PART 1

Which of the following would never affect retained earnings? 

Stock dividend
Reissue of treasury shares
Correction of a prior period errors
Payment of long-term indebtedness

Appropriation for accumulated profits, if reflected in separate account, shall be shown as  

Component of equity as part of reserves
Component of total liabilities as current liability
Component of equity as part of share premium
Component of total assets as noncurrent assets

An appropriation of accumulated profits for possible contingencies should be 

Charged with all losses related to that contingency
Transferred to income as losses are realized
Classified in the liability section of the statement of financial position
Shown within shareholders’ equity in the statement of financial position

When preference share is cumulative, preferred dividends not declared in a period are
never paid
called dividends in arrears
considered a liability
Distribution of earnings

Dividends in arrears on cumulative preference share 

are considered to be a non-current liability
Should be disclosed in the notes to the financial statements
Only occur when preferred dividends have been declared
are considered to be a current liability

It represents the cumulative balance of periodic earnings, dividend distributions, prior period
adjustments and other capital adjustments. 
net income
Income summary
accumulated profits
dividends

The date on which liability for dividends must be recorded. 

Declaration date
Date of payment
Date of record
Date of issuance

The amount attributable to every share of ordinary share capital outstanding during the period.  
book value
carrying value
par value
stated value

The date which determines who gets the dividend 

date of payment
date of issuance
date of declaration
date of record

How is the treasury share account presented in the Statement of Financial Position?  
part of reserves
deducted from shareholders’ equity
current asset
deducted from accumulated profits

PART 2
Celestial Inc. issued 8,000 shares of its P10 par ordinary shares to a CPA for 600 hrs. of accounting
services rendered. A CPA usually bills P500 per hour of legal service. On this date of issuance, the
share was selling at public trading at P20 per share. By what amount should the share premium
account of Celestial Inc. increase as a result of the above transaction. 
160,000
220,000
80,000
None of the choices
300,000

Value of service rendered(500*600) 300,000

Ordinary shared at par value (8,000*10) 80,000

Share premium 220,000

Travis Co. decided set up a corporation issuing 5000 shares of P20 par ordinary stocks trading at
P25 in the stock market in exchange for an equipment with a fair value of 150,000. Similarly, Travis
Co. has a similar equipment which it bought for 160,000. The equipment is depreciated over 5 years
using the straight-line method and it has no salvage value. How much is the depreciation on the
first year? 
25,000
32,000
20,000
Option
30,000

160,000/5 years = 32,000

A corporation issues 500 shares of P50 par ordinary share capital for store equipment. The market
value of the store equipment is P35,000 and the market value of the stock is P55 per share. What
amount should be charged to the store equipment? 
P 25,000
P 10,000
P 27,500
None of the choices
P 35,000

Store equipment 35,000

Ordinary shares 25,000

Share premium 10,000

A company issued 20,000 shares of its P70 par value ordinary share capital and 8,000 of its P80 par
value preference share capital for a total amount of 1,800,000. At this date, the company’s ordinary
share capital was selling P 80 per share and the preference share capital was selling for P100 per
share. What amount of the proceeds should be allocated to the preference share capital? 
P400,000
None of the choices
P640,000
P800,000
P600,000

The shareholders’ equity section of JAO Co. revealed the ff. on Dec. 31, 2015: Preference share
(P100 par) P2,300,000; Share Premium – Preference: P805,000; Ordinary share (P15 par)
P5,250,000; Share Premium – Ordinary: P2,750,000; Subscribed ordinary shares: P50,000;
Accumulated Profits and losses: P1,900,000. How much is the legal capital? 
P7,600,000
P13,055,000
P11,150,000
P7,550,000
None of the choices

Preferred shares at par 2,300,000

Ordinary shares at par 5,250,000

Legal capital 7,550,000

If West Corporation has 80,000 ordinary shares authorized, has 50,000 ordinary shares issued, and
holds 4,000 ordinary shares as treasury stock, the total number of outstanding shares of West
Corporation amounts to 
76,000
30,000
34,000
46,000
None of the choices

Ordinary share issued 50,000

Ordinary share treasury stock 4,000

Ordinary share 46,000

On April 8, 2019, GODLY Corporation declared and issued a 25% ordinary share capital dividend.
Prior to this date, GODLY had 20,000 issued and outstanding shares of ₱2 par value ordinary
shares. The carrying value of each share is ₱20 at the time of declaration of dividend. As a result of
the share capital dividend, how much will be debited to retained earnings
P40,000
P75,000
P100,000
None of the choices
P10,000

20,000*25%*20 = 100,000

INDUSTRY Company had 40,000 shares of ₱10 par value treasury shares. These shares were
reacquired at a cost of ₱800,000. During the current year, the company reissued 30,000 shares at
₱25 per share. At December 31, what amount should INDUSTRY Company recognize as a
restriction to retained earnings? 
200,000
None of the choices
300,000
250,000
800,000

10,000/40,000*800,000=200,000

HARDWORK Corporation purchased 10,000 shares of its ₱10 par value ordinary shares for
₱120,000 on March 2, 2019. On December 18, 2019, HARDWORK reissued all 10,000 shares for
₱190,000. The issuance of treasury shares would include a credit to: 
None of the choices
Gain on sale of investment of ₱70,000
Retained earnings of ₱70,000
Share capital of ₱100,000
Share premium of ₱70,000

Treasury shares 120,000

Cash 120,000

Cash 190,000

Treasury shares 120,000

Share premium 70,000

Selling price 190,000

Cost 120,000

Share premium 70,000

A corporation has 4,000 shares of 10% noncumulative non participating preference shares
outstanding, par ₱100 and 10,000 ordinary shares outstanding, par ₱15. At the end of the year,
dividends of ₱200,000 were declared. How much dividends were paid to preference and ordinary
shareholders, respectively? 
₱40,000 and ₱160,000
₱0 and ₱200,000
₱100,000 and ₱100,000
₱80,000 and ₱120,000

PART 3

The following data are extracted from the shareholders’ equity section of the statement of financial
position of Del Corporation: Ordinary shares, P2 par value – Balance as of December 31, 2010;
P1,000,000. Ordinary shares, P2 par value – Balance as of December 31, 2011; P1,020,000. Share
premium - Balance as of December 31, 2010; P500,000. Share premium - Balance as of December
31, 2011; P580,000. Retained earnings - Balance as of December 31, 2010; P1,000,000. Retained
earnings - Balance as of December 31, 2011; P1,046,000. During 2011, the corporation declared and
paid cash dividends of P150,000 and also declared and issued a share dividend. There were no
other changes in shares issued and outstanding during 2011. What is the net income for 2011.  

Your answer

On January 2, 2010, Megan Company declared and distributed its only investment in equity
securities as dividend. At the time of the declaration, the securities has a carrying value of P500,000
and a related unrealized loss of P100,000. By what amount should Megan Company charge its
accumulated profit as a result of the property dividend declaration? 
400k

Your answer

On July 1, 2010, Bettina Company’s board of directors declared a 10% share dividend. The market
price of Bettina’s 400,000 outstanding ordinary shares, P50 par value, was P80 per share on the
date of declaration. The share dividend was distributed on September 1, 2010 when the market
price of the shares was P100 per share. What amount should be charged to the Accumulated
Profits and Losses account as a result of the share dividend? 

Your answer

What should FROZEN report as total contributed capital in its December 31, 2018 statement of
financial position? 
Your answer

For the year ended December 31, 2006, the financial records of Planet Corp. reported the ff.: Total
revenues – P801,400; total expenses – P601,100; Dividends declared – P25,600. What is the entry
to close Income Summary to Retained Earnings? (Input the total debit or credit amount and attach
your entry in the google classroom) 

Your answer

Venus Company issued 20,000 shares of its P70 par value ordinary shares and 8,000 shares of its
P80 par value preference share capital for a total of P1,800,000. At this date, the company’s
ordinary shares were selling at P80 per share and the preference was selling at P100 per share. (1)
What amount of the proceeds should be allocated to the preference shares? 

Your answer

What is the par value per share? 

Your answer

Jupiter corporation had the following shares outstanding at December 31, 2018: Ordinary shares,
par P80 – 320,000; 6% preference shares, par P80 – 160,000. Accumulated profits for dividend
distribution amounted to P64,400. No dividends were declared for 2016 and 2017. If the preference
share capital is cumulative and fully participating, what is the dividends per share of the preference
share? (Round off answers to two decimal places.)