Sabino Corporation's total common stock was $500,000 at the end of both Year 2 and Year 1. The par value of common stock is $5 per share. The company's total stockholders' equity at the end of Year 2 amounted to $1,125,000 and at the end of Year 1 to $1,090,000. The company's total liabilities and stockholders' equity at the end of Year 2 amounted to $1,581,000 and at the end of Year 1 to $1,540,000. The company's retained earnings at the end of Year 2 amounted to $545,000 and at the end of Year 1 to $510,000. The company's net income in Year 2 was $39,000. The company's book value per share at the end of Year 2 is closest to:
A) $0.39 per share
B) $15.81 per share
C) $11.25 per share
D) $5.45 per share

Question

Quizplus · Accepted Answer

First, we need to calculate the number of common shares outstanding:

Year 1 and Year 2: Total common stock / Par value per share = $500,000 / $5 = 100,000 shares.

To calculate book value per share at the end of Year 2, we can use the formula:

Book Value per Share = (Total Stockholders' Equity - Preferred Stock) / Common Shares Outstanding

We are not given any information about preferred stock, so we assume it is zero.

At the end of Year 2:

Book Value per Share = ($1,125,000 - 0) / 100,000 shares = $11.25 per share.

Therefore, the closest choice is (C), $11.25 per share.

Sabino Corporation's Total Common Stock Was $500,000 at the End