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

ID: 2533518 • 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: Common stock-$20 par value, 150,000 shares authorized, 1,220,000 61,000 shares issued and outstanding $ Paid-in capital in excess of par value, Retained earnings Total stockholders' equity 525,000 common stock 675,000 $2,420,000 On February 5, the directors declare a 14% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock's market value is $46 per share on February 5 before the stock dividend. The stock's market value is $40 per share on February 28

Explanation / Answer

2. One stockholder owned 650 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

$16.13

$14.15

Total book value of shares

$10,485

$10478

Book value per share Before

= $24,20,000 / 150,000

= $16.13

Book value per share After

= $24,20,000 / (150,000 x 114%)

= $14.15

Total book value of shares Before

= 650 x $16.13

= $10,485

Total book value of shares After

= (650x114%) x $14.15

= $10478

3. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.

February 5

February 28

Total Market Value of Shares

$29,900

$29,640

February 5

Market value = $46

Total market value = $46 x 650 = $29,900

February 28

Market value = $40

Total market value = $40 x (650 x 114%) = $29,640

Before

After

Book value per share

$16.13

$14.15

Total book value of shares

$10,485

$10478