CHAPTER 18: BOOK VALUE PER SHARE

Problem 18-1
Required: Compute the book value per share
Book Value Per share = Shareholder’s Equity/ Number of shares outstanding
Book value per share = P 8,800,000/50,000 shares
Book value per share = P 176

Problem 18-2
a. Cumulative and Full Participating

Excess over par Preference Ordinary

Outstanding balances 3,000,000 1,000,000 4,000,000
Preference dividend:
2020 (12% x 1,000,000) (120,000) 120,000
2021 (120,000) 120,000
Ordinary dividend for 2021 (480,000) 480,000
using preference rate of 12%
(12% x 4,000,000)
Balance for participation 2,280,000
Preference (1/5 x 2,280,000) 456,000
Ordinary (4/5 x 2,280,000) ____________ 1,824,000
Total 1,696,000 6,304,000
Divide by shares outstanding 10,000 40,000
Book value per share 169.6 157.6

b. Cumulative and Fully participating after ordinary shares receive 15%

Excess over par Preference Ordinary

Outstanding balances 3,000,000 1,000,000 4,000,000
Preference dividend:
2020 (12% x 1,000,000) (120,000) 120,000
2021 (120,000) 120,000
Ordinary dividend for 2021 (600,000) 600,000
(15% x 4,000,000)
Balance for participation 2,160,000
Preference (1/5 x 2,160,000) 432,000
Ordinary (4/5 x 2,160,000) ____________ 1,728 ,000
Total 1,672,000 6,328,000
Divide by shares outstanding 10,000 40,000
Book value per share 167.2 158.2

c. Cumulative and participating up to 16%

Excess over par Preference Ordinary

Outstanding balances 3,000,000 1,000,000 4,000,000
Preference dividend:
2020 (12% x 1,000,000) (120,000) 120,000
2021 (120,000) 120,000
Ordinary dividend for 2021 (480,000) 480,000
using preference rate of 12%
(12% x 4,000,000)
Balance for participation 2,280,000
Preference (4% x 1,000,000) 40,000
Ordinary (balance to ____________ 2,240,000
common)
Total 1,280,000 6,720,000
Divide by shares outstanding 10,000 40,000
Book value per share 128 168
 d. Cumulative and nonparticipating

Excess over par Preference Ordinary

Outstanding balances 3,000,000 1,000,000 4,000,000
Preference dividend:
2020 (12% x 1,000,000) (120,000) 120,000
2021 (120,000) 120,000
Balance to common 2,760,000 _______ 2,760,000
Total shareholder’s equity 1,240,000 6,760,000
Divide by shares outstanding 10,000 40,000
Book value per share 124 169

e. Noncumulative and nonparticipating

Excess over par Preference Ordinary

Outstanding balances 3,000,000 1,000,000 4,000,000
Preference dividend (12% x (120,000) 120,000
1,000,000)
Balance to common 2,880,000 ________ 2,880,000
Total shareholder’s equity 1,120,000 6,880,000
Divide by shares outstanding 10,000 40,000
Book value per share 112 172

Problem 18-3
a. Preference as to assets

Excess over par Preference Ordinary

Outstanding balances (900,000) 2,000,000 4,000,000
Preference dividend (12% x (720,000) 720,000
2,000,000 x 3)
Balance to common (1,620,000) ________ (1,620,000)
Total shareholder’s equity 2,720,000 2,380,000
Divide by shares outstanding 40,000 40,000
Book value per share 68 59.5

b. Preference as to dividends

Excess over par Preference Ordinary

Outstanding balances (900,000) 2,000,000 4,000,000
Share in deficit:
Preference – 2/6 300,000 (300,000)
Ordinary – 4/6 600,000 _______ (600,000)
Total shareholder’s equity 1,700,000 3,400,000
Divide by shares outstanding 40,000 40,000
Book value per share 42.5 85

Problem 18-4
Required: Calculate the book value per preference share and per ordinary share assuming preference
share has a call price of 55, a liquidation price of 53 and dividends are unpaid since December 31, 2016
 Excess over par Preference Ordinary
Outstanding balances 4,000,000 2,000,000 5,000,000
Liquidation premium (40,000 (120,000) 120,000
shares x P3)
Preference dividend (240,000) 240,000
(12% x 2,000,000)
Balance to common 3,640,000 ________ 3,640,000
Total shareholder’s equity 2,360,000 8,640,000
Divide by shares outstanding 40,000 100,000
Book value per share 59 86.4

Problem 18-5

Required: Compute the book value per share 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.

Excess over par Preference 6% Preference Ordinary

8%
Outstanding balances 530,000 3,000,000 2,000,000 5,000,000
Preference dividend (6% x (540,000) 540,000
3,000,000 x 3)
Preference dividend (160,000) 160,000
(8% x 2,000,000)
Ordinary (6% x 5,000,000) (300,000) 300,000
Balance to common (470,000) ________ _________ (470,000)
Total shareholder’s equity 3,540,000 2,160,000 4,830,000
Divide by shares 30,000 20,000 50,000
outstanding
Book value per share 118 108 96.6

Problem 18 – 6
Required: Compute the book value per ordinary share and per preference share on December 31,
2021

Preference Ordinary
Amount Shares Amount Shares
Issued 1,500,000 15,000 3,000,000 30,000
Subscribed 200,000 2,000 500,000 5,000
Total 1,700,000 17,000 3,500,000 35,000
Less: Treasury 100,000 1,000 100,000 1,000
share at par
Outstanding 1,600,000 16,000 3,400,000 34,000

Preference share capital (1,000 x 100) P 100,000

Share premium 10,000
Treasury shares P 110,000
To retire treasury shares

Ordinary share capital (1,000 x 100) 100,000

Treasury Shares 70,000
Share Premium 30,000
To retire treasury shares

Computation of excess over par

Share premium (300,000 -10,000 + 30,000) 320,000

 Retained earnings unappropriated 968,000
Retained earnings appropriated 680,000
Total P 1,968,000

Excess over par Preference Ordinary

Outstanding balances 1,968,000 1,600,000 3,400,000
Preference dividend: (12% x 1,600,000 x (960,000) 960,0000
5)
Ordinary dividend for 2021 using (408,000) 408,000
preference rate of 12% (12% x
3,400,000)
Balance for participation 600,000
Preference (16/50x 600,000) 192,000
Ordinary (34/50 x 600,000) ____________ 408,000
Total 2,752,000 4,216,000
Divide by shares outstanding 16,000 34,000
Book value per share 172 124

Problem 18-7
Required: Compute book value per preference share and per ordinary share on December 31, 2021

Preference Ordinary
Amount Shares Amount Shares
Issued 1,000,000 10,000 2,200,000 22,000
Less: Treasury ______ _______ 200,000 2,000
share at par
Outstanding 1,000,000 10,000 2,000,000 20,000

Ordinary share capital (2,000 x 100) 200,000

Share Premium 100,000
Treasury Shares 300,000
To retire treasury shares

Computation of excess over par

Share premium (400,000 – 100,000) 300,000

Retained earnings 520,000
Total P 820,000

Excess over par Preference Ordinary

Outstanding balances 820,000 1,000,000 2,000,000
Preference dividend (8% x 1,000,000 x (160,000) 160,000
2)
Balance to common 660,000 _______ 660,000
Total shareholder’s equity 1,160,0000 2,660,000
Divide by shares outstanding 10,000 20,000
Book value per share 116 133

Problem 18-8
Required: Compute book value per preference share and per ordinary share

Preference Ordinary
Amount Shares Amount Shares
Issued 1,500,000 15,000 2,000,000 20,000
Subscribed __________ ________ 1,000,000 10,000
Total 1,500,000 15,000 3,000,000 30,000
Less: Treasury _______ _______ 500,000 5,000
 share at par
Outstanding 1,500,000 15,000 2,500,000 25,000

Ordinary share capital (5,000 x 100) 500,000

Treasury Shares 400,000
Share Premium 100,000
To retire treasury shares

Computation of excess over par

Share premium (300,000 + 100,000) 400,000

Retained earnings 2,040,000
Total P 2,440,000

Excess over par Preference Ordinary

Outstanding balances 2,440,000 1,500,000 2,500,000
Preference dividend (12% x 1,500,000 x (540,000) 540,000
3)
Ordinary dividend for 2021 using (300,000) 300,000
preference rate of 12% (12% x
2,500,000)
Balance for participation 1,600,000
Preference (15/40 x 1,600,000) 600,000
Ordinary (25/40 x 1,600,000) ____________ 1,000,000
Total 2,640,000 3,800,000
Divide by shares outstanding 15,000 25,000
Book value per share 176 152

Problem 18-9
Required: Compute book value per preference share and per ordinary share

Preference Ordinary
Amount Shares Amount Shares
Issued 4,000,000 40,000 10,000,000 200,000
Subscribed __________ ________ 3,500,000 70,000
Total 4,000,000 40,000 13,500,000 270,000
Less: Treasury _______ _______ 1,000,000 20,000
share at par
Outstanding 4,000,000 40,000 12,500,000 250,000

Ordinary share capital (20,000 x 50) 1,000,000

Share Premium 200,000
Treasury Shares 1,200,000
To retire treasury shares
Computation of excess over par

Share premium (3,000,000 -200,000) 2,800,000

Retained earnings 5,000,000
Total P 7,800,000

Excess over par Preference Ordinary

Outstanding balances 7,800,000 4,000,000 12,500,000
Liquidation premium (40,000 (400,000) 400,000
shares x P 10)
Preference dividend: (10% x (1,200,000) 1,200,000
 4,000,000 x 3)
Balance to common 6,200,000 _______ 6,200,000
Total shareholder’s equity 5,600,000 18,700,000
Divide by shares outstanding 40,000 250,000
Book value per share 140 74.8

Problem 18-10
Required:
1. How much dividend should the preference shareholders received in 2021?
2. How much should the ordinary shareholders receive in 2021?

Annual Dividends Paid To be Preference Ordinary

– preference carried
2020 240,000 200,000 40,000 200,000 -
2021 240,000 600,000 280,000 320,000

Problem 18-11
Required: Determine the total amount of dividend that must be declared to meet the dividend goal
of the entity

Ordinary (P 5 x 200,000 shares P 1,000,000

Preference (15% x 2,500,000) 375,000
Maximum Dividend P 1,375,000

Problem 18 -12
Required: Compute The maximum amount of dividend to be declared in order to meet the dividend
objective of the board of directors

Ordinary dividend for 2021 (P10 x 200,000 P 2,000,000

shares)
Percentage of Ordinary dividend 20%
(2,000,000/10,000,000)

Ordinary Dividend P 2,000,000

Preference dividend:
2020 (12% x 8,000,000) 960,000
2021 (20% x 8,000,000) 1,600,000
Maximum Dividend P 4,560,000