Retained Earnings Mrs. Paz Castro

Ex.: Hizon Advertising and Marketing, Inc. is one of the leading firms doing highly creative tri-media product exposures in Cebu. The shareholders’ equity section of the company’s statement of financial position is as follows:

6% Cumulative non-participating Preference Shares, P1,000 par, P 400,000 5,000 shares authorized, 400 shares issued and outstanding

Ordinary Shares, P100 par, 20,000 shares authorized, 5,500	550,000
shares issued and outstanding Share Premium – Preference	40,000
Share Premium – Ordinary	720,000
Retained Earnings	850,000
Total Shareholders’ Equity	P2,560,000

Suppose that the preference shares has a liquidation value of P1,300 and dividends are in arrears for 3 years. The computation of the preference book value per share follows:

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Suppose that the preference shares has a liquidation value of P1,300 and dividends are in arrears for 3 years. The computation of the preference book value per share follows:

Preference Shares:
Liquidation Value, P1,300 x 400 shares P520,000
Dividends in Arrears, 6% x P400,000 x 3 yrs. 72,000
Current Dividends, 6% x P400,000 Preference Shareholders’ Equity
Book Value per Share, P616,000/400 shares
24,000
P616,000 P 1,540

The ordinary book value per share is obtained as follows:

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bargaining price in negotiating the purchase of a corporation whose shares are not traded in the stock exchange.
BBooookkVvalauelupeer pShearres, hP1a,9r4e4,m00a0/y5,5b0e0 suhasreesd asP th3e53i.n45itial
Ordinary Shares:
Total Shareholders’ Equity P2,560,000
Less: Preference Shareholders’ Equity Ordinary Shareholders’ Equity
616,000
P1,944,000