ACCTG 101

FINAL QUIZ

1. SECERN TO SEPARATE Co. started operations on January 1, 2021. Its authorized capitalization
is ₱2,000,000 divided into 20,000 shares with par value per share of ₱100. SECERN Co. receives
cash subscriptions for 5,000 shares at ₱120 per share. On January 31, 2021, SECERN receives
subscription for 2,000 shares at ₱160 per share.

Requirement: Provide the necessary journal entries.

January 1, 2021
Debit Credit
Subscription receivables 600,000
     Subscribed Ordinary shares 500,000
     Share premium-Ordinary` 100,000

January 31, 2021

Cash 320,000
     Subscription Receivables 200,000
     Share Premium 120,000

2. On January 1, 2021, the statement of financial position of LABILE ADAPTABLE Co. shows
the following information:

Share capital (authorized 20,000 shares with par value of 1,600,000

₱100)
Share premium 320,000
Retained earnings 1,080,000
Total shareholders’ equity 3,000,000

On July 1, 2021, LABILE reacquires 1,000 shares at ₱90. 

Requirements: Provide the entry on July 1, 2021 and in each of the following independent scenarios:
a. On September 1, 2021, LABILE reissues the 1,000 treasury shares at ₱90. 
b. On September 1, 2021, LABILE reissues the 1,000 treasury shares at ₱140. 
c. On September 1, 2021, LABILE reissues the 1,000 treasury shares at ₱60.

July 1, 2021
Entry
Debit Credit
Treasury shares-Ordinary 90,000
     Cash 90,000

a. September 1, 2021

Cash 90,000
     Treasury Shares-Ordinary 90,000

b. September 1, 2021
Debit Credit
Cash 140,000
     treasury shares-ordinary 90,000
     Share premium-ordinary 50,000

c. September 1, 2021

Cash 60,000
Share premium 30,000
     Treasury shares 90,000

3. On April 1, 2021, the board of directors of PEAL LOUD RINGING OF BELLS Co. declared
₱50 dividends per share to shareholders of record as of April 15, 2021 for distribution on
May 1, 2021. The shareholders’ equity of PEAL as of April 1, 2021 is as follows:

Share capital, authorized capital 20,000 shares, ₱100 1,600,000

par
Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity 140,000
Total shareholders’ equity 3,000,000

Requirement: Provide all the pertinent entries.

1. Solution: Cash dividends payable is computed as follows: 

Shares issued (P1,600,000 ÷ P100 par) 16,000 
Shares subscribed (P440,000 ÷ P100 par) 4,400 
Treasury shares (P288,000 ÷ P120 cost) ( 2,400) 
Outstanding shares 18,000 
Multiply by: Dividends per share 50 
Total cash dividends declared 900,000 

date of declaration
Debit credit
Retained earnings 900,000
     Cash dividends payable 900,000

Date of record No Journal entry

Date of distribution

cash Dividends payable 900,000

     cash 900,000

4. On April 1, 2021, DOLEFUL SAD Co. declared share dividends on a “1 share dividend for
every 10 shares held” basis to shareholders of record as of April 15, 2021 for distribution on
May 1, 2021. The market price per share on declaration date is ₱120. DOLEFUL’s
shareholders’ equity immediately before dividend declaration is shown below:

Share capital, authorized capital 20,000 shares, ₱100 1,600,000

par
Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity 140,000
Total shareholders’ equity 3,000,000

Requirement: Provide all the pertinent entries.

The share dividends declared is determined as “small” or “large” as follows: 

Share dividends declared – “1 sh. for every 10 shares held” 1/10 

Percentage of share dividends declared 10% The share dividends declared is considered
“small”because it is less than 20%.

Thus, fair value accounting is appropriate. 

Share dividends distributable is computed as follows: 
Shares issued (P1,600,000 ÷ P100 par) 16,000 
Shares subscribed (P440,000 ÷ P100 par) 4,400 
Treasury shares (P288,000 ÷ P120 cost) ( 2,400) 
Outstanding shares 18,000 
Multiply by: Dividends declared 1/10 
Number of shares declared as dividends 1,800
 Multiply by: Par value per share 100 
Total share dividends distributable 180,000

Date of Declaration
Debit Credit
Reatained earnings 216,000
    Share distributable payable 180,000
     Share Premium 36,000

date of Record NO ENTRY

date of distribution

Share distributable payable 180,000

     Share capital 180,000

5. On April 1, 2021, VELVETY SMOOTH Co. declared share dividends on a “1 share dividend
for every 5 shares held” basis to shareholders of record as of April 15, 20x1 for distribution
on May 1, 2021. The par value of the shares is ₱100 while the market price per share on
declaration date is ₱120. The total outstanding shares as of April 1, 2021 is 18,000.

Requirement: Provide all the pertinent entries.

The share dividends declared is determined as “small” or “large” as follows: 

Share dividends declared – “1 sh. for every 5 shares held” 1/5 

Percentage of share dividends declared 20% The share dividends declared is considered “large”
because it meets the threshold of “20% or more.”
 
Thus, fair value accounting is not appropriate. 
Share dividends distributable is computed as follows: 
Outstanding shares 18,000 
Multiply by: Dividends declared 1/5 
Number of dividends declared 3,600 
Multiply by: Par value per share 100 
Total share dividends distributable 360,000

Date of Declaration
Debit Credit
Retained earnings 360,000
     share distributable Payable 360,000

Date of record NO ENTRY

Date of distribution

Share distributable payable 360,000

     Share capital 360,000