Book value - Lecture notes 1-3 PDF

Preview

Summary

PAGE 391 -A. Assets 2,500, Liabilities 450, Capital Stock, par P50 1,500, Retained Earnings (including net income of P250,000 for the year 550,Shareholder’s Equity:2,500,000 – 450,000 = P 2,050,Book Value per share:P 2,050,000 – 550,000 = P 1, 500,000 / 30,000 shares= P 50 per shareEarnings per shar...

Description

PAGE 391 -392

A. Assets Liabilities Capital Stock, par P50 Retained Earnings (including net income of P250,000 for the year Shareholder’s Equity: 2,500,000 – 450,000 = P 2,050,000 Book Value per share: P 2,050,000 – 550,000 = P 1, 500,000 / 30,000 shares = P 50.00 per share

Earnings per share Issued and outstanding shares

30,000

Net Income

P 250,000

Earnings per share (P 250,000/30,000 shares)

P 8.33 per share

Return on Equity P 250,000/2,050,000 = 0.12

B. Net Assets Outstanding common shares Retained Earnings of which Net Income is P 500,0000 Shareholder’s Equity: P 1,500,000 + P50,000 = P 1,550,000 Liability: P 1,750,000 – P 1,550,000 = P 200,000

Book Value per share P 1,550,000 – 1,500,000 = 50,000/50,000 = P 1.00 per share

P 1,750,000 50,000 1,500,000

2,500,000 450,000 1,500,000 550,000

Earning per share Issued and Outstanding

50,000

Net Income

550,000

Earnings per share (P 500,000/50,000)

P 10.00 per share

Return on Equity P 500,000 / 1,550,000 = 0.32

C. 10% Preferred Share, par P100 issued and outstanding 5,000 shares Ordinary Shares, par P10, issued and outstanding 75,000 shares Retained Earning of which P 500,000 is net Income for the year Particulars Par Value Dividends Remainder ( 2,650,000 – 1,250,000) Total Book Value Computation Book Value per share

P 500,000 P 750,000 P 1,400,000

Total SE 1,250,000 0 1,400,000

Preference 500,000 0

P 2,650,000

500,000 500,000/5,000 shares P100 per share

Ordinary 750,000 1,400,000 2,150,000 2,150,000/75,000 P 28.67 per share

The Preferred is non-cumulative and non - participating Particulars Par Value Dividends (500,000 x .10) Remainder ( 2,650,000 – 1,250,000) Total Book Value Computation Book Value per share

Total SE 1,250,000 50,000 1,350,000

Preference 500,000 50,000

P 2,650,000

550,000 500,000/5,000 shares P110 per share

Ordinary 750,000 1,350,000 2,100,000 2,150,000/75,000 P 28 per share

D. Same data as in C) above except that the preferred share is cumulative and participating. No dividend declaration for two years.

Particulars Par Value Dividends Preference Current Dividends (500,000 x .10) Passed Dividends (50,000 x 2 yrs) Ordinary (750,000 x .10) Balance for Participation Total Book Value Computation Book Value per share

Total SE 1,250,000

Preference 500,000

50,000 100,000 75,000 P 1,175,000 P 2,650,000

50,000 100,000 470,000 P 1,120,000 1,120,000/5,000 shares P 224.00 per share

Ordinary 750,000

75,000 745,000 P 1,530,000 1,530,000/75,000 share P 20.40 per share

PAGE 227 Exercise 9 The stockholders’ equity section of Kay Corporation at the end of 2015 showed: Preference shares (6%, P50 par, 10,000 shares authorized, 6,000 shares issued) Ordinary shares (P10 par, 80,000 shares authorized, 50,000 issued) Paid-in capital in excess of par, preference shares Paid-in capital in excess of par, ordinary shares Retained earnings, January 1 Less Treasury Shares (350 ordinary shares at cost) Total shareholders’ equity a. What is the peso amount to be reported for preference shares? Preference Share = 6,000 x P50 par = P 300,000 b. What is the average price for which ordinary shares were issued? 120,000 + 150,000 / 50,000 shares = 12.4 c. If preference shares were issued at an average price of P53 per share, what amount should appear in its paid-in capital in excess of par? P53 – P50 x 6,000 shares = 18,000 d. What is the average cost per share of treasury stock? (Round to the nearest cent.)

P

? 500,000 ? 120,000 86,000 8,400 P ?

P 8,400/ 350 share = 24.00 per share e What is the revised retained earnings if the net income for the year is P167,000 and total dividends declared is P50,000? P 167,000 + 86,000 – 50,000 = P 203,000 f. Present the shareholders equity Kay Corporation Stockholder’s Equity Paid in Capital Preference Shares (6,000 shares x P50 par) Ordinary Shares Additional Paid in Capital Paid in Capital in excess of par, Preference Shares Paid in Capital in excess of par, Ordinary Shares Total Contributed Capital Retained Earnings Less: Treasury Shares Total Shareholder’s Equity

P 300,000 500,000 18,000 120,000

P 800,000

P 138,000 938,000 203,000 8,400 P 1, 132,600

Exercise 10 a. Give the number of shares authorized (P 500,000sh) issued (2,000,000/5 = P400,000) b. Give the number of shares outstanding (400,000sh issued - 10,000 treasury) 390,000 shares c. Give the amount of Additional – Paid – In Capital (400,000 x 8 = 3,200,000 - 2,000,000) 1,200,000 share premium d. Give the earnings per share (P481,000/390,000) P1.23 earnings per share e. Amount of dividends paid during 2015 P500,000 f. Amount of treasury shares reported in the stockholders’ equity P60,000 g. Amount of free retained earnings on December 31. P4,401,000

Exercise 11 The following account balances were selected from the records of wine maker of Grace Corporation at December 31, 2015, after adjusting and closing entries snowed a net income of P84,000: Share Capital (par P15; authorized 100,000 shares, issued 35,000 shares of which 1,000 shares are held as treasury stock) P 525,000 Additional paid-in capital 180,000 Dividends declared and paid 28,000 Retained earnings, January 1, 2015 76,000 Treasury stock at cost, January 1 (1,000 shares) 20,000

A. Prepare the statement of retained earnings for the year ended December 31, 2015, and the stockholders’ equity section of the balance sheet at December 31, 2015 Grace Corporation Statement of Retained Earnings For the Year Ended December 31 Retained Earnings, January 1 76,000 Net Income 84,000 Less: Dividends (28,000) Retained Earnings, December 31 P 132,000 Grace Corporation Balance Sheet At December 31 Shareholders’ Equity Contributed Capital: Share Capital Additional Paid in Capital Total Contributed Capital Retained Earnings, December 31 Less: Treasury Shares Total Shareholders’ Equity

525,000 180,000 P 705,000 132,000 (20,000) P 817,000

B. Determine the number of shares of stock that received dividends. 35,000 – 1,000 = 34,000 shares C. Compute for EPS, PER, ROE, assuming shareholders equity January 1 was P629,000 and market value of its stock is P80 per share. EPS PER ROE

(84,000/34,000) P 2.47 (P80 market value / P 2.47 earnings per share) P32.39 price earnings per ratio (84,000/817,000) 0.10

Exercise 12 An examination of the Ledger of Fernando Corporation revealed the following balances on January 2, 2015: Ordinary Share Capital, 30,000 shares authorized at a par value of P50. (20,000 shares issued of which 1,000 are in the treasury Share Premium Appropriation Reserve for Plant Expansion Appropriation Reserve for Treasury Stock Retained Earnings Unappropriated Treasury Shares at cost, 1,000 shares

P1,000,000 600,000 50,000 36,000 750,000 36,000

The following transactions occurred during the year: Jan 10

Feb 4

Feb 10

May 15

Retained Earnings Cash Dividends Payable (P20 x 20,000sh)

400,000 400,000

Retained Earnings 100,000 Appropriation Reserve for Plant Expansion

Cash Dividends Payable Cash

400,000 400,000

Cash 28,000 Treasury Shares (700sh x P36 cost) Paid In Capital from Treasury Shares

25,200 2,800

Appropriation Reserve for Plant Expansion Retained Earnings

June 1

Nov 1

Dec 31

Dec 31

100,000

100,000 100,000

Retained Earnings 100,000 Scrip Dividends Payable (1,000,000 x .10)

Scrip Dividends Payable Interest Expense Cash

100,000

100,000 18,000 118,000

Investment in Stocks of Ayala Corporation (250,000 x .10) 25,000 Unrealize Gain on Stock

Income Summary Retained Earnings

250,000 250,000

25,000

Fernando Corporation Statement of Changes in Owner’s Equity For the year ended December 31,2015 January 2 Reacquired Appropriated for Plant Expansion Net Income Dividends December 31

Share Capital P 1,000,000

1,000,000

Share Premium P 600,000 2,800

602,800

Retained Earning P 750,000

Reserves P86,000

100,000

100,000

250,000 500,000 400,000

186,000

Treasury Shares P36,000 25,200

Total P 2,400,000 28,000

10,800

250,000 500,000 P 2,178,000

Fernando Corporation Shareholders’ Equity Contributed Capital: Paid In Capital Share Capital Additional Paid in Capital Share Premium Paid in Capital for Treasury Shares Total Contributed Capital Retained Earnings Unappropriated Appropriation for Land Expansion Less: Treasury Shares Total Shareholders’ Equity ROE: (250,000/2,178,000) 11.48% EPS: (250,000/20,000sh) P12.50

1,000,000 600,000 2,800

400,000 186,000

602,800 P 1,602,800

586,000 (10,800) P2,178,000

EXERCISE NO. 13 RUTHBEER CORPORATION STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, 2015

Net Sales Cost of Sales Gross Profit Distribution Costs Administrative Expenses Operating Income Other Expenses Net Income before Tax 30% Tax Provision Net Income to Retained Earnings Other Comprehensive Income: Gain on Forward Contracts Dividend Income Interest Revenue TOTAL COMPREHENSIVE INCOME

NOTE 1 2

P 1,447,540 878,600

3 4

122,700 243,000

P 568,940

5

365,700 203,240 15,500 187,740 56,322 131,418

50,000 12,500 2,400

64,900 P 196,318

NOTES 1-NET SALES Sales Less: Sales Return and Allowances Less: Sales Discount NET SALES

P 1,483,000 13,800 21,660 P 1,447,540 1-COST OF SALES

Merchandise Inventory, January 1 Purchases Less: Purchase Returns and Allowances Less: Purchase Discounts Freight-in Total Cost of Goods Available for Sale Merchandise Inventory, December 31 COST OF SALES

265,000 980,000 21,800 19,600 7,500 1,211,100 332,500 P 878,600

3-DISTRIBUTION COSTS Salaries-Sales Freight Out Supplies Expense Telephone Expense TOTAL DISTRIBUTION COSTS

105,000 7,200 5,000 5,500 P 122,700

4-ADMINISTRATIVE EXPENSES Utilities Telephone Expense-Office Salaries-Office Depreciation Insurance Supplies Expense-Office TOTAL ADMINISTRATIVE EXPENSES

60,000 5,000 133,000 31,000 10,000 4,000 P 243,000

5-OTHER EXPENSES Insurance Telephone Expense TOTAL OTHER EXPENSES

10,000 5,500 P 15,500

RUTHBEER CORPORATION STATEMENT OF CHANGES IN RETAAINED EARNINGS For the year ended December 31,2015 Balance, January 1 P 1,375,000 Add: Net Income 131,418 TOTAL 1,506,418 Less: Dividends Declared 500,000 Retained Earnings, December 31 P 1,006,418 GROSS PROFIT RETURN ON SALES (operating income/net sales) EPS

39% 14.04% P 2.63

EXERCISE NO. 14 DATE APRIL 10

APRIL 15

MAY 15

MAY 30 JUNE 1O

JOURNAL ENTRIES Treasury Shares (5,000sh x P20) Cash Cash (5,000sh x P30) Treasury Shares PIC from Treasury Shares Retained Earnings Cash Dividend Payable

P 100,000 100,000 150,000 56,350 93,650 8,500 8,500

No entry, the stock & Transfer Book will be updated. Retained Earnings Stock Dividend Payable Stock Dividend Payable Share Capital PIC from Stock Dividend

54,400 54,400 54,400 17,000 37,400

Declared and Issued 10% stock dividend @ P32 per share JULY 10

JULY 31

Cash Dividend Payable Cash

Issuance Reacquired Appropriated For Treasury Unrealized Net Income Dividends July 31

8,500

Income Summary Retained Earnings Retained Earnings (100,000 + 90,000 – 56,250) Appropriation Reserve for Treasury Share

Share Capital

May 1

8,500

P 250,000 17,000

175,000 175,000 133,750 133,750

STATEMENT OF SHAREHOLDER’S EQUITY Subscribe Share Retained Appropriatio d Premiu Earnings n Share m Reserve Capital 468,650 450,000

Total

(133,650)

1,035,000 17,000

(133,650 )

267,000

Treasury Shares

37,400 506,050

175,000 (62,900) 428,450

133,650

133,650

(133,650)

175,000 (25,500) 1,201,500

EXERCISE 15: DATE JAN 15

DESCRIPTION Retained Earnings Cash Dividends Payable Cash Dividends Payable Cash

FEB 15

APRIL 11

MAY 31

JUNE 1

P 2,500,000 P 2,500,000 2,500,000 2,500,000

Treasury Shares Cash

600,000

Retained Earnings Appropriation Reserve for Purchase of Machinery

200,000

Cash Treasury Shares Paid in Capital from Treasury Shares

125,000

Retained Earnings Stock Dividends for Distribution

960,000

600,000

200,000

120,000 5,000

800,000

Share Premium

160,000

No entry. Update for S&T books. JULY 01

DEC 31

Appropriation Reserve for Contingencies Retained Earnings

725,000

Ordinary Share Share Premium on common stock Retained Earnings Treasury Shares

200,000 12,500 37,500

Income Summary Retained Earnings

725,000

250,000 1,750,000 1,750,000

Retained Earnings Appropriation Reserve for Treasury Shares

22,500 22,500

THAI CORPORATION SHAREHOLDER’S EQUITY As of December 31, 2015 Contributed Capital Paid in Capital Authorized to issue 250,000, 18% cumulative Preference Shares P50 par, issued 150,000 shares Authorized to issue 100,000 Ordinary Shares, P100 par, Issued 78,000 shares Additional Paid in Capital Share Premium on Common Stock Total Paid in Capital Retained Earnings Unappropriated Appropriated Reserve for Treasury Shares Total Shareholder’s Equity

P 7,500,000 8,000,000

15,500,000 500,000 16,000,000

3,505,000 22,500

3,527,500 P 19,527,500...