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Chapter 14
Book Value per Share
PROBLEM 1: TRUE OR FALSE
1. TRUE
2. TRUE
3. TRUE – For example, if the market value per share is lower
than the book value per share, this may indicate that the stock
price is undervalued.
4. TRUE
5. FALSE
PROBLEM 2: MULTIPLE CHOICE – THEORY
1. C
2. C
3. A
4. C To test-check the accuracy of the answer, we’ll make the
following assumptions:
Share capital (100 sh. @ ₱1 par)
100
Share premium
20
Retained earnings
200
Total equity
320
Divide by: Outs. Shares
100
BVPS
3.20
➢ The entity acquires 50 shares at ₱1.50 each (i.e., ‘price greater
than both the par value and the original issue price’).
Share capital (100 sh. @ 1 par)
Share premium
Retained earnings
Before
After
100
100
20
20
200
200
Treasury sh. (50 sh. @ 1.50)
Total equity
(75)
320
245
Decrease
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Divide by: Outs. Shares
100
50
BVPS
3.20
4.90
Increase
5. B
PROBLEM 3: MULTIPLE CHOICE – COMPUTATIONAL
1. A
9.2M + 800K subscription receivable = 10M;
100,000 issued sh. + 50,000 subscribed (2M / 40par) – 10,000
treasury sh. = 140,000 outstanding;
10M / 140,000 = 71.43
2. B
(PS): 8M par + (8M x 10% x 3 years) = 10.4M / 20,000 pref. sh. = 520
(OS): (15.280M – 10.4 pref. equity) / 100,000 ord. sh. = 48.80
3. A
Solution:
Total shareholders' equity
Preference shareholders' equity:
Liquidation value (20,000 shares x ₱105)
Dividends in arrears
Ordinary shareholders' equity
Ordinary shareholders' equity
Divide by: No. of ordinary shares outstanding
Book value per share (Ordinary shares)
9,900,000
2,100,000
-
(2,100,000)
7,800,000
7,800,000
60,000
130.00
4. A
Solution:
Total shareholders' equity, excldg.
subscription receivable (5.9M + 80K)
Preference shareholders' equity:
Liquidation value (6,000 shares x 250)
Dividends in arrears (1.2M x 8% x 4 yrs.)
Ordinary shareholders' equity
5,980,000
1,500,000
384,000
(1,884,000)
4,096,000
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Preference shareholders' equity
Divide by: No. of preference shares
outstanding
Book value per share (Preference shares)
1,884,000
Ordinary shareholders' equity
Divide by: No. of ordinary shares
outstanding a
Book value per share (Ordinary shares)
4,096,000
Ordinary shares issued (3.6M / 100par)
Subscribed shares (400K / 100par)
Treasury shares (300K / 80 cost per share)
Outstanding ordinary shares
a
6,000
314.00
36,250
112.99
36,000
4,000
(3,750)
36,250
5. B
Solution:
Total shareholders' equity, excldg.
subscription receivable (5.9M + 80K)
Preference shareholders' equity:
Liquidation value (6,000 shares x 250)
Dividends in arrears (1.2M x 8% x 1 yr.)
Ordinary shareholders' equity
5,980,000
1,500,000
96,000
Preference shareholders' equity
Divide by: No. of preference shares
outstanding
Book value per share (Preference shares)
1,596,000
Ordinary shareholders' equity
Divide by: No. of ordinary shares
outstanding a
Book value per share (Ordinary shares)
4,384,000
Ordinary shares issued (3.6M / 100par)
36,000
a
6,000
266.00
36,250
120.94
(1,596,000)
4,384,000
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Subscribed shares (400K / 100par)
Treasury shares (300K / 80 cost per
share)
Outstanding ordinary shares
4,000
(3,750)
36,250
6. D
Solution:
Total shareholders' equity, excldg.
subscription receivable (5.9M + 80K)
Preference shareholders' equity:
Liquidation value (6,000 shares x ₱250)
Dividends in arrears
Ordinary shareholders' equity
5,980,000
1,500,000
-
Preference shareholders' equity
Divide by: No. of preference shares
outstanding
Book value per share (Preference shares)
1,500,000
Ordinary shareholders' equity
Divide by: No. of ordinary shares
outstanding a
Book value per share (Ordinary shares)
4,480,000
Ordinary shares issued (3.6M / 100par)
Subscribed shares (400K / 100par)
Treasury shares (300K / 80 cost per share)
Outstanding ordinary shares
a
7. C
6,000
250.00
36,250
123.59
36,000
4,000
(3,750)
36,250
(1,500,000)
4,480,000
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Solution:
Total shareholders' equity
12% PS (aggregate par value)
12% PS (dividends) - (2M x 12% x 3 yrs.)
14% PS (aggregate par value)
14% PS (dividends) - (3M x 14% x 1 yr.)
Common stock (aggregate par value)
Common stock (dividends) - (5M x 12% x 1 yr.)
Amount for allocation
12% PS (2M x 2/10)
14% PS (2M x 3/10)
Common stock (2M x 5/10)
As allocated
Ordinary shareholders' equity:
Aggregate par value
Dividends
Participation
Total
Divide by: Outstanding shares
Book value per ordinary share
13,740,000
(2,000,000)
(720,000)
(3,000,000)
(420,000)
(5,000,000)
(600,000)
2,000,000
(400,000)
(600,000)
(1,000,000)
-
5,000,000
600,000
1,000,000
6,600,000
50,000
132.00
8. B
Solution:
Total shareholders' equity
10% PS (aggregate par value)
10% PS (dividends) - (8M x 10% x 3 yrs.)
8% PS (aggregate par value)
8% PS (dividends) - (800K x 8% x 1 yr.)
Ordinary shares (aggregate par value)
Ordinary shares (dividends) - (4M x 8% x 1 yr.)
Amount for allocation
10% PS (496K x 8/12.8)
8% PS (496K x .8/12.8)
Ordinary shares (496K x 4/12.8)
As allocated
16,080,000
(8,000,000)
(2,400,000)
(800,000)
(64,000)
(4,000,000)
(320,000)
496,000
(310,000)
(31,000)
(155,000)
-
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10% preference shareholders' equity:
Aggregate par value
Dividends
Participation
Total
Divide by: Outstanding shares
Book value per ordinary share
8,000,000
2,400,000
310,000
10,710,000
20,000
535.50
9. A
8% preference shareholders' equity:
Aggregate par value
Dividends
Participation
Total
Divide by: Outstanding shares
Book value per ordinary share
800,000
64,000
31,000
895,000
2,500
358.00
10. C
Ordinary shareholders' equity:
Aggregate par value
Dividends
Participation
Total
Divide by: Outstanding shares
Book value per ordinary share
4,000,000
320,000
155,000
4,475,000
100,000
44.75
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PROBLEM 4: FOR CLASSROOM DISCUSSION
1. Solution:
Total shareholders' equity, excldg.
subscription receivable (4.68M + 60K)
Preference shareholders' equity:
Liquidation value (10,000 shares x ₱120)
Dividends in arrears (1M x 10% x 3 yrs.)
Ordinary shareholders' equity
4,740,000
1,200,000
300,000
(1,500,000)
3,240,000
Preference shareholders' equity
Divide by: No. of preference shares outstanding
Book value per share (Preference shares)
1,500,000
10,000
150.00
Ordinary shareholders' equity
Divide by: No. of ordinary shares outstanding a
Book value per share (Ordinary shares)
3,240,000
29,000
111.72
Ordinary shares issued (3M / 100par)
Subscribed shares (100K / 100par)
Treasury shares
Outstanding ordinary shares
30,000
1,000
(2,000)
29,000
a
2. Solution:
Total shareholders' equity, excldg.
subscription receivable (4.68M + 60K)
Preference shareholders' equity:
Liquidation value (10,000 shares x ₱120)
Dividends in arrears (1M x 10% x 1 yr.)
Ordinary shareholders' equity
Preference shareholders' equity
Divide by: No. of preference shares outstanding
Book value per share (Preference shares)
4,740,000
1,200,000
100,000
(1,300,000)
3,440,000
1,300,000
10,000
130.00
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Ordinary shareholders' equity
Divide by: No. of ordinary shares outstanding a
Book value per share (Ordinary shares)
3,440,000
29,000
118.62
3. Solution:
Total shareholders' equity, excldg.
subscription receivable (4.68M + 60K)
Preference shareholders' equity:
Liquidation value (10,000 shares x ₱120)
Dividends in arrears
Ordinary shareholders' equity
4,740,000
1,200,000
-
(1,200,000)
3,540,000
Preference shareholders' equity
Divide by: No. of preference shares outstanding
Book value per share (Preference shares)
1,200,000
10,000
120.00
Ordinary shareholders' equity
Divide by: No. of ordinary shares outstanding a
Book value per share (Ordinary shares)
3,540,000
29,000
122.07
4. Solution:
Total shareholders' equity
8% PS (aggregate par value)
8% PS (dividends) - (3M x 8% x 3 yrs.)
10% PS (aggregate par value)
10% PS (dividends) - (4.5M x 10% x 1 yr.)
Ordinary shares (aggregate par value)
Ordinary shares (dividends) - (7.5M x 8% x 1 yr.)
Amount for allocation
8% PS (3.83M x 3/15)
10% PS (3.83M x 4.5/15)
Ordinary shares (3.83M x 7.5/15)
As allocated
20,600,000
(3,000,000)
(720,000)
(4,500,000)
(450,000)
(7,500,000)
(600,000)
3,830,000
(766,000)
(1,149,000)
(1,915,000)
-
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Ordinary shareholders' equity:
Aggregate par value
Dividends
Participation
Total
Divide by: Outstanding shares (7.5M ÷ ₱150 par)
Book value per ordinary share
7,500,000
600,000
1,915,000
10,015,000
50,000
200.30