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Enscoe Enterprises, Inc. (EEI) has 225,000 shares authorized, 150,000 shares issued, and 30,000 shares of treasury stock. At this point, EEI has $780,000 of assets. $180,000 liabilities, $360,000 of common stock, and $240,000 of retained earnings. Further, assume that the market value of EEI's common stock is $7 per share.
Required:
a. Determine the number of shares of stock that is outstanding.
b. Determine the book value per share.
c. Provide a rational explanation for the difference between the book value per share and the market value per share of EEIs' common stock.

Respuesta :

sahir9397

Answer:

a  

Shares issued                      150000  

Less: Treasury Stock      30000  

Shares outstanding               120000 shares

b  

Common stock                 360000  

Add: Retained earnings         240000  

Total stockholders' equity  600000  

Divide by Shares outstanding  120000  

Book value per share              5

Tundexi

Particulars                             Units

Shares issued                      150,000

Less: Treasury Stock           30,000  

Shares outstanding            120,000

Therefore, number of shares of stock that is outstanding is 120,000 units.

Particulars                                   Amount

Common stock                           $360,000  

Add: Retained earnings             $240,000

Total stockholders' equity        $600,000

  • Shares outstanding  = 120,000 units  

Book value per share = Total stockholders' equity / Shares outstanding  

Book value per share = $600,000 / 120,000 units

Book value per share = $5

Therefore, the book value per share is $5

The market value is greater than the book value because the book value is a measure of historical Cost and the market value is a measure of current values.

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