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Exercise 11-6 Stock dividends and per share book values LO P2 [The following inf

ID: 2530125 • Letter: E

Question

Exercise 11-6 Stock dividends and per share book values LO P2

[The following information applies to the questions displayed below.]

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


On February 5, the directors declare a 16% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $35 per share on February 5 before the stock dividend. The stock’s market value is $30 per share on February 28.

Exercise 11-6 Part 2

2. One stockholder owned 700 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.)

Common stock—$5 par value, 150,000 shares
authorized, 51,000 shares issued and outstanding $ 255,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders’ equity $ 1,455,000

Explanation / Answer

2. One stockholder owned 700 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

Before

After

Book value per share

$28.529

$24.594

Total book value of shares

$19,970.3

$19,970.3

Book value per share Before

= $14,55,000 / 51,000

= $28.529

Book value per share After

= $14,55,000 / (51,000 x 116%)

= $14,55,000 / 59,160

= $24.594

Total book value of shares Before

= 700 x $28.529

= $19,970.3

Total book value of shares After

= (700x116%) x $24.594

= $19,970.30

Before

After

Book value per share

$28.529

$24.594

Total book value of shares

$19,970.3

$19,970.3