Excerpts from Stys Corporation's most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $50 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $8.20 per share.
-The book value per share at the end of Year 2 is closest to:
A) $8.70
B) $13.50
C) $1.00
D) $7.70

Question

Excerpts from Stys Corporation's most recent balance sheet and income statement appear below:  Dividends on common stock during Year 2 totaled $50 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of Year 2 was $8.20 per share.
-The book value per share at the end of Year 2 is closest to:
A) $8.70 
B) $13.50 
C) $1.00 
D) $7.70

Quizplus · Accepted Answer

The book value per share represents the amount of equity in the company that is attributable to each outstanding share of common stock. It is calculated by dividing the total stockholders' equity by the number of outstanding shares of common stock.

Book value per share = (Total stockholders' equity - Preferred dividends) / Number of shares outstanding

Total stockholders' equity at the end of Year 2 = $820,000
Preferred dividends = $10,000
Number of shares outstanding = $100,000 / $10 per share = 10,000 shares

Book value per share = ($820,000 - $10,000) / 10,000 shares = $81 per share

Therefore, the book value per share at the end of Year 2 is $7.70 ($81 per share rounded to the nearest cent). The closest answer choice is D.

Excerpts from Stys Corporation's Most Recent Balance Sheet and Income