The stockholders’ equity of TVX Company at the beginning of the day on February
ID: 2528038 • Letter: T
Question
The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:
On February 5, the directors declare a 18% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $47 per share on February 5 before the stock dividend. The stock’s market value is $40 per share on February 28.
1. One stockholder owned 400 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 2 decimal places. Round "Total book value of shares" to the nearest whole dollar.)
2. Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.
Common stock—$20 par value, 150,000 shares authorized, 51,000 shares issued and outstanding $ 1,020,000 Paid-in capital in excess of par value, common stock 525,000 Retained earnings 675,000 Total stockholders’ equity $ 2,220,000Explanation / Answer
1. One stockholder owned 400 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
$43.53
$36.89
Total book value of shares
$17,412
$17,412
Book value per share Before
= $22,20,000 / 51,000
= $43.53
Book value per share After
= $22,20,000 / (51,000 x 118%)
= $36.89
Total book value of shares Before
= 400 x $43.53
= $17,412
Total book value of shares After
= (400x118%) x $36.89
= $17,412
2. 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
$18,800
$18,880
February 5
Market value = $47
Total market value = $47 x 400 = $18,800
February 28
Market value = $40
Total market value = $40 x (400 x 118%) = $18,880
Before
After
Book value per share
$43.53
$36.89
Total book value of shares
$17,412
$17,412
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