Question

Recent financial statements for Madison Company follow:

Madison Company Balance Sheet June 30
Assets
Current assets:
Cash			$	21,000
Accounts receivable, net				160,000
Merchandise inventory				300,000
Prepaid expenses				9,000
Total current assets				490,000
Plant and equipment, net				810,000
Total assets			$	1,300,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities			$	200,000
Bonds payable, 10%				300,000
Total liabilities				500,000
Stockholders’ equity:
Common stock, $5 par value	$	100,000
Retained earnings		700,000
Total stockholders’ equity				800,000
Total liabilities and stockholders' equity			$	1,300,000

Madison Company Income Statement For the Year Ended June 30
Sales	$	2,100,000
Cost of goods sold		1,260,000
Gross margin		840,000
Selling and administrative expenses		660,000
Net operating income		180,000
Interest expense		30,000
Net income before taxes		150,000
Income taxes		45,000
Net income	$	105,000

Account balances at the beginning of the company’s fiscal year were: accounts receivable, $140,000; and inventory, $260,000. All sales were on account.

Required:

Compute financial ratios as follows:

1. Book value per share. (Omit the "$" sign in your response.)

Answer 1

1 Book value per share 40 Working Notes: No of Outstanding Shares = Common stock / stock price = $100,000/$5 = 20,000 shares Total stockholders' equity = $800,000 Book value per share = Stockholders' Equity / No of outstanding shares = $800,000/20,000 = $40