One stockholder owned 450 shares on february 5 before the dividend. compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of february 5. (round your "book value per share" answers to 3 decimal places.)

a)Book value per share before stock dividend= 26.901

TBV before stock dividend= $12105.450

b) Book value per share after stock dividend= 23.191

TBV after stock dividend= 12105.702

Explanation:

Assuming we have the following data with respect to the question,

Total shareholders' equity = 1910000

Total shares issued are = 71000

The directors' declare a 16% stock dividend distributable to stock holders.

Solution:

Stock dividend refers to the issuance of shares in place of cash dividend to shareholders. This means stock dividend results in increase in number of shares. The impact of issuance of additional shares increases the supply of shares hence the book value per share after stock dividend decreases but the impact on Total shareholder's equity remains same, because in case of cash dividend we reduce retained earnings (which is part of owners' equity) but in this case we increase our equity and don't reduce retained earnings.

A)

Book value per share before stock dividend:

BVS= total shareholders equity / total shares issued

BVS= 1910000 / 71000

BVS= 26.901

The total book value before stock dividend:

TBV before stock dividend= BVS * stockholder owned shares

TBV before stock dividend= 26.901 * 450

TBV before stock dividend= $12105.450

B)

Book value per share after stock dividend:

Book value per share after stock dividend= 1,910,000 / (71,000*1.16)

Book value per share after stock dividend= 23.191

The total book value after stock dividend:

TBV after stock dividend= 23.191 * (450*1.16)

TBV after stock dividend= 12105.702

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