BOOK VALUE PER SHARE

PROBLEM 3: EXERCISES

Use the following information for the next three questions:

Fraulein Co.’s equity structure at December 31, 20x1 is shown below:

8% Preference sh., P200 par (liquidation value P250 per share) 1,200,000
Ordinary shares, P100 par 3,600,000
Subscribed share capital - ordinary shares 400,000
Subscription receivable (80,000)
Retained earnings 1,080,000
Treasury shares (P80 cost per share) (300,000)
Total shareholders' equity P 5,900,000

1. The preference shares are cumulative. Dividends are in arrears for four years.

Requirement: Compute for the book value per preference share and per ordinary share.

Solution:

Total shareholder’s equity 5,980,000

Preference shareholder’s equity:
Liquidation value (6k x P250) 1,500,000
Dividends in arrears (1.2M x 8% x 4yrs.) 384,000 (1,884,000)
Ordinary shareholder’s equity 4,096,000
Divided by: No. of ordinary shares outstanding *36,250
Book value per share (Ordinary shares) 112.9931034

*The number of shares outstanding is computed as follows:

Number of shares issued (3.6M ÷ P100 par) 36,000

Number of shares subscribed (400k ÷ P100 par) 4,000
Total 40,000
Number of treasury shares (300k ÷ P80 cost per share) (3,750)
Number of shares outstanding 36,250

Book value per share (Preference shares) = 1,884,000 / 6,000

Book value per share (Preference shares) = 314

 BOOK VALUE PER SHARE

2. The preference shares are noncumulative. Dividends are in arrears for four years.

Requirement: Compute for the book value per preference share and per ordinary share.

Solution:

Total shareholder’s equity 5,980,000

Preference shareholder’s equity:

Liquidation value (6k x P250) 1,500,000

Dividends in arrears (1.2M x 8%) 96,000 (1,596,000)

Ordinary shareholder’s equity 4,384,000

Divided by: No. of ordinary shares outstanding *36,250

Book value per share (Ordinary shares) 120.937931

*The number of shares outstanding is computed as follows:

Number of shares issued (3.6M ÷ P100 par) 36,000

Number of shares subscribed (400k ÷ P100 par) 4,000

Total 40,000

Number of treasury shares (300k ÷ P80 cost per share) (3,750)

Number of shares outstanding 36,250

Book value per share (Preference shares) = 1,596,000 / 6,000

Book value per share (Preference shares) = 266

 BOOK VALUE PER SHARE

3. The preference shares are cumulative. All dividends are paid up to end of the current year.

Requirement: Compute for the book value per preference share and per ordinary share.

Solution:

Total shareholder’s equity 5,980,000

Preference shareholder’s equity:

Liquidation value (6k x P250) 1,500,000

Dividends - (1,500,000)

Ordinary shareholder’s equity 4,480,000

Divided by: No. of ordinary shares outstanding *36,250

Book value per share (Ordinary shares) 123.5862069

*The number of shares outstanding is computed as follows:

Number of shares issued (3.6M ÷ P100 par) 36,000

Number of shares subscribed (400k ÷ P100 par) 4,000

Total 40,000

Number of treasury shares (300k ÷ P80 cost per share) (3,750)

Number of shares outstanding 36,250

Book value per share (Preference shares) = 1,500,000 / 6,000

Book value per share (Preference shares) = 250

 BOOK VALUE PER SHARE

4. The stockholders' equity of Retro Company on December 31, 2008 includes the following:

12% Preferred stock, 20,000 shares, P100 par value 2,000,000

14% Preferred stock, 10,000 shares, P300 par value 3,000,000

Common stock, 50,000 shares, P100 par value 5,000,000

Retained earnings 2,240,000

Additional paid in capital 1,500,000

The 12% stock is cumulative and fully participating. The 14% stock is noncumulative and fully
participating. Dividends have not yet been paid for 3 years.

Requirement: Compute for the book value per ordinary share.

12% PS 14% PS Ordinary Totals

(C & FP) (NC & FP) shares

Total shareholders’ equity       13,740,000
Allocation:        

Aggregate par values 2,000,000 3,000,000 5,000,000 10,000,000

Dividends        

12% PS (2M x 12% x 3 yrs.) 720,000     720,000

14% PS (3M x 14%)   420,000   420,000

OS (5M x 12%)     600,000 600,000

Balance for participation       2,000,000
12% PS (2M x 1/5) 400,000     400,000
14% PS (2M x .3/10)   600,000   600,000

OS (2M x 1/2)     1,000,000 1,000,000

Equity as allocated 3,120,000 4,020,000 6,600,000 -

Divide by: Outstanding sh. 20,000 10,000 50,000  

Book Value Per Share 156 402 132
 BOOK VALUE PER SHARE

PROBLEM 4: CLASSROOM ACTIVITY

1. CORPULENT FAT Co.'s shareholders' equity at year-end consisted of the following:

Share capital, P40 par, 100,000 shares issued 4,000,000

Subscribed share capital 2,000,000

Share premium 1,480,000

Subscription receivable (800,000)

Retained earnings 2,640,000

Revaluation surplus 560,000

Cumulative translation losses on foreign operation (400,000)

Treasury shares, at cost, 10,000 shares (280,000)

Total shareholders' equity P 9,200,000

Requirement: How much is the book value per share?

Solution:

The number of shares outstanding is computed as follows:

Number of shares issued 100,000

Number of shares subscribed (2M ÷ P40 par) 50,000

Total 150,000

Number of treasury shares (10,000)

Number of shares outstanding 140,000

Book value per share = 10,000,000 / 140,000

Book value per share = 71.42857143

 BOOK VALUE PER SHARE

Use the following information for the next two questions:

2. The shareholders' equity of STATUTE LAW Co. as of year-end consisted of the following:

Preference share, 10% cumulative, P400 par, 20,000 shares 8,000,000

Ordinary share, P40 par, 100,000 shares issued 4,000,000

Retained earnings 3,280,000

Total shareholders' equity 15,280,000

Dividends are in arrears for three years.

Requirements:

a. How much is the book value per preference share?

b. How much is the book value per ordinary share?

Solution:

Total shareholder’s equity 15,280,000

Preference shareholder’s equity:

Aggregate par value 8,000,000

Dividends in arrears (8M x 10% x 3yrs.) 2,400,000 (10,400,000)

Ordinary shareholder’s equity 4,880,000

Divided by: No. of ordinary shares outstanding 100,000

Book value per share (Ordinary shares) 48.8

Book value per share (Preference shares) = 10,400,000 / 20,000

Book value per share (Preference shares) = 520