Symons Corporation has provided the following financial data: Balance Sheet December 31, Year 2...

Question:

Symons Corporation has provided the following financial data:

Balance Sheet

December 31, Year 2 and Year 1

Year 2 Year 1

Assets
Current assets:
Cash $225,000 $160,000
Accounts receivable 191,000 180,000
Inventory 96,000 110,000
Prepaid expenses 91,000 80,000
Total current assets 603,000 530,000
Plant and equipment, net 810,000 840,000
Total assets $1,413,000 $1,370,000

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $226,000 $190,000
Accrued liabilities 66,000 70,000
Notes payable, short term 54,000 50,000
Total current liabilities 346,000 310,000
Bonds payable 170,000 170,000
Total liabilities 516,000 480,000
Stockholders' equity:
Common stock, $5 par value 250,000 250,000
Additional paid-in capital-common stock 70,000 70,000
Retained earnings 577,000 570,000
Total stockholders' equity 897,000 890,000
Total liabilities & stockholders' equity $1,413,000 $1,370,000

Income Statement

For the Year Ended December 31, Year 2

Sales (all on account) $1,260,000
Cost of goods sold 760,000
Gross margin 500,000
Operating expenses 473,429
Net operating income 26,571
Interest expense 13,000
Net income before taxes 13,571
Income taxes (30%) 4,071
Net income $9,500

Dividends on common stock during Year 2 totaled $2,500.

The market price of common stock at the end of Year 2 was $2.01 per share.

Required:

The company's book value per share at the end of Year 2 is closest to:

  • a) $17.94 per share.
  • b) $28.26 per share.
  • c) $ 0.19 per share.
  • d) $11.54 per share.

Book Value Per Share:

Book-value per share is computed based on the historical costs unlike the market price per share which is computed based on the market. The book value per share computes the per share value of a company based on the stockholders equity i.e the amount available for equity shareholders after meeting all the liabilities. Book value per share = Common stockholders equity / Number of shares outstanding.

Answer and Explanation:

Option a) $17.94 per share is correct.

Given:

  • Common stockholders equity in year 2 = 897,000
  • Number of shares outstanding = Common stock value / Par...

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