Book Value per Share

NAME: Date:

QUIZ:

1. Which of the following is incorrect when computing for preference shareholders’ equity?
a. The liquidation value, or in the absence thereof, the aggregate par value, is allocated to the
preference shareholders’ equity.
b. If the preference shares are cumulative, all dividends in arrears are allocated.
c. If the preference shares are noncumulative, only the current year dividend is allocated.
d. If there are no dividends in arrears, only one-year dividends are allocated to the preference
shareholders’ equity.

2. The numerator used in the computation of book value per share is

a. market value of net assets
b. carrying amount of net assets
c. total outstanding shares
d. authorized capitalization

3. The denominator used in the computation of book value per share is

a. number of outstanding shares
b. weighted average outstanding shares
c. number of issued shares
d. number of authorized shares

4. Which of the following is excluded when computing for the number of shares outstanding?
a. treasurer shares c. issued shares
b. subscribed but unpaid shares d. treasury shares

5. Which of the following is incorrect when computing for book value per share when there are
fully participating preference shares?
a. The ordinary shareholders’ equity is allocated one year dividend in arrears.
b. The amount subject to participation is allocated to participating preference shares and
ordinary shares based on aggregate par values of outstanding shares.
c. Only participating preference shares and ordinary shares share on the amount subject to
allocation.
d. The ordinary shareholders’ equity is allocated the aggregate par value before participation
by participating preference shares.

6. Boe Corporation's stockholders' equity at December 31, 2008 was as follows:

6% noncumulative preference shares, ₱100 par (liquidation value ₱105 per share) 1,000,000
Ordinary shares, ₱100 par 3,000,000
Retained earnings 950,000
Preferred dividends have been paid up to December 31, 2008.

At December 31, 2008, Boe's book value per common share was
a.131.70 b.130.00 c.129.70 d.128.00

7. Nova Corporation has an authorized capital of 10,000 shares of ₱100 par, 8% cumulative
preferred stock and 20,000 shares of ₱100 par common stock. The equity account balances at
December 31, 2008 are as follows:

Cumulative preferred stock 500,000

Common stock 1,100,000
Additional paid in capital 200,000
Retained earnings 260,000
Treasury stock, common-1,000 shares at cost (150,000)
Total shareholders' equity 1,910,000

Dividends on preferred stock are in arrears for 2007 and 2008. The book value of a share of common
stock at December 31, 2008 should be
a. 125 b. 191 c. 133 d. 141

8. Georgia, Inc. has an authorized capital of 1,000, ₱100 par, 8% cumulative preference shares and
100,000, ₱10 par, ordinary shares. The equity account balances at December 31, 20x1, are as
follows:

Cumulative preference share 50,000

Ordinary share 90,000
Share premium 9,000
Retained earnings 13,000
Treasury shares, ordinary – 100 shares at cost (2,000)
Total 160,000

Dividends on preferred stock are in arrears for the year 20x1. The book value per ordinary share at
December 31, 20x1, should be
a. 11.78 b. 11.91 c. 12.22 d. 12.36

9. Hoyt Corp.’s current balance sheet reports the following stockholders’ equity:

5% cumulative preference shares, ₱100 par value 250,000

Ordinary share, par value ₱3.50 per share 350,000
Share premium on ordinary shares 125,000
Retained earnings 300,000

Dividends in arrears on the preference share amount to ₱25,000. If Hoyt were to be liquidated, the
preference stockholders would receive par value plus a premium of ₱50,000. The book value per
ordinary share is
a. 7.75 b. 7.50 c. 7.25 d. 7.00
10. Maga Corp.'s shareholders' equity at December 31, 20x1, comprised the following:
6% cumulative preference share, ₱100 par; liquidating value ₱110
per share; authorized, issued, and outstanding 50,000 shares 5,000,000
Ordinary share, ₱5 par; 1,000,000 shares authorized; issued
and outstanding 400,000 shares 2,000,000
Retained earnings 1,000,000

Dividends on preferred stock have been paid through 20x0 but have not been declared for 20x1. At
December 31, 20x1, Maga's book value per ordinary share was
a. 5.50 b. 6.25 c. 6.75 d. 7.50