported net income of P1,550,000. The
ordinary share holders equity at year ended was P5,000,000. The ordinary shares outstanding.
What is the book value per ordinary share ?

a. 25.00
b. 22.00
c. 3.00
d. 7.75

Solution :
Book value per ordinary share (5,000,000/200,000 shares) 25