Question

In: Accounting

The equity section of the balance sheet of the Guts Company on December 31, 2010 shows...

The equity section of the balance sheet of the Guts Company on December 31, 2010 shows following items:

6% Cumulative preference share capital, P100 par value (liquidation value, P115 per share); Authorized, 6,000 shares; issued, 4,000 shares; in treasury, 600 shares

P400,000

Ordinary share capital, P100 par value, authorized, 20,000 shares; issued and outstanding, 8,000 shares

800,000

Share premium – preference shares

150,000

Share premium – ordinary shares

165,000

Retained earnings

458,600

Reserve for bond retirement

320,000

Treasury shares - preference, at cost

84,000

REQUIRED

1) The book value per share of ordinary stock is
        a.223.65 b. 224.78   c.223.70   d.121
2.) Assuming the preference share is participating, the book value per share of ordinary stock is
        a.204.35   b.187.56    c.223.70    d. 187.56

Solutions

Expert Solution

1.

Equity Balance        800,000.00
Balances as per Working Note No.1    1,069,600.00
Preference Share Dividend -       20,400.00
Preference Share liquidation premium   -       51,000.00
Total    1,798,200.00
Divide by Outstanding Shares            8,000.00
Book value per share                224.78

Working Note-

Total Equity    2,209,600.00
Outstanding par value of PS -     340,000.00
Outstanding par value of OS -     800,000.00
   1,069,600.00

2)

Equity Balance        800,000.00
Ordinary Share Dividend          48,000.00
Ordinary share Participation (800/1,140 x 950,200)        666,807.00
Total    1,514,807.00
Divide            8,000.00
Book Value Per Share                189.35

Working Note-2

Excess over Par
Balances    1,069,600.00
Preference Share Dividend -       20,400.00
  Preference Share liquidation premium -       51,000.00
Ordinary Share Dividend -       48,000.00
       950,200.00

ekkarill92 answered 2 years ago
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