The stockholders’ equity of TVX Company at the beginning of the day on February

Question

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:

On February 5, the directors declare a 12% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $39 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28.

1. One stockholder owned 800 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of February 5. (Round your "Book value per share" answers to 3 decimal places.)
2. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.

Common stock—$25 par value, 150,000 shares
authorized, 72,000 shares issued and outstanding $ 1,800,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders’ equity $ 3,000,000

Explanation / Answer

1.

2.

Particulars $ Per Share Value Remark Par Value of One Share 25 Share Premium Per Share 7.29 (525000/72000) Total Paid in Value of one share 32.290 No. of Shares hold by Shareholder 800 Book Value of Share to him before dividend (This will be the Value paid by him for acquiring the shares i.e. @ 32.29 for 800 shares) 25832.000 32.290 Book Value for shareholder before dividend Book Value of Shares after Dividend is declared on Feb 5 25832.000 32.290 As Dividend is to be given for Shares hold at 15th Feb hense right to receive dividend will be established on 15th Feb only. Hence the dividend will be recorded on that day. Further one more view is there, Dividend will be taken as the income hence it will not impact the Book Value of share.

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