
Compute the

Explanation of Solution
Stockholders’ equity: It refers to the amount of capital that includes the amount of investment by the stockholders, earnings generated from the normal business operations, and less any dividends paid to the stockholders.
Common stock: Common stock is the cash raised by the company by issuing common or ordinary shares to the stockholders. This is an investment for the shareholders for which they receive the dividends from the issuing company, and have voting rights.
Book value per share: This is a financial ratio which measures the value of shareholders’ equity available per common share.
Formula for book value per common share:
Compute the stockholders’ equity, number of common shares outstanding, and book value per share after each of the successive transactions.
Transaction | Stockholders’ Equity ($) | Number of Common Shares | Book Value Per Share ($) |
Beginning balance | $840,000 | 40,000 | $21.00 |
January 10 | 2,000 | ||
Balance | 840,000 | 42,000 | 20.00 |
March 15 | (42,000) | (2,000) | |
Balance | 798,000 | 40,000 | 19.95 |
May 30 | 63,000 | 2,000 | |
Balance | 861,000 | 42,000 | 20.50 |
July 31 | 42,000 | ||
Balance | 861,000 | 84,000 | 10.25 |
December 15 | (92,400) | ||
Balance | 768,600 | 84,000 | 9.15 |
December 31 | 525,000 | ||
Balance | $1,293,600 | 84,000 shares | $15.40 |
Table (1)
Working Notes:
Compute the number of stock dividend shares distributed on January 10.
Compute the book value per share after the January 10 transaction.
Compute the reduction in stockholders’ equity due to buy back of shares as
Compute the book value per share after the March 15 transaction.
Compute the increase in stockholders’ equity due to sale of buy back of shares as treasury stock on May 30.
Compute the book value per share after the May 30 transaction.
Compute the number of shares after stock split on July 31.
Compute the book value per share after the July 31 transaction.
Compute the decrease in stockholders’ equity due to declaration of cash dividends on December 15.
Compute the book value per share after the December 15 transaction.
Compute the book value per share after the December 31 transaction.
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Chapter 12 Solutions
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