CPA REVIEW SCHOOL FOF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING _VALINISIYIVALIX/ESCALA/SANTOS'DELA CRUZ BOOK VALUE AND QUASI-REORGANIZATION 1. Anentity provided the following equity balances at yearend: 10% preference share capital, 30,000 shares, par P100 3,000,000 ‘Ordinary share capital, 30,000 shares. par POD 5,000,000 Share premium ‘0.000 Retained canings 000,000 ‘The preference shares have a call price of 120, a liquidation price of 115 and dividends have not been paid for 3 years. What is the book value per preference share? 125 130 «45 4 10 2. Anentty provided the following shareholders’ equity at year-end: 10% cumulative preference share capital, P100 par, 30,000 shares. 3,000,000 Ordinary share capital, POO par value, $0,000 shares 5,000,000 Retained eamings 4,000,000 Dividends in arrears on the preference shares are for S years. Ifthe entity were to be liquidated, the preference share would receive par plus a premium of P300,000. What is the book value per ordinary share? Om b 134 174 ad 150 3, Anentity provided the following shareholders’ equity at year-end share capitl, P10O par, 72,000 shares 7,200,000 Subseribed ordinary share capital, 12,000 shares 1.200 000 Subscription receivable 400,000 ‘Treasury shares, 4,000 a cost 600,000 Retained earings 2,000,000, ‘What i the book value per ordinary share? 12250 1750 . 100.00 4 130.00 4, On December 31, 2019 and 2018, an entity had 30,000 10% cumulative preference shares of P1O0 par ‘alue outstanding. No dividends were in arrears on December 31, 2017, The entity did not decere a Gividend during 2018, During 2019, the entity paid a cash dividend of P200,000 on the preference shares. How should the dividend in arrears dn preference shares be reported in the 2019 financial ‘statements? ‘a. Accrued Hishiity of P300,000, », Disclosure of P300,000 by of P0000 Ebi orrtoncon 6692Page 2 5. An ett began operations lnuary 1,2015 and reported he ellowing net income ot los fr Bie years of operations: 2015 1,500,000 loss 2016 1,300,000 loss. 2017 1.200.000 loss 2018. 4,500,000 income 2019 9,000,000 income ‘On December 31, 2019, the capital accounts were: Preference share capital, P100 par, 12% participating and ‘cumulative, 100,000 shares 10,000,000 Preference share capital, P100 par, 10% nonparticipating. rnoncumulative, $0,000 shares 5,000,000 ‘Ordinary shitre capital, P10 par, 1,000,000 shares 10,000,000 ‘The entity has neVer paid cash or share dividend. The capital sccounts have not changed sine the entity began operations. If the maximum amount available for eash dividend is declared on December 31,2019, what amount of dividend is payable 10 1.12% Preference sharcholders? 6,000,000 ‘y 6900,000 © 1,100,000 1200,000 2.10% Preference shareholders? a. 2500,000, 2,860,000 500.000, 4 360,000, 3,_Ondinarysharcholders? & 2,100,000 . 1200,000, ©. 1920,000 d. 4:500:000 6. Adverse financial and operating circumstances warrant that an entity should undergo a quasi- reorganization at year-end. © Inventory with fair value of P1,000,000 is currently revorded in the accounts at cost of P1,500,000. * Plant assets with a fair value of P3,000,000 are curently recorded at P4,000,000 net ‘of accumulated depreciation, * Unrecorded accounts payable amiount to P300,000. * Individual shareholders contribute P1,500,000 to create additional paid-in capital 'o facilitate the reorgenization. No new shares are issued to the shareholders. + ‘The par value of the share capital is reduced from P100 to PSO. * Immediately before these events, the entity reported the following shareholders" equity ‘Share capital, P1O0 par value, 50,000 shares 5,000,000 ‘Share premium , '500,000 Retained earings (deficit) (@,000,000) After the quasi-reorganization, what is the total shareholders’ equity? 200,000 , 2,500,000 1,700,000 1,000,000 END 6692