Chapter 18 - BVPS

18-2

a. Cumulative and fully participating

● Ordinary shares -> Preference rate (no ordinary share rate)

● Share in the dividends of the Ordinary shares before the participating preference shares
● Liquidating dividends came from: retained earnings, share premium, and revaluation surplus
● Ordinary share capital = Legal Capital

b. Cumulative and participating up to 16%

● Partially participating -> participating only to the (extent of) certain peso per share or
percentage.
● 16% – 12% = 4% -> multiply to preference share capital
● All remaining after 4% rate is for the ordinary share capital

*Also, If there is a nonparticipating preference share capital: After the share of

cumulative/noncumulative preference share capital, all remaining is for the ordinary share capital.

18-4

● Liquidation value is amount which preference shareholders normally receive upon the
liquidation of the corporation. The liquidation value may be more than the par value. Thus, may
up to P53.
● P53- P50 par value = P3 x outstanding preference shares + Preferred dividends + Preference
share capital = Total Shareholders’ Equity attributed to Preference shares
● Shortcut: Liquidation value x outstanding preference share + Preferred dividends = Total
Shareholders’ Equity attributed to Preference shares

18-6

● At liquidation, the entity should make an entry to derecognize Treasury shares: Close Treasury
shares account by debiting Share Capital account - @ par. Any deficiency or excess is charged to
the Share Premium account.
● Excess: P968,000 + 680,000 + (300,000 - 10,000 PS Premium + 30,000 OS Premium) =
P1,968,000
● P1,968,000 - 960,000 - 408,000 = P600,000
 ● Preference share capital: P1,500,000 - 100,000 + 200,000 = P1,600,000
○ Dividends in arrears: P1,600,000 x 12% = P192,000 x 5 = P960,000
● Ordinary share capital: P3,000,000 - 100,000 + 500,000 = P3,400,000
○ Dividends of Ordinary share capital @ rate of PSC: P3,400,000 x 12% = P408,000
● Allocation: PS -> (P600,000 x 1.6)/5 = P192,000 (OS -> P408,000)
● PS BVPS: P1,600,000 + 960,000 + 192,000 = P2,752,000/[15,000 - 1,000 + (200,000/100)] = P172
● OS BVPS: P3,400,000 + 408,000 + 408,000 = 4,216,000/(30,000 - 1,000 + 5,000) = P124

18-10

● Paid dividends first to Preference Shareholders, the remaining is for the Ordinary Shareholders.

18-12

● Noncumulative and partially participating

● Preference shares are attributed up to 15% of the preference share capital
● Ordinary shares are attributed to “outstanding shares x peso per ordinary share”