Lecture 2 STATEMENT OF CHANGES IN EQUITY

MULTIPLE CHOICE
1. Which is not considered as sub classification of equity:
A. Share Capital
B. Share premium
C. Retained earnings
D. Dividends

2. The important data affecting the retained earnings that should be clearly disclosed in
the statement of retained earnings are:
A. Prior period errors
B. Appropriation of retained earnings
C. Effect of change in accounting policy
D. All of the above

3. I. Equity is defined as the residual interest in the assets of an entity after deducting
some of the liabilities
II. Equity is the equivalent of net assets, meaning total assets minus total liabilities
A. True, True
B. False, False
C. False, True
D. True, False

4. All items directly affecting retained earnings, except

A. Prior period errors
B. Dividends to shareholders
C. Net income or loss for the period
D. None of the above
5. Retained earnings may be appropriated for the following reasons, except
A. Legal requirement
B. Contractual requirement
C. Accounting policy
D. Entity policy

6. If the net income of prior period is understated because of change in accounting

policy, the effect is ________ to the beginning retained earnings.
A. Added
B. Excluded
C. Deducted
D. None of the above

PROBLEM 1
Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of
$2 par value common stock, which had a fair value of $5 per share before the stock
dividend was declared. This stock dividend was distributed 60 days after the declaration
date.

By what amount did Ray’s current liabilities increase as a result of the stock dividend
declaration?
a. $1,000N
b. $2,50
c. $0
d. $500

PROBLEM 2
Kamey Company reported the following adjusted account balances at year-end:

Share capital 15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment-credit 1,500,000
What amount should be reported as shareholder’s equity at year-end?
A. 41,900,000
B. 31,900,000
C. 31,000,000
D. 45,000,000

PROBLEM 3
Segihagid Company provided the following information on December 31, 2010:
Share premium 1,000,000
Accounts payable 1,100,000
Preference share capital, at par 2,000,000
Ordinary share capital, at par 3,000,000
Sales 10,000,000
Total Expenses 7,800,000
Treasury shares-ordinary, at cost 500,000
Dividends 700,000
Retained Earnings-January 11,000,000

The total shareholders’ equity should be reported on December 31, 2010 at

a. 8,000,000
b. 8,500,000
c. 5,800,000
d. 8,700,000

PROBLEM 4
Lusa Company provided the following information on December 31, 2010:
Share capital 5,000,000
Subscribed share capital 3,000,000
Subscription receivable 2,000,000
Share premium 1,500,000
Cumulative translation adjustment- debit 500,000
Treasury shares, at cost 700,000
Retained earnings 1,000,000
Cumulative unrealized gain on available for sale securities 600,000

What is the contributed capital on December 31, 2010?

a. 9,500,000
b .7,500,000
c. 8,500,000
d. 6,800,000
PROBLEM 5
Slobpa Company’s records included the following shareholders’ equity accounts:
Preference share capital, par value P15, authorized
200,000 shares 2,550,000
Share premium- preference 150,000
Ordinary share capital, no par, P50 stated value,
100,000 shares authorized 3,000,000

In Munn’s statement of shareholders’ equity, the number of issued and outstanding

shares for each class of stock is Ordinary Preference?
a. 60,000 170,000
b. 60,000 180,000
c. 63,000 170,000
d. 63,000 180,000

PROBLEM 6
Ashereyt Company was organized on January 1, 2010, with authorized share capital of
100,000 shares of P20 par value. During the year, Ashe had the following transactions
affecting shareholders’ equity:

January 10 -Issued 25,000 shares at P22 a share

March 25 -Issued 1,000 shares for legal services when the fair value was P24 share
September 30-Issued 5,000 shares for a tract of land when the fair value was P26 a
share

What amount should Ashe report for share premium at December 31, 2010?
a. 84,000
b. 80,000
c. 54,000
d. 50,000

PROBLEM 7
Panghimakas Company reported the following adjusted account balances at year-end:

Share capital 25,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment-credit 1,500,000

What amount should be reported as shareholder’s equity at year-end?

A. 41,900,000
B. 42,800,000
C. 48,900,000
D. 45,900,000

PROBLEM 8
Hangol Company provided the following information on December 31, 2010:
Share capital 5,500,000
Subscribed share capital 3,000,000
Subscription receivable 1,000,000
Share premium 1,550,000
Retained earnings 1,000,000

What is the contributed capital on December 31, 2010?

a. 6,800,000
b .7,500,000
c. 8,500,000
d. none

PROBLEM 9
Muviey Company provided the following information on December 31, 2010:
Share capital 5,500,000
Subscribed share capital 3,000,000
Subscription receivable 1,000,000
Share premium 1,550,000
Cumulative translation adjustment- debit 500,000
Treasury shares, at cost 700,000
Retained earnings 1,000,000
Cumulative unrealized gain on available for sale securities 600,000

What is the contributed capital on December 31, 2010?

a. 9,050,000
b .7,500,000
c. 8,500,000
d. 6,800,000