Question
Green Caterpillar Garden Supplies Inc. is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first and
Green Caterpillar Garden Supplies Inc. is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first and second years of operation.
Use the information given in the balance sheet to answer the question that follows.
Green Caterpillar Garden Supplies Inc. | ||
---|---|---|
Balance Sheet | ||
Years ending December 31 | ||
Year 2 | Year 1 | |
ASSETS | ||
Current assets: | ||
Cash and equivalents | $46,125 | $36,900 |
Accounts receivables | $16,875 | $13,500 |
Inventory | $49,500 | $39,600 |
Total current assets | $112,500 | $90,000 |
Net fixed assets: | ||
Net plant and equipment | $137,500 | $110,000 |
Total assets | $250,000 | $200,000 |
LIABILITIES AND EQUITY | ||
Current liabilities: | ||
Accounts payable | $0 | $0 |
Accruals | $2,344 | $0 |
Notes payable | $13,281 | $12,500 |
Total current liabilities | $15,625 | $12,500 |
Long-term bonds | $46,875 | $37,500 |
Total debt | $62,500 | $50,000 |
Common equity: | ||
Common stock | $121,875 | $97,500 |
Retained earnings | $65,625 | $52,500 |
Total common equity | $187,500 | $150,000 |
Total liabilities and equity | $250,000 | $200,000 |
If Green Caterpillar Garden Supplies Inc. has 50 million shares of common stock outstanding, then the book value per share of Green Caterpillars stock in Year 2 was $3,750.
This statement is (correct or incorrect)? because:
The per-share book value is calculated by dividing the companys total common equity by the number of outstanding shares of common stock.
The per-share book value is calculated by dividing the companys total debt by the number of outstanding shares of common stock.
The per-share book value is calculated by dividing the companys total assets by the number of outstanding shares of common stock.
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