Question

The following is the stockholders' equity section of Harbor Co.'s balance sheet on December 31:Common stock $10 par, 100,000 shares authorized, 50,000 shares issued of which 5,000 have been reacquired,and are held in treasury $ 450,000Additional paid-in capital common stock 1,100,000Retained earnings 800,000Subtotal $2,350,000Less treasury stock (150,000)Total stockholders' equity $2,200,000Harbor has insignificant amounts of convertible securities, stock warrants, and stock options. What is the book value per share of Harbor's common stock?

Answer 1

Answer:

Book value per share: 48.88

Explanation:

The book value per share is the minimun value of the company equity.

Book value per share = (Total Equity - Preferd Equity) / Total shares outstanding

Book value per share = 2,200,000 / 45,000  

Book value per share = 48.88

In the numerator, we do not deduct anything from equity because there are no preferred shares. In the dividend, the outstanding shares are 45,000, because 50,000 have been issued and 5,000 are held in treasury, despite being authorized to issue 100,000 shares.