The book value per share (BVPS) is calculated by taking the ratio of equity available to common stockholders
against the number of shares outstanding.
When compared to the current market value per share, the book value per share can provide information on how a
company’s stock is valued.
If the value of BVPS exceeds the market value per share, the company’s stock is deemed undervalued.
The book value is used as an indicator of the value of a company’s stock, and it can be used to predict the possible
market price of a share at a given time in the future.
1. Which statement is incorrect regarding book value per share (BVPS)?
a. BVPS is a measure of the level of safety associated with each individual share after all debts are paid
accordingly.
b. BVPS is the amount that a shareholder would get if the entity were to liquidate.
c. BVPS is computed based on the assumption that the amount available for distribution to owners is equal
to the book value of equity.
d. BVPS is computed by dividing the entity’s profit by the number of shares outstanding.
BVPS COMPUTATION
BVPS (OS) = Ordinary shareholders’ equity/Number of ordinary shares outstanding
Ordinary shareholders’ equity = Total shareholders’ equity – Preference shareholders’ Equity
Number of outstanding shares = Issued + Subscribed – Treasury
*For the purpose of BVPS computation, subscription receivable is not deducted from total shareholders’ equity. This is
because in case of corporate liquidation, any unpaid subscription must be collected to settle the corporation’s
obligations to outside creditors (trust fund doctrine).
2. The equity balances of Kitty Company as of the end of the reporting period are:
Ordinary share capital, P100 par, 360,000 shares P36,000,000
Subscribed ordinary share capital, 60,000 shares 6,000,000
Subscription receivable 2,000,000
Treasury shares, 20,000 shares, at cost 3,000,000
Retained earnings 10,000,000
The book value per share of ordinary is
a. 122.50
b. 130.00 TSHE=36M+6M-3M+10M FS
c. 117.50 TSHE = 47M TSHE = 36M+6M-2M-3M+10M
d. 125.00 BVPS = 47M/400,000
TSHE =47M
BVPS (PS) = Preference shareholders’ equity/Number of preference shares outstanding
The following are guidelines when computing for preference shareholders’ equity
i. Allocate to the preference shareholders’ equity their liquidation value. In the absence of liquidation value, allocate
their aggregate par value.
ii. If the preference shares are cumulative, allocate all dividends in arrears.
iii. If the preference shares are noncumulative, allocate the current year dividend only, if it is in arrear.
iv. If there are no dividends in arrears, no dividends shall be allocated to either cumulative or noncumulative
preference shares
3. Equity balances of Monster Company as of the end of the reporting period follow:
12% preference share capital, 200,000 shares, par P100 P20,000,000
Ordinary share capital, 500,000 shares, par P100 50,000,000
Share premium 10,000,000
Retained earnings 15,000,000
The preference shares have a call price of 130, a liquidation price of 115 and dividends have not been paid for
three years. The book value per share of preference shares should be
a. P127
b. P112
c. P151 Noncumulative cumulative
d. P115 23,000,000 (115*200,000) 23,000,000 (115*200,000)
2,400,000 (.12*20M) 7,200,000 (.12*20M*3)
4. The shareholders’ equity of Kimi Company on December 31, 2020 consisted the following:
Preference share capital, P100 par value, 12% annual dividend (50,000) P5,000,000
Ordinary share capital, P100 par (150,000) 15,000,000
Share premium 3,000,000
Retained earnings 4,000,000
Total P27,000,000
The preference share is noncumulative and nonparticipating with a liquidation value of P120 per share.
Preference dividends have been paid up to December 31, 2020. What is the book value per share of ordinary?
a. P140.00
Oshe = tshe – pshe
b. P136.00
c. P146.67 TSHE = 27,000,000
d. P142.67 PSHE = 6,000,000
OSHE = 21,000,000
BVPS = 21,000,000/150,000
5. The shareholders’ equity of Play Company on December 31, 2020, consists of the following capital balances:
Preference shares capital, 10% cumulative, 3 years in arrears, P100 par, P15,000,000
P110 liquidation price 150,000 shares
Ordinary share capital, P100 par, 200,000 shares 20,000,000
Subscribed ordinary share capital, net of subscription receivable of 6,000,000
P4,000,000
Treasury shares ordinary, 50,000 shares at cost 4,000,000
Share premium 3,000,000
Retained earnings 20,000,000
The book value per share of ordinary is
a. P156.00 OSHE = TSHE - PSHE
b. P190.00
TSHE = 64,000,000
c. P172.00
PSHE = 16,500,000 + 4,500,000
d. P286.67
OSHE = 43,000,000
BVPS = 43,000,000/250,000
Use the following information for the next two questions.
The equity section of the balance sheet of the Blue Bird Company on December 31, 2020 shows the following items:
6% cumulative preference share capital. P100 par value (liquidation value, P115 P400,000
per share); Authorized, 6,000 shares; issued, 4,000 shares; in treasury, 600 shares
Ordinary share capital, P100 par value, authorized, 20,000 shares; issued and 800,000
outstanding, 8,000 shares
Share premium – preference 150,000
Share premium – ordinary 165,000
Retained earnings 458,600
Reserve for bond retirement 320,000
Treasury shares – preference, at cost (84,000)
Total 2,209,600
6. The book value per share of ordinary is OSHE = TSHE - PSHE
a. P121.00 TSHE = 2,209,600
b. P223.70 PSHE = 391,000 + 20,400 (391,000=3400*115) (340,000*.06)
c. P224.78 OSHE = 1,798,200
d. P223.65 BVPS = 1,798,200/8,000
7. Assuming the preference share is participating, the book value per share of ordinary is
a. P204.35
b. P223.70
c. P189.35
d. P187.56
