SOL. MAN. Chapter 14 BVPS 2021 PDF

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Chapter 14Book Value per SharePROBLEM 1: TRUE OR FALSE1. TRUE2. TRUE3. TRUE – For example, if the market value per share islower than the book value per share, this may indicatethat the stock price is undervalued.4. TRUE5. FALSEPROBLEM 2: MULTIPLE CHOICE – THEORY1. C2. C3. A4. C To test-check the ac...

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Page | 1

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’). Befo re After Share capital (100 sh. @ 1 par) 100 100 Share premium

20

20

Retained earnings

200

200

Treasury sh. (50 sh. @

Page | 2 1.50)

(75)

Total equity

320

245

Divide by: Outs. Shares

100

50

BVPS

3.20

4.90

Decreas e

Increas e

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: 9,900,00 0

Total shareholders' equity Preference shareholders' equity: Liquidation value (20,000 shares x ₱105) Dividends in arrears

2,100,0 00 -

Ordinary shareholders' equity

Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding Book value per share (Ordinary shares)

7,800,0 00 60,000 130.0 0

(2,100,0 00) 7,800,0 00

Page | 3 4. A Solution: Total shareholders' equity, excldg. subscription receivable (5.9M +

5,980,00 0

80K)

Preference shareholders' equity: Liquidation value (6,000 shares x 250)

Dividends in arrears (1.2M x 8% x 4 yrs.)

1,500,00 0 384,000

Ordinary shareholders' equity

Preference shareholders' equity Divide by: No. of preference shares outstanding Book value per share (Preference shares) Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares)

(1,884,00 0) 4,096,00 0

1,884,00 0 6,000 314.00 4,096,00 0 36,250 112.99

a

Ordinary shares issued (3.6M / 100par) Subscribed shares (400K / 100par) Treasury shares (300K / 80 cost per share) Outstanding ordinary shares

5. B Solution: Total shareholders' equity, excldg. subscription receivable (5.9M + 80K) Preference shareholders' equity: Liquidation value (6,000 shares x 250)

36,000 4,000 (3,750) 36,250

5,980,00 0 1,500,00 0

Page | 4 Dividends in arrears (1.2M x 8% x 1 yr.)

96,000

Ordinary shareholders' equity

Preference shareholders' equity Divide by: No. of preference shares outstanding Book value per share (Preference shares) Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares)

(1,596,00 0) 4,384,00 0

1,596,00 0 6,000 266.00 4,384,00 0 36,250 120.94

a

Ordinary shares issued (3.6M / 100par) Subscribed shares (400K / 100par) Treasury shares (300K / 80 cost per share) Outstanding ordinary shares

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

36,000 4,000 (3,750) 36,250

5,980,00 0 1,500,00 0 -

Ordinary shareholders' equity

Preference shareholders' equity

1,500,00

(1,500,0 00) 4,480,00 0

Page | 5 0 Divide by: No. of preference shares outstanding Book value per share (Preference shares) Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares) a Ordinary shares issued (3.6M / 100par) Subscribed shares (400K / 100par) Treasury shares (300K / 80 cost per share) Outstanding ordinary shares

6,000 250.00 4,480,00 0 36,250 123.59

36,000 4,000 (3,750) 36,250

7. C Solution: Total shareholders' equity

13,740,000

12% PS (aggregate par value)

(2,000,000)

12% PS (dividends) - (2M x 12% x 3 yrs.)

(720,000)

14% PS (aggregate par value)

(3,000,000)

14% PS (dividends) - (3M x 14% x 1 yr.)

(420,000)

Common stock (aggregate par value) Common stock (dividends) - (5M x 12% x 1 yr.)

(5,000,000) (600,000)

Page | 6

Amount for allocation

2,000,000

12% PS (2M x 2/10)

(400,000)

14% PS (2M x 3/10)

(600,000)

Common stock (2M x 5/10)

(1,000,000)

As allocated

-

Ordinary shareholders' equity: Aggregate par value

5,000,000

Dividends

600,000

Participation

1,000,000

Total

6,600,000

Divide by: Outstanding shares

50,000

Book value per ordinary share

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)

16,080,0 00 (8,000,0 00) (2,400, 000) (800,000 ) (64,00 0) (4,000,0 00) (320,0 00) 496,000 (310,0

Page | 7

8% PS (496K x .8/12.8) Ordinary shares (496K x 4/12.8) As allocated

00) (31,000) (155,000 ) -

10% preference shareholders' equity: 8,000,0 Aggregate par value 00 2,400 Dividends ,000 310,00 Participation 0 10,710,0 Total 00 Divide by: Outstanding 20,0 shares 00 Book value per 53 ordinary share 5.50

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

4,000, 000 320, 000 155,00 0 4,475,00 0

Page | 8

Divide by: Outstanding shares Book value per ordinary share

100 ,000 44 .75

Page | 9 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 1,200,0 ₱120) 00 Dividends in arrears (1M x 10% x 3 300,00 yrs.) 0 Ordinary shareholders' equity

Divide by: No. of preference shares outstanding Book value per share (Preference shares) Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares)

3,240,0 00 29, 000 11 1.72 30, 000 1, 000 (2, 000) 29, 000

Ordinary shares issued (3M / 100par)

Subscribed shares (100K / 100par) Treasury shares Outstanding ordinary shares

2. Solution: Total shareholders' equity, excldg. subscription receivable (4.68M + 60K) Preference shareholders' equity: Liquidation value (10,000 shares x

(1,500,0 00) 3,240,0 00 1,500, 000 10 ,000 1 50.00

Preference shareholders' equity

a

4,740,00 0

4,740,00 0 1,200,0

P a g e | 10 ₱120) Dividends in arrears (1M x 10% x 1 yr.)

00 100,00 0

Ordinary shareholders' equity

1,300, 000 10 ,000 1 30.00

Preference shareholders' equity Divide by: No. of preference shares outstanding Book value per share (Preference shares)

3,440, 000 29, 000 11 8.62

Ordinary shareholders' equity Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares)

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

Preference shareholders' equity Divide by: No. of preference shares outstanding Book value per share (Preference shares) Ordinary shareholders' equity

(1,300,0 00) 3,440,0 00

4,740,00 0 1,200,0 00 -

(1,200,0 00) 3,540,0 00 1,200, 000 10 ,000 1 20.00 3,540,

P a g e | 11 000 29, 000 12 2.07

Divide by: No. of ordinary shares outstanding a Book value per share (Ordinary shares)

4. Solution: Total shareholders' equity

20,600,000

8% PS (aggregate par value)

(3,000,000)

8% PS (dividends) - (3M x 8% x 3 yrs.)

(720,000)

10% PS (aggregate par value)

(4,500,000)

10% PS (dividends) - (4.5M x 10% x 1 yr.)

(450,000)

Ordinary shares (aggregate par value) Ordinary shares (dividends) - (7.5M x 8% x 1 yr.)

(7,500,000) (600,000)

Amount for allocation

3,830,000

8% PS (3.83M x 3/15)

(766,000)

10% PS (3.83M x 4.5/15)

(1,149,000)

Ordinary shares (3.83M x 7.5/15)

(1,915,000)

As allocated

-

Ordinary shareholders' equity: Aggregate par value

7,500,000

Dividends

600,000

Participation

1,915,000

Total

10,015,000

P a g e | 12 Divide by: Outstanding shares (7.5M ÷ ₱150 par) Book value per ordinary share

50,000 200.30...