POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF ACCOUNTANCY

NAME __ZUMARRAGA________________________________ SECTION ________________________

True or False. Write T or F.

1. Retained Earnings with credit balance is called Deficit. F
2. The Articles of incorporation enumerates the powers and limitations conferred upon the corporation
by the government which includes the name of corporation, the authority and duties of the directors
and the principal office of the corporation. F
3. When preference share capital is participating, ordinary shares are always given regular dividends with
the same rate as that of preference shares, whether they are cumulative or not, as long as there are
available dividends. T
4. The Retained Earnings Account of the corporation has a credit balance of P500,000. 80% of this was
appropriated for the expansion of the company, while the Cash account has a balance of P150,000.
The corporation can only declare dividends up to P150,000 Cash dividends. T
5. Corporate Recapitalization generally affects the total Stockholder’s equity of a corporation. F
6. The account Retained Earnings Appropriated for Dividends is debited at the date of declaration. F
7. All the partners in a Limited Partnership are only liable up to their contributions to the partnership
only. T
8. The bonus account is debited when there is transfer of capital from one partner to the other. F
9. Asset revaluation may be recorded upon the admission of a new partner whether by purchase or by
investment. T
10. Free Interest – Amounts to be Paid to partners are first applied to loan and then on capital. T
11. Share Capital includes issued shares at its par or stated value, subscribed shares (net of long-term
subscription receivables), and stock dividend distributable. T
12. When the value of the asset received in exchange for stocks is overstated, the share capital is said to
hold secret reserves. T
13. Partnership liquidation is always preceded by partnership dissolution. T
14. A corporator whose name is mentioned in the Articles of Incorporation is an incorporator. T
15. The chronological and numerical records of stock certificates issued are listed in the stockholder’s
ledger. T
16. If the FMV of stocks is greater than the PV at the time of stock declaration of 18%, the gain from the
issuance of stock dividends at more than par has no effect on Total Stockholder’s Equity. F
17. Share Capital and Additional Paid-in Capital is known as the legal capital. F
18. To compute for Earnings per Share, subtract from the Net Income the earnings attributable to ordinary
shares divided by the outstanding ordinary shares. F
19. Equity identified with Preference share Capital (cumulative) generally includes the liquidation value of
the outstanding shares and any claim on current and dividend in arrears. T
20. If there are 5,000 authorized shares and 1,000 shares in treasury which includes 300 shares acquired
through donation, we can assume that 4,000 shares are outstanding shares. F (char di ko sure)
21. A partner who desires to withdraw from the partnership may do so as long as he gets the consent of
majority of the other partners. T
22. Preference Share Capital is usually recorded at Par Value while Ordinary share Capital is at stated
value. F
23. Subscribers are persons who purchase stocks and agree to pay at a later date, while undertakers are
those who agree to dispose of the shares to the general public T
24. Share Capital shown in the Statement of Financial Position is the difference between Authorized Share
Capital and Unissued Share Capital F
25. Another term used for Share Capital is Paid-in Capital. F
26. Quasi-public corporations are actually private corporations. F
27. When share capital are reacquired and then retired by the issuing corporation, the related additional
paid in capital from the original issuance of stock is also cancelled. T
28. The highest bidder is the one who is willing to pay the unsettled subscription plus any expense
incurred in relation with the delinquency sale and is agreeable to receive the least number of stocks. T
29. Dividend in arrears on preference shares are reported in the financial statement as a liability. F (char di
ko sure)
30. A corporation may never earn a profit or incur a loss by selling or buying its own stock. T
MULTIPLE CHOICE. Write the Letter of your choice on the before the number.
Show necessary computations on your worksheet
31 The Shareholder’s equity of OTWOL, Inc. Show the following information:
Preference share capital 5,000 share authorized, P50 par P 160,000
Ordinary Share Capital, P20 stated value 250,000
Preference Share premium 8,000
Ordinary share Capital in excess of stated value 10,000
Retained Earnings 200,000
Half of the Preference Shares were converted into Ordinary Shares. Two Ordinary shares
were issued for every preference converted. Paid-In capital from Conversion will be credited for -
a. P24,000 b. P33,000 c. P20,000 d. No Paid-in Capital
e. P48,000
32 The Shareholder’s Equity of DOLCE AMOR Incorporated as of December 31, 2010 consists of 10%
Preference Shares (cumulative and participating) with outstanding shares of 6,000, P100 par
value; Ordinary Shares of 10,000 with P40 par value and Retained Earnings of P300,000.
Dividends were in arrears for 2 years at the start of 2010. Dividends declared for 2010 amounted
to P200,000. How much will be in arrears at the end of 2010?
a. none b. P20,000 c. P60,000 d. P180,000

33 The Retained Earnings account of PASSION Corp. has a credit balance of P75,000 as of December
31, 2011. During that year 20% stock dividends were declared to 5,000 outstanding Ordinary
shares with par value of P50/sh (fair market value of P55/sh). It has been noted that the retained
earnings had a deficit of P5,000 at the beginning of the year (2011). No other stock transactions
were made. Compute for the Earnings Per Share.
a. P26/sh b. P4/sh c. P27/sh d. incomplete data

34 On April 1, 2012, VERGARA Corp received subscription for 12,000 Ordinary Shares at P5 above the
par value of P95/sh. The subscribers gave a down payment of 30% . After a month, Mary 1, 2012,
the subscribers paid an additional 30% of the balance. How much would be reported as
Subscription Receivable in the Statement of Financial Position after these transactions?
a. P480,000 b. P558,600 c. P588,000 d. P117,500

35 Assuming only half of the subscribers of VERGARA Corp made a full payment on June 1, 2012, how
many shares will be issued stock certificates?
a. 12,000 shares b. 6,000 shares c. 3,221 shares d. 6,442 shares

36 FONTANILLA, Inc. issued 3,000 to Ordinary shareholders for cash (at par) and another 3,000 stocks
to lawyers during incorporation as payment for legal fees amounting to P200,000. It also issued
4,000 shares in exchange for an equipment with book value of P265,000 but has FMV of P289,000.
The corporation also received subscription for 2,000 shares issued at P76/sh. If, after these
transactions, Subscribed Ordinary Shares has a balance of P130,000, what would be shown as
Ordinary Share Capital in the Shareholder’s Equity?
a. P684,000 b. P650,000 c. P836,000 d. P780,000

37 The Shareholder’s Equity of FONTANILLA, Inc. would show its Additional Paid-in Capital at -
a. P56,000 b. P34,000 c. P22,000 d. zero

38 As of November 31, 2014, SerCHief Incorp. has 10,000 shares authorized, 8,000 Ordinary shares
issued and 1,100 shares in treasury. Retained Earnings as of the same period showed a credit
balance of P300,000, with no Additional Paid-in Capital balance. Additional information shows that
the shares have a stated value of P80 while said treasury shares had been reacquired at P110/sh.
A month later, 800 of the treasury shares were sold at P125/sh, while a net income of P50,000
was closed to Retained Earnings. What would be the Total Stockholder’s Equity at the end of the
year?
a. P952,000 b. P919,000 c. P969,000 d. P940,000

39 Partners Kara, Sarah and Alex divide their profits and loss in the ratio 45%, 30% and 25%.
Sebastian is to join the partnership and will invest sufficient amount to have 30% interest in the
partnership. The new profit and loss ratio for partners Kara, Sarah, Alex and Sebastian
(respectively) will be:
a. 45%-30%-25%-25% b. 35%-20%-15%-30% c. 31.5%-21%-17.5%-30% d. equally
40 The Shareholder’s Equity of Clarky Corp shows the following information as of December 31, 2013.
₱8 Preference Share Capital, P50 par P325,000
Ordinary Share Capital, P15 par. 600,000
Retained Earnings 200,000
Dividends declared for the year amounted to P66,000. Preference Shares are noncumulative and
non-participating. Dividends per share (PSC and OSC respectively) for the year would be:
a. P4 and P2.22 b. P4 and P3.63 c. P8 and P0.35 d. P8 and P2.50

41 Four thousand ordinary shares were reacquired by Leah Inc. at P55/sh. A month later, 1,250
treasury shares were reissued at P59/sh. Additional information shows that all the shares were
originally issued at P10 above the par value of P40. What would be credited (debited) as Paid-in
Capital (Retained Earnings) upon the reissuance of the treasury shares?
a. P23,750 b. P5,000 c. (P12,500) d. P18,750

42 After the reacquisition and reissuance of the treasury shares, the total Retained Earnings will -
a. increase b. decrease c. increase then decrease d. remain the same

43 Tolayts Corporation received 2,160 Ordinary shares as donation. It later sold 1,500 shares
P30/share. Ordinary shares has par value of P25/sh. Memorandum entry method was used by
the company. The entry to record the sale will show a credit to_____ amounting to ______.
a. Donated Capital, P45,000 c. Paid in Capital from Donated Stock, P64,800
b. Donated Capital, P22,500 d. Paid in Capital from Donated Stock, P37,500

44 The Shareholder’s Equity of Manang Incorp contain the following: Ordinary Share Capital, P30
par, 25,000 shares; Ordinary Share Premium, P87,500 and Retained Earnings of P150,000.At the
end of the year, the original issue of Ordinary share P30 par was replaced by P30 stated value. The
total additional paid in capital would -
a. decrease by P87,500 b. increase by P87,500 c. increase by P62,500 d. remain the same

45 The Shareholder’s Equity of Jiggs Corp shows the following information as of December 31, 2012.
8% Non cumulative Preference Share Capital, P50 par P325,000
Ordinary Share Capital, P15 par. 270,000
Retained Earnings 200,000
Net Income for the period was P52,250.00. Dividends were declared to stockholders of record as
of December 31, 2012. Give the earnings per share.
a. P4.04 b. P4.00 c. P1.46 d. P1.44

46 What would be the earnings per share assuming dividends were not declared by Jiggs Corp,?
a. P4.04 b. P2.90 c. P1.46 d. P8.04

47 The Shareholder’s Equity of Princess Grace Corp shows the following information as of December
31, 2011. 10% Preference Share Capital, P100 par P500,000
Preference Share

7,500
Ordinary Share Capital, 10,000 shares 400,000
Ordinary Share Premium 50,000
Retained Earnings 200,000
The corporation has P35,150 dividend in arrears at the end of 2008. Preference shares were
noncumulative but participating up to an additional 6%. Dividends declared was P150,000.
Dividends per share for Preference & Ordinary share capital (respectively) would be -
a. P16.67; P6.67 b. P16.00; P7.00 c. P19.24; P5.38 d. P23.03; P3.49

48 What would be the Dividends per share for Preference & Ordinary share capital (respectively)
assuming the preference share capital was cumulative and fully participating?
a. P24.24; P2.88 b. P16.67; P6.67 c. P100.00; P40.00 d. P19.79; P5.10

49 Gabriel and Marian are sole proprietors who decided to pool their assets to form a Partnership.
Both have adjusted net assets totalling P357,000. Another partner, Mike is to invest sufficient
amount to have 35% interest in the partnership. How much cash should Mike invest?
a. P124,950 b.P541,239 c. P663,000 d. P192,231
50 Hugs Corporation owns 40,000 shares in the Grace Fashion. Hugs is to distribute 3 shares of Grace
Fashion for every 2 shares of Hugs Corp owned. At the date of declaration the financial
statements show that Investment in Grace Fashion has a debit balance of P1,060,000, while Hugs
Corporation has reported 13,400 P160-par outstanding Ordinary shares. On the date of
declaration, the Retained Earnings account will be recorded at -
a. P532,650 debit b. P236,733 debit c. P706,667 debit d. P1,590,000 debit

51 A week before the property dividend was distributed, Grace Fashion stocks rose by P2.50/sh. This
increase would mean the Retained Earnings will be credited for -
a. P50,250 b. P22,333 c. P66,667 d. none of the above

52 On April 1, 2013, KusYna Conglomerate issued 10% Promissory note to its 50,000 stockholders for
the scrip dividends they have declared last March 1, 2013 amounting to P1,005,000 to be paid on
Nov 15, 2013. On the date of payment, Interest Expense will be debited for -
a. P71,187.50 b. P62,812.50 c. P58,625.00 d. P100,500

53 Amor Corporation is to issue 2,300 P30-pv Ordinary shares as payment for the legal fees rendered
during incorporation. Various receipts were gathered to estimate for the lawyer’s fees were more
or less at P2,000/day including transportation and other miscellaneous fees, totalling 35 days.
Upon the issuance of the stocks, the Pre-operating expenses will be debited for
a. P70,000 b. P69,000 c. P80,500 d. P60,000

54 The following information were taken from the books of Buenavista Co., Incorp. Compute for the
total shareholder’s equity.
Cash, P300,000
Dividends payable, P25,000
Treasury shares, P52/sh
Retained Earnings - Appropriated, P450,000
Input tax, P8,500
Ordinary share capital, 50,000 shares issued, P20 par
Ordinary share premium, P91,500
Ordinary Shares subscribed, 20,000 shares
Ordinary Shares Subscription Receivable - due in 3 years, P120,000
Preference Share Capital, 10,000 share outstanding, P50 par, 1,000 shares in treasury
Retained Earnings - Unappropriated, P150,000
Preference Share dividend distributable, 5,000 shares
a. P2,619,500 b. P2,671,500 c. P2,791,500 d. P2,719,500

55 Coco Corporation has authorized ordinary shares of 200,000 with par value of P250/share. As of
the date of incorporation 50,000 shares were subscribed at P275/share. How much should be
reported to the Securities and Exchange Commission as paid up?
a. P3,437,500 b. P3,125,000 c. P13,750,000 d. P12,500,000

56 Use the information from Coco Corporation. The company undertakes a 5 for 2 share split. The
new number of authorized shares and par value would be:
a. 500,000 shares at P110.00/share c. 80,000 shares at P625.00/share
b. 500,000 shares at P100.00/share d. 80,000 shares at P687.50/share

57 Maalala Corporation has a Total shareholder’s Equity of P11,225,000 as of December 31, 2014,
which includes 23,000 Ordinary shares issued at P200 par and 5,000 12% Preference shares issued
at P300 par. Dividends in arrears amounted to P410,000 (including the current year). Compute for
the book value per share assuming the cumulative preference shares has a liquidation value of
P333/share.
a. PSC – P423; OSC – P396.09 c. PSC – P415.00; OSC – P397.83
b. PSC – P333; OSC – P200.00 d. PSC – P451.00; OSC – P390.00

58 The following information were taken from the stockholder’s equity of Forget-me-not, Inc. as of
December 31, 2013: 10% Preference Share Capital, P80-par 50,000 shares issued and
outstanding; Preference Share Premium, P50,000; Ordinary Share Capital, 160,000 shares issued
 and outstanding, P25 par; Ordinary share Premium, P16,000; Dividend in Arrears at the start of
2013 was P65,000. Preference Share capital is cumulative but non-participating. How much total
dividends should be declared so that the total dividends given to the Ordinary Share Capital would
be the same with that of the Preference Share Capital?
a. P465,000 b. P930,000 c. P400,000 d. P65,000

59 Using the Shareholder’s equity of Forget-me-not, Inc., how much should be declared as Dividends
for the year so that the dividends per share for Preference share would be P9.70, assuming
Preference shares were cumulative and fully participating?
a. P760,000 b. P825,000 c. P505,000 d. P905,000

60 On February 28, 2010, OLYANIN, Inc. declared 15% stock dividends to its 50,000 P50-par Ordinary
shareholders as of March 31, 2015 payable on May 1, 2015. FMV of stocks are of the following
dates were as follows: Feb 28 – P60/share; March 31 – P61/share; May 1 – P65/share. How
much would be debited to retained earnings?
a. P375,000 b. P450,000 c. P457,500 d. P487,500

61 MEMORY Company shows the following information its shareholder’s equity:

Ordinary Share Capital, 25,000 authorized shares, 18,000 shares issued
16,200 shares outstanding, P 60 par. - - - - - - - - - - - - - - - - - - - - - - - -- P _____________
What will be the amount written on the space above?
a. P1,500,000 b. P1,080,000 c. P972,000 d. P108,000

62 Based on MEMORY Company, if P33,372 were declared as dividends, what would be the dividends
per share?
a. P1.83 b. P1.85 c. P2.06 d. P18.54

63 Jack and Jill are partners with beginning capital balances of P300,000 and P200,000 respectively.
They agreed to divide their profits as follows: 5% interest on their beginning capital, weekly
salaries of P800 and P850 respectively and the remainder in the ratio 3:5. Net Income for the year
was P100,000. What would be the share of Jack and Jill, respectively, in the Income?
a. P60,650 and P60,950 c. P49,350 and P44,050
b. P50,120 and P49,880 d. P52,550 and P47,450

64 Upon partnership liquidation, the total non-cash assets of Powderpuff Girls, Ltd were sold with a
gain on realization amounting P180,000. Liabilities of P110,000 were all paid. The partners,
Bubbles, Blossoms and Buttercup share income and loss in the ratio 3:2:5. Powderpuff Girls, Ltd
had a beginning balance of P90,000 invested equally by the partners. Upon liquidation, Blossom
would receive -
a. P66,000 b. P36,000 c. P44,000 d. P126,000

65 Princess Lia Corporation has authorized shares consisting of 5,000 shares of P50-par value
Preference Share Capital and 15,000 shares of P20-stated value Ordinary Shares. The ledger
included the following balances pertaining to its shareholder’s equity.
Preference Share Capital P 225,000
Preference Share Premium 60,000
Ordinary Share Capital 200,000
Paid in Capital in Excess of Stated Value – Ordinary Share 35,000
One-third of the preference shares were issued for cash, while the rest were issued as payment
for accounting services totalling P195,000. All ordinary shares were issued for cash. Compute for
(1) number of preference shares issued for cash; (2) Total preference share premium arising from
issuance to accountants (3) average price per share of ordinary share capital

# of PS issued for cash Total PS premium Ave price/share on OSC

( accountants)
a. 1,500 shares P45,000 P 23.50
b 3,000 shares P15,000 P 23.50
.
c. 4,500 shares P60,000 P 23.50
d 5,000 shares P60,000 P 50.00
.