Book Value Is Calculated By

question 52

Multiple Choice

Book value is calculated by:

• A) dividing total preferred equity less dividends in arrears by the number of preferred shares outstanding
• B) dividing total shareholders' equity less preferred shareholders' equity by the number of common shares outstanding
• C) dividing total preferred equity plus dividends in arrears by the number of common shares outstanding
• D) dividing total shareholders' equity by the number of common shares outstanding

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overhead used to convert raw materials into finished products.

FIFO Method

A method of inventory valuation that assumes the first items placed in inventory are the first sold, hence, the cost of the oldest inventory is used to determine the cost of goods sold.

Process Costing

A costing method used where similar products are produced continuously, allocating production costs based on the process or department.

Conversion Cost

The total cost of transforming raw materials into finished goods, including labor and manufacturing overhead.