College of Accounting Education

3nd Floor, Dr. Florencio T. Facundo Hall, Business

& Engineering Bldg., Matina, Davao City
Phone No.: (082)305-0640 Local 137

BOOK VALUE PER SHARE

February 17,
2021

BOOK VALUE PER SHARE:

 is the amount that would be paid on each share assuming the entity is liquidated and the amount
available to shareholders is exactly the amount reported as shareholders equity.
Going concern: Receivable, Payable

Asset= Liability + Equity

Liquidating concern: settlements

Asset- Liability = Equity

Formula
= Total SHE (Preference or Ordinary)
No. of shares outstanding (Preference or Ordinary)*

* Issued Capital Share

+ Subscribed Capital Share
-Treasury shares (par)

 Treasury shares are assumed to be retired

 (gain on retirement
- share premium increase.)

OS Par 10 issue price 11

Cash 11
OS 10
SP 1

TS@ 8
TS 8
Cash 8

OS 10
SP 1
TS 8
SP-TS 3

 (loss on retirement
- share premium-TS P1, retained earnings decrease)

OS Par 10 issue price 11

Cash 11
OS 10
SP 1

TS@ 14
TS 14
Cash 14

Competency Appraisal 2nd Semester SY2020-2021

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 College of Accounting Education
3nd Floor, Dr. Florencio T. Facundo Hall, Business
& Engineering Bldg., Matina, Davao City
Phone No.: (082)305-0640 Local 137

OS 10
SP 1
RE 3
TS 14

 Subscribed share capital is presented at gross (before deducting the subscriptions receivable).

Definition:
Liquidation value – is the amount which the preference shareholders normally received upon the
liquidation of the corporation.
Liquidation premium – is the excess of the liquidation value over the par or stated value of the
preference share.
Call Price – callable PS during the lifetime

PS 25 liquidation value
-PS 20 par
LP 5

Practice: non-cumulative and non-participating

Axa Corporation reported the following capital balances on December 31,2020:
Preference share capital, 12% 40,000 shares P50 par 2,000,000/50=40,000
Ordinary share capital, 100,000 shares P50 par 5,000,000/50=100,000
Share premium 2,000,000
Retained earnings 2,000,000
11m
Calculate the book value per preference share and per ordinary share assuming preference share has a call
price of P55, a liquidation price of P53 and dividends are unpaid since December 31,2015.

Equity 11,000,000
-PS(1)53x40,000=2,120,000
(2)2mx.12 = 240,000 2,360,000/40,000= 59 book value per PS
OS 8,640,000/100,000= 86.4 book value per OS

 The dividend right:

1. non-cumulative,
2. cumulative,
3. participating,
4. and nonparticipating.
 In addition, in the absence of any statement, preference share is assumed to be non-cumulative and
non-participating.

Practice:
The shareholders’ equity of San Miguel Company on December 31,2020 shows the following balances:
Preference share capital, 12% 100 par P1,000,000/100= 10,000shares
Ordinary share capital,P100 4,000,000/100=40,000shares
Share premium 2,000,000
Retained Earnings 1,000,000
8,000,000
Dividends have been paid on the preference share up to December 31,2018.
Conditions:
1. Noncumulative and nonparticipating
2. Cumulative and nonparticipating
3. Cumulative and participating
4. Cumulative and participating up to 14%

Competency Appraisal 2nd Semester SY2020-2021

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 College of Accounting Education
3nd Floor, Dr. Florencio T. Facundo Hall, Business
& Engineering Bldg., Matina, Davao City
Phone No.: (082)305-0640 Local 137

5. Cumulative and fully participating after ordinary share receives 14%

(1) Noncumulative and nonparticipating

E 8,000,000
PS(1) (10tx100) 1m
(2)1mx.12= 120,000 1,120,000/10,000=112 BPS
OS 6,880,000/40,000=172BPS

(2) Cumulative and nonparticipating

E 8,000,000
PS(1) 1,000,000
(2)(1mx.12.2) 240,000 1,240,000/10,000=124 BPS
OS 6,760,000/40,000=169 BPS

(3)Cumulative and participating

Computation PS @ 12% 10,000 shs OS 40,000 shs Excess

1,000,000 4,000,000 3,000,000
1mx.12x2 240,000 (240,000)
4m x .12 480,000 (480,000)
2,280,000
(2,280,000 x 1/5) 456,000 (456,000)
(2,280,000 x 4/5 1,824,000 (1,824,000)
1,696,000/10,000 6,304,000/40,000
169.6 157.6

(4) Cumulative and participating up to 14%

Computation PS @ 12% 10,000 shs OS 40,000 shs Excess
1,000,000 4,000,000 3,000,000
1mx.12x2 240,000 (240,000)
1mx.02 20,000 (20,000)
2,740,000
2,740,000 (2,740,000)
1,260,000/10,000= 6,740,000/40,000=
126 168.5

(5) Cumulative and fully participating after ordinary share receives 14%
Computation PS @ 12% 10,000 shs OS 40,000 shs Excess
1,000,000 4,000,000 3,000,000
1mx.12x2 240,000 (240,000)
4mx.14 560,000 (560,000)
2,200,000
2,200,000 x 1/5 440,000 (440,000)
2,200,000 x 4/5 1,760,000 (1,760,000)
1,680,000/10,000 6,420,000/40,000
168 158

Competency Appraisal 2nd Semester SY2020-2021

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 College of Accounting Education
3nd Floor, Dr. Florencio T. Facundo Hall, Business
& Engineering Bldg., Matina, Davao City
Phone No.: (082)305-0640 Local 137

 Preference as to assets – means preference shareholders are entitled to payment not only for liquidation
value but also for dividends in arrears.
 Preference as to dividends – means the preference shareholders have the right to receive dividends first
before the ordinary shareholders are paid with dividends.

Practice:
Citigroup Corporation reported the following shareholders’ equity on December 31,2020:
Preference share capital,12% P50 par 2,000,000
Ordinary share capital,P100 par 4,000,000
Retained earnings(deficit) ( 900,000)

No dividends have been paid on the preference share since 2018.

Assuming: a. Preference as to assets b. Preference as to dividends

a. Preference as to assets (RE deficit)

b. Preference as to dividends (RE deficit)

 In case where there are two classes of preference share with different dividend rates and both are
participating, the lower rate shall be the basis for allocation to the ordinary share.

 If only one preference share is participating, the rate of the participating preference shall be used as
basis for ordinary share dividend.

Practice:
(1) Toyota Motors showed the following shareholders’ equity on December 31,2020:
Ordinary share capital, P100 par 5,000,000/100=50,000
Preference share capital, 6% P100par, cumulative and participating 3,000,000/100=30,000
Preference share capital , 8% P100par, noncumulative and participating  2,000,000/100=20,000
Retained earnings 530,000

Compute the BPS for each class of share capital assuming dividends in arrears are for 3 years, preference
share has preference as to assets or preference share has preference as to dividend.

Maximum Dividend (Formula)

 Ordinary dividend/Ordinary share capital= Percentage of ordinary dividend, which the PS shall also
receive the same percentage for the current year if it is fully participating.

Practice:
The following information appears in the shareholders’ equity section of the statement of financial of
Accenture Company on December 31, 2020: 
Preference share capital, P100 par, 100,000 shares
authorized and 80,000 shares issued 8,000,000
Ordinary share capital, P50 par, 500,000 shares
authorized and 200,000 shares issued 10,000,000
Share premium 2,000,000
Retained earnings 5,000,000 
The preference dividends are in arrears for two years and the preference rate is 12%. The preference
share is cumulative and fully participating. On December 31, 2020, the boards of directors intend to pay
cash dividend of P10 per share to ordinary shareholders.

Competency Appraisal 2nd Semester SY2020-2021

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 College of Accounting Education
3nd Floor, Dr. Florencio T. Facundo Hall, Business
& Engineering Bldg., Matina, Davao City
Phone No.: (082)305-0640 Local 137

Comprehensive Problem:
Prudential Company reported the following shareholders’ equity on December 31,2020:
PS,12%cumulative,participating,P100 par, 50,000 shrs authorized,
25,000 shrs. Issued, of which 5,000 shrs are in treasury 2,500,000/100=25,000
Treasury PS, at cost 400,000
SPS, 10,000 shrs 1,000,000
SR-PS 300,000
OS, P50 par, 300,000 shrs authorized, 90,000 shrs issued on
which 10,000 shrs are in treasury 4,500,000/50=90,000
Treasury OS, at cost 550,000
SOS capital, 20,000 shrs 1,000,000
SR-OS 200,000
Share premium 1,250,000
RE – unappropriated 1,000,000
RE- appropriated 2,500,000
Last dividend payment was on December 31, 2015. Compute the book value per ordinary share and per
preference share on December 31,2020.

DO NOT DOUBT GOD’S MERCY!

Competency Appraisal 2nd Semester SY2020-2021

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