PROBLEMS PROBLEM 1: TRUE OR FALSE 1. Book value is the value of an entity according to its statement of financial position. 2. Book value per [Link] equity divided by the number of outstanding shares. 3. When compared to the market value per share, the book value per share can provide information on how an entity's stock is valued. 4. An entity's equity structure may affect the computation of its book value per share. 5. When computing for book value per share, no dividends are allocated to the preference shares if the preference shares are noncumulative. Scanned with CamScannerPROBLEM 2: MULTIPLE CHOICE - THEORY 1. Which of the following statements is incorrect regarding book value per share? a. Book value per share is equity divided by the number of shareé outstanding. 'b. Ifthe market value per share is lower than the book value per share, the stock price may be undervalued. The computation and disclosure of book value per share is, addressed by a separate PFRS, d._ Book value and fair value are not the same, 2. Whichoof the following basic accounting concepts supports the ‘computation of book value per share when an entity has more than one clas of shares? 1. Prudence or Conservatism _¢. Residual equity ». Articulation 4. Stable monetary 3. For purposes of book value per share computation, if preference shares are participating, ordinary shares are allocated one year dividends using the a. lowest preference dividend rate b, highest preference dividend rate, average preference dividend rate d. not given any dividend 4, PROFUSE EXTRAVAGANT BOUNTIFUL Corp. acquired some of its own common shares at a price greater than both their par value and original issue price but less than their book value. PROFUSE uses the cost method of accounting for treasury stock. What is the impact ofthis acquisition on total stockholders’ equity and the book value per common share? (ltem #1) Tota stockholders equity; (Item £2) Book value pe share a. Increase, Increase Decrease, Increase: b. Increase, Decrease d, Decrease, Decrease ‘atcra) a Scanned with CamScannerflue per share of non-partcipating, cumulative sshares equals tion value plus dividends in arrears divided by ed average number of preference shares 8: tion value plus dividends in arrears divided by of preference shares outstanding, fuidation value plus one-year dividend in arrears | by the weighted average number of preference outstanding. quidation value plus one-year dividend in arrears by the number of preference shares outstanding. ILTIPLE CHOICE - COMPUTATIONAL ENT FAT Co’s shareholders’ equity at year-end of the following: J P40 par, 100,00 shares issued 44000,000 it 2,000,000 1,480,000 (800,000) 2,640,000 560,000 Josses on foreign operation (400,000) 10,000 shares —(280,000)_ 200,000 Yalue per share? bi7644 8194, B42 ity of STATUTE LAW Co. as of year-end iB lative, P400 par, 20000 sh, 8,000,000 0000 shares issued Scanned with CamScannerDividends are in arrears for three years. How much are the book values per preference share (PS) and ordinary share (OS)? a. (PS) 524.00; (0S) 42.99 &.(PS) 512.00; (OS) 46.00 . (PS) 520.00; (05) 48.80 . (PS) 541.00; (05) 42.99 3, Manouche Co.'s shareholders’ equity on December 31, 20x1 was as follows: {6% noncumulative preference shares, P100 par (liquidation value P105 per share) 2,000,000 Ordinary shares, P100 par 6 000,000 Retained earnings 1,900,000 Preferred dividends have been paid up to December 31, 20x1. ‘At December 31, 20x1, Manouche Co,'s book value per ordinary share was 130.00. 132.40. 134.98, 4.260.00, ‘aicray Use the following information forthe next three questions: Fraulein Cos equity structure on Dec. 31, 20x1 is as follows: 8% Preference sh, 200 par (liquidation enue F250 per share) 1,200,000 Ordinary shares, P100 par 3,600,000 Subscribed share capital - ordinary shares 400,000 Subscription receivable (60,000) Retained earnings | 1,080,000 ‘Treasury shares (P80 cost per share) (300,000) Total shareholders’ equity 4, The preference shares are cumulative and dividends arrears for four years. How much are the book val preference share (PS) and ordinary share (OS)? a. (PS)314.00; (OS) 112.99. (PS) 312.80; (05) 116.00 b. (PS)316.28; (08) 102.89 d. (PS) 341.00; (0S) 121.99 Scanned with CamScanner‘The preference shares are noncumulative, Dividends are in arrears for four years. How much are the book values per reference share (PS) and ordinary share (05)? ‘a. (PS) 216.00; (OS) 121.99 . (PS) 212.80; (OS) 121.99 b. (PS) 266.00; (OS) 120.94 4. (PS) 264,00; (0S) 120.94 5 4 The preference shares are cumulative. All dividends are paid up to end of the current year. How much are the book values per preference share (PS) and ordinary share (OS)? a. (PS) 260.00; (OS) 123.99 «. (PS) 252.80; (0S) 121.49 b. (PS) 266.00; (OS) 120.94 . (PS) 250.00; (05) 123.59 7, The stockholders’ equity of Retro Company on December 31, 2008 includes the following: 12% Preferred stock, 20,000 shares, #100 par value 2,000,000, 14% Preferred stock, 10,000 shares, P300 par value 3,000,000 Common stock (Ordinarysh, 50,000 shares, F100 par value 5,000,000 Retained earnings 2,240,000 Additional paid in capital grace prenm) 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. How much is the book value per ordinary share? a. 128 b. 130 6.132 dus (Adapted) Use the following information for the next three questions: e shareholders’ equity of QUALM MISGIVING Co. as of year- consisted of the following: )% Preference share, cumulative, fully participating, P400 par, 20,000 shares 8,000,000 Preference share, noncumulative, fully participating, 20 par, 2,500 shares 800,000 ary share, P40 par, 100,000 shares issued and 4,000,000 ine Scanned with CamScannerRetained earnings Total shareholders’ equity Dividends are in arrears for three years. 8. How much is the book value per 10% preference share? a. 525.22 53550 © 52252. 432.56 9. How much i the book value per 8% preference share? a. 358 ».336 422 4.432 10. How much is the book value per ordinary share? a. 52.6 b. 48.23 44.75 d. 42.64 PROBLEM 4: FOR CLASSROOM DISCUSSION Use te fllowing information forthe next three questions: Caroline Co’s equity structure at December 31, 20x1 is shown below: 10% Preference sh, P100 par (liquidation value P120pershare) 1,000,000 Ordinary shares, #100 par 3,000,000 Subscribed share capital - ordinary shares 100,000 Subscription receivable (60,000) Retained earnings 900,000 Treasury shares (at cost 2000 ordinary shares) (260,000) Total shareholders’ equity 4,680,000 1. The preference shares are cumulative and dividends are in arrears for three years. How much are the book values per preference share and per ordinary share, respectively? 2. The preference shares are noncumulative. Dividends are is arrears for three"years. How much are the book values preference share and per ordinary share, respectively? Scanned with CamScanner3, The preference shares are cumulative. All dividends are paid up to end of the current year. How much are the book values per preference share and per ordinary share, respectively? 4. ‘The shareholders’ equity of ABC Construction, December 31, 20x1 includes the following: ‘50 Preference shares, 00 pat value 10% Preference shares, #300 par value Ordinary shares, "150 par value Share premium in excess of par Retained earnings Total sharcholders’ equity Inc. on 3,000,000 The 8% stock is cumulative and fully participating. The 10% stock is noncumulative and fully participating. Dividends have not yet been paid for 3 years. How much is the book value per ordinary share? (Adapted) Scanned with CamScanner