Multiple Choice

Choose the best possible answer.

ABC Cor. reported P3,000,000 of ordinary share capital and

P4,500,000 of additional paid-in capital on its balance sheet.
Ordinary shares issued and outstanding is 500,000 shares. The
book value per share is *
P6
P9
P15
not determinable
answer not given

Which statement is incorrect? *

Book value per share is the claim of a shareholder in the net assets of the corporation
for every share held in the corporation.
If a corporation has 2 classes of shareholders, the book value per share should be
computed for both preference shares and ordinary shares.
Book value per share assumes that assets are realized at book values and liabilities
are liquidated at book values. Total gains (losses) on realization of assets and
liquidation of liabilities, if there are any, are assumed to sum up to zero.
Excess over par refers to the amount of shareholders’ equity in excess of the total
par value of the preference shares and ordinary shares issued by the corporation.
none of the above

Which statement is incorrect? *

Dilution is an increase in earnings per share when convertible instruments are
converted to ordinary shares.
Diluted EPS is required when there are potential shares outstanding.
Dilutive potential shares shall be deemed to have been converted into shares at the
start of the period or, if later, the date of the issue of the potential shares
Options and warrants are dilutive, when they would result in the issue of shares for
less than the average market price of shares during the period.
none of the above

ABC Co. ‘s shareholders’ equity on December 31,2020 are as

follows: 7% preference shares P100 par P3,000,000; Ordinary
share capital, 50,000 shares P1,500,000; Donated capital
P500,000; Accumulated profits P4,500,000. All preference
dividends have been fully paid. If preference shares have total
liquidation value of P3,200,000, how much is the book value per
ordinary share? *
P125.80
P126.00
P130
P300
answer not given

ABC Co. had 200,000 ordinary shares, 20,000 convertible

preference shares, and P1,000,000 of 5% convertible bonds
outstanding during 2020. The preference shares are convertible
into 40,000 ordinary shares. During 2020, ABC paid dividends of
P.60 per share on the ordinary shares and P2 per share on the
preference shares. Each P1,000 bond is convertible into 45
ordinary shares. The net income for 2020 was P400,000 and the
income tax rate was 30%. Diluted EPS for 2020 is (rounded to the
nearest penny) *
P1.39
P1.41
P1.53
P1.67
answer not given

Potential ordinary shares include the following, except: *

financial liabilities (or equity instruments), including preference shares, that are
convertible into ordinary shares
options and warrants
shares that would be issued upon the satisfaction of conditions resulting from
contractual arrangements, such as the purchase of a business, or other assets
treasury shares that have been cancelled
none of the above

Book value per share is ____ oriented while market value per
share is ____oriented. *
short term; long term
long term; short term
future; historical
historical; future
At December 31, the stockholders’ equity section shows:
Ordinary share capital, P5 par value; 1,320,000 shares issued and
1,200,000 shares outstanding: P6,600,000; Share Premium:
P1,400,000; Retained earnings: P500,000; Treasury shares,
(120,000 shares): P700,000; Total shareholders’ equity -
P7,800,000. How much is the book value per share? *
P5.91
P6.44
P6.50
P7.08
answer not given

On January 1, 2020, XYZ Corporation had 250,000 ordinary shares

of P2 par value outstanding. On March 1, XYZ sold an additional
500,000 shares on the open market at P20 per share. XYZ issued
a 20% share dividend on May 1. On August 1, XYZ purchased
280,000 shares and immediately retired the shares. On
November 1, 400,000 shares were sold for P25 per share. What is
the weighted-average number of shares outstanding for 2020? *
344,444
477,777
750,000
1,020,000
answer not given

ABC Company had 600,000 ordinary shares outstanding on

January 1, 2020. During 2020, ABC Company issued rights to
acquire on ordinary share at P10 in the ratio of 1 new share for
every 4 shares outstanding. The market value of ordinary share
immediately prior to the rights issue is P35. The rights were
exercised on October 1, 2020. The net income of ABC Company
for 2020 is P8,550,000. In its 2020 income statement, how much
should ABC Company report as basic EPS? *
P11.40
P12.00
P13.41
P14.25
answer not given

LOVE Co. had EPS of P15.00 for 2020 before considering the
effects of any convertible securities. No conversion or exercise
of convertible securities occurred during 2020. However,
possible conversion of convertible bonds would have reduced
EPS by P0.75. The effect of possible exercise of ordinary share
options would have increased EPS by P0.10. What amount should
LOVE Co. report as diluted EPS for 2020? *
P14.25
P14.35
P15.00
P15.10

Which statement is incorrect? *

PAS 33 is required to be used by companies whose shares and potential shares are
publicly traded.
When an undertaking presents both consolidated and separate financial statements,
the disclosures required by PAS 33 need be presented only for the consolidated
information
Basic EPS amounts uses the profit attributable to ordinary equity holders of the
parent undertaking.
Basic EPS shall be calculated by dividing the numerator by the weighted-average
number of ordinary shares during the period
none of the above

The book value per share *

is usually a close approximation of the market price per share.
is the same as the par value per share.
may be useful in determining the trend of a shareholders’ per share equity in a
corporation.
always falls within the annual range of a company's market value per share.

Which statement is incorrect? *

Shares, issued in exchange for the settlement of a liability, are included in EPS
calculation from the settlement date.
Shares, that will be issued upon the conversion of a mandatorily convertible
instrument, are included in the calculation of basic EPS from the date the contract is
entered into.
Contingently-issuable shares are treated as outstanding, and are included in the
calculation of basic EPS from the date when all necessary conditions are satisfied.
none of the above
When a corporation’s earnings and dividends are exemplary
good, which type of preference shares will yield the highest
benefit for ordinary shareholders? *
noncumulative, nonparticipating
noncumulative, fully participating
cumulative, nonparticipating
cumulative, participating
cumulative, partially participating