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Mavis corporation has 75,000 shares of $1 par value stock outstandiing. The largest single stockholders is...

Mavis corporation has 75,000 shares of $1 par value stock outstandiing. The largest single stockholders is Lennox Bing, who owns 6,000 shares. On December 31, the total assets of the company amount to $4,360,000 and total liabilities to $2,230,000. On that day, the board of directors declared a stock dividend of one new share for each five shares outstanding. Compute the following: Book value per share before the stock dividend:( ) Book value per share after the stock dividend ( ) Total book value of Lennox Bing's stockholdings before the dividend ( ) Total book value of Lennox Bing's stockholdings after the dividend ( ) Prepare the stockholder's equity section of the Mavis Corporation balance sheet assuming that retained earning is $1,650,000 and there are no perferred stocks.

Solutions

Expert Solution

1. Book value per share before the stock dividend

Book value per Share = Total Shareholder's Equity/ Total outstanding shares

Total shareholder's equity=4,360,000-2,230,000=2,130,000

Book Value per share before stock dividend=2,130,000/75000=28.40

2. Book value per share after the stock dividend

Shares issued in stock dividend=75,000* 1/5= 15,000

Total Outstanding shares=75000+15000=90,000

book value per share after the stock dividend=2,130,000/90,000=23.67

3 Total Book Value of Lennox Bing's stockholdings before the dividend

Number of shares owned by lennox=6000

Total book value per share=6000*28.40=170400

4.Total Book Value of Lennox Bing's stockholdings after the dividend

Shares issued in stock dividend=6,000* 1/5= 1200

Total shares owned by lennox after receiving stock dividend=6000+ 1200= 7200

Total book value per share after the stock dividend=23.67* 7200=170,424

5 Partial presentation in balance sheet

Shareholder' s Equity

Share Capital 2,130,000

Retained Earnings 1,650,000

ekkarill92 answered 1 year ago
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