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RETAINED EARNINGS represent the cumulative amount of profits and/or losses,

dividends and other capital adjustments. It may be appropriated or unappropriated.

Appropriated retained earnings represent that portion which has been restricted and
therefore is not available for any dividend.

Unappropriated retained earnings represent that portion which is free and can be
declared as dividends to stockholders

Legal appropriation was mandated by law because the legal capital cannot be
returned to the shareholders until the corporation is dissolved and liquidated. An
example is appropriation for an amount equal to the cost of the treasury stocks.
Contractual appropriation is required by the contract to ensure their payment.
Such issuances may impose restriction on the payment of dividends. Examples
include:
a. Appropriation for sinking fund or bond redemption
b. Appropriation for redemption of preference shares

Voluntary appropriation is the one made or initiated by management. Examples


are:
a. Appropriation for plant expansion
b. Appropriation for increase in working capital
c. Appropriation for contingencies
BOOK VALUE PER SHARE is the portion of the total shareholders’ equity assigned
to each ordinary outstanding share. It is the expected amount that the
shareholders will receive assuming the assets of the corporation will be realized
at their book values.

Determination of book value per share:

Where there is only one class of share:

Total shareholders’ equity excluding subscription


BVPS = receivable
Number of shares outstanding
BOOK VALUE PER SHARE

Determination of book value per share:

Where there is more than one class of share:

BVPS of = Preference shareholders’ equity


Preference share Number of preference shares outstanding

BVPS of ordinary = Ordinary shareholders’ equity


share Number of ordinary shares outstanding