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    Answered Step-By-Step: Data Relating To The Shareholders' Equity of Martin Co. During..

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    Jefferson Mañale
    The document provides shareholder equity data for Martin Co. as of December 31, 2016 and poses four cases to calculate book value per share for preference and ordinary shares. Case 1 assumes preference shares are cumulative. Book value is $100 per preference share and $40 per ordinary share. Case 2 assumes preference shares are cumulative with liquidation value of $105 per share. Book value is $48.40 per preference share and $194.77 per ordinary share. Case 3 assumes preference shares are noncumulative. Book value is $8 per preference share and $40 per ordinary share.

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    Answered Step-By-Step: Data Relating To The Shareholders' Equity of Martin Co. During..

    Uploaded by

    Jefferson Mañale
    242 views8 pages
    The document provides shareholder equity data for Martin Co. as of December 31, 2016 and poses four cases to calculate book value per share for preference and ordinary shares. Case 1 assumes preference shares are cumulative. Book value is $100 per preference share and $40 per ordinary share. Case 2 assumes preference shares are cumulative with liquidation value of $105 per share. Book value is $48.40 per preference share and $194.77 per ordinary share. Case 3 assumes preference shares are noncumulative. Book value is $8 per preference share and $40 per ordinary share.

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    The document provides shareholder equity data for Martin Co. as of December 31, 2016 and poses four cases to calculate book value per share for preference and ordinary shares. Case 1 assumes preference shares are cumulative. Book value is $100 per preference share and $40 per ordinary share. Case 2 assumes preference shares are cumulative with liquidation value of $105 per share. Book value is $48.40 per preference share and $194.77 per ordinary share. Case 3 assumes preference shares are noncumulative. Book value is $8 per preference share and $40 per ordinary share.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    242 views8 pages

    Answered Step-By-Step: Data Relating To The Shareholders' Equity of Martin Co. During..

    Uploaded by

    Jefferson Mañale
    The document provides shareholder equity data for Martin Co. as of December 31, 2016 and poses four cases to calculate book value per share for preference and ordinary shares. Case 1 assumes preference shares are cumulative. Book value is $100 per preference share and $40 per ordinary share. Case 2 assumes preference shares are cumulative with liquidation value of $105 per share. Book value is $48.40 per preference share and $194.77 per ordinary share. Case 3 assumes preference shares are noncumulative. Book value is $8 per preference share and $40 per ordinary share.

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    Question

    Answered step-by-step
    Data relating to the shareholders' equity of Martin Co. during...
    Data relating to the shareholders' equity of Martin Co. during December 31, 2016 are as
    follows:
    8% Preference share, P 100 par, 40,000 shares 4,000,000
    Ordinary share, P40 par, 26,000 shares issued 1,040,000
    Treasury ordinary shares (1,000 shares at cost) (70,000)
    Retained earnings
    7,000,000
    Total shareholders' equity 11,970,000
    Dividends are in arrears for four years.
    Based on the above data, answer the following independent cases:
    Case No. 1: Assume that the preference shares are cumulative.
    1. How much is the book value per preference share?
    2. How much is the book value per ordinary share?
    Case No. 2: Assume that the preference shares are cumulative with liquidation value of
    P105 per share.
    3. How much is the book value per preference share?
    4. How much is the book value per ordinary share?
    Case No. 3: Assume that the preference shares are noncumulative.
    5. How much is the book value per preference share?
    6. How much is the book value per ordinary share?
    Case No. 4: Assume that the preference shares are cumulative and participating.
    7. How much is the book value per preference share?
    8. How much is the book value per ordinary share?
    Answer & Explanation
    Solved by verified expert
    Case No. 1: Assume that the preference
    shares are cumulative.

    1. How much is the book value per


    preference share?

    2. How much is the book value per ordinary


    share?

    Preferred Ordinary Total

    Dividends are in arrears

    8% Preference share, P 100 par,


    40,000 shares

    8% x P 100 X 40,000
    shares X 4 years 1,280,000.0 1,280,000.0
    0 0
    Current
    Dividend

    8% Preference share, P 100 par,


    40,000 shares

    8% x P 100 X 40,000
    shares 320,000.00 320,000.00

    Ordinary share, P40 par, 26,000


    shares issued 1,040,000.0 1,040,000.0
    0 0

    Total
    1,600,000.0 1,040,000.0 2,640,000.0
    0 0 0

    No of
    shares 40,000.00 26,000.00

    Book Value per share


    40.00 40.00
    Case No. 2: Assume that the preference shares are
    cumulative with liquidation value of P105 per share.

    3. How much is the book value per


    preference share?

    4. How much is the book value per


    ordinary share?

    Preferred Ordinary Total

    Dividends are in arrears

    8% Preference share, P 100 par,


    40,000 shares

    8% x P 100 X 40,000
    shares X 4 years 1,280,000.0 1,280,000.0
    0 0
    Current
    Dividend

    8% Preference share, P 100 par,


    40,000 shares

    8% x P 100 X 40,000
    shares 320,000.00 320,000.00

    Ordinary share, P40 par, 26,000


    shares issued 1,040,000.0 1,040,000.0
    0 0

    Liquidation
    Value

    8% Preference share, P 105 par,


    40,000 shares

    8% x P 105 X 40,000
    shares 336,000.00 4,024,000.0 4,360,000.0
    0 0
    Ordinary share, P40 par, 26,000
    shares issued (remaining) -

    Total
    1,936,000.0 5,064,000.0 7,000,000.0
    0 0 0

    No of
    shares 40,000.00 26,000.00

    Book Value per share


    48.40 194.77

    Case No. 3: Assume that the preference


    shares are noncumulative.

    5. How much is the book value per


    preference share?
    6. How much is the book value per
    ordinary share?

    Preferred Ordinary Total

    Current
    Dividend

    8% Preference share, P 100 par,


    40,000 shares

    8% x P 100 X 40,000
    shares 320,000.00 320,000.00

    Ordinary share, P40 par, 26,000


    shares issued 1,040,000.0 1,040,000.0
    0 0

    Total
    320,000.00 1,040,000.0 1,360,000.0
    0 0
    No of
    shares 40,000.00 26,000.00

    Book Value per share


    8.00 40.00

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