Question

The year-end statement of financial position of Jackson Products Limited, includes the following shareholders' equity section (with certain details omitted): Shareholders' equity: Share Capital: 7% cumulative preference shares, $100 par value Ordinary shares $5 par value, 5,000,000 shares authorized 3,600,000 shares issued and outstanding Share premium Ordinary shares Retained earnings $ 13,000,000 18,000,000 43,000,000 64,450,000 Total shareholders' equity $ 138,450,000 From this information, compute answers to the following questions: a. How many shares of preference shares have been issued? Shares of preference shares shares b. What is the total amount of the annual dividends to which preference shareholders are entitled? (Omit the "S" sign in your response.) Annual dividends $ c. What was the average issuance price per share of ordinary shares? (Round your answer to the nearest dollar amount.Omit the "$" sign in your response.) Issuance price $ d. What is the amount of legal capital and the amount of total paid-in capital? (Omit the "$" sign in your response.) Legal capital Total paid-in capital A A $ e. What is the book value per share of ordinary shares? (Round your answer to 2 decimal places. Omit the "S" sign in your response.) Book value per share $ f. Is it possible to determine the fair market value per share of ordinary shares from the shareholders' equity section above? Yes No

Answer 1

a Particulars 7% Preference share capital Par value per share No of preference shares issued a b a/b Amount ($) $ 13,000,000 $ 100 130,000 b. a $ 7% Preference share capital Interest rate Annual dividend to preference shareholders b 13,000,000 7% 910,000 a*b $ C. Ordinary share capital Share premium-ordinary shares Total share capital No of shares outstanding Average issuance price per share a $ b $ C = a+b $ d c/d $ 18,000,000 43,000,000 61,000,000 3,600,000 16.94

d. a $ Particulars Ordinary share capital 7% Preference share capital Legal capital Add: Share premium ordinary shares Total paid in capital Amount ($) $ 18,000,000 b 13,000,000 c = a+b $ 31,000,000 d 43000000 74,000,000 c+d Legal capital $ 31,000,000 Total paid in capital 31,000,000 Legal capital means only par value per share and for preference shareholders it is stated value. $ e Total shareholders' equity is Less: preferred stock Equity of common stake holders No of equity shares outstanding Book value per share a $ b $ c-a-b $ d c/d $ 138,450,000 -13,000,000 125,450,000 3,600,000.00 34.85 f No, it is not possible to determine the fair market value of ordinary shares from the equity section Because, in equity portion, does not change with changes in market. I hope this solves your doubt. Feel free to comment if you still have any query or need something else. I'll help asap.