(Learning Objective 5: Measuring the book value per share of ordinary share)

The balance sheet of Luxury Rug Company reported the following:

❙ Requirements 1. Compute the book value per share for an ordinary share, assuming all preference dividends are fully paid up (none in arrears).

2. Compute the book value per share of the ordinary shares, assuming that three years’

cumulative preference dividends, including the current year, are in arrears.

3. Luxury Rug’s ordinary shares recently traded at a market price of $6.00 per share. Does this mean that Luxury Rug’s shares are a good buy at $6.00?