NAME: Date

Professor: Section: Score:

QUIZ 1:

1. On April 1, 20x1, the board of directors of PEAL LOUD RINGING OF BELLS Co. declared ₱50
dividends per share to shareholders of record as of April 15, 20x1 for distribution on May 1,
20x1. The shareholders’ equity of PEAL as of April 1, 20x1 is as follows:
Share capital, authorized capital 20,000 shares, ₱100 par 1,600,000
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 Total shareholders’ equity 140,00
3,000,00
0
Requirement: Provide all the pertinent entries. 0

NUMBER 1:

Total cash dividends 900,000

declared
April 1, 20x1 Retained earnings or 900,000
(Date of Dividends
declaration) Cash dividends
payable 900,000
April 15, 20x1
(Date of record) No entry

May 1, 20x1 Cash dividends 900,000

(Date of payable 900,000
distribution) Cash

2. On April 1, 20x1, 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, 20x1 for distribution on May 1,
20x1. 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 par 1,600,000
Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000

1
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity Total shareholders’ equity 140,00
3,000,00
0
Requirement: Provide all the pertinent entries. 0

NUMBER 2:

The pertinent entries are:

April 1, 20x1 Retained earnings (1,800 sh. x P120) 216,000
(Date of Share dividends distributable / Stock
declaration) dividends payable 180,000
Share premium 36,000
April 15, 20x1
(Date of record) No entry

May 1, 20x1 Share dividends distributable / Stock dividends 180,000

(Date of payable
distribution) Share capital 180,000

3. On April 1, 20x1, 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, 20x1. 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, 20x1 is 18,000.

Requirement: Provide all the pertinent entries

NUMBER 3:

Total share dividends distributable 360,000

The pertinent entries are:
April 1, 20x1 Retained earnings (3,600 x P100) 360,000
(Date of Share dividends distributable 360,000
declaration)
April 15, 20x1
(Date of record) No entry

May 1, 20x1 Share dividends distributable 360,000

(Date of Share capital 360,000
distribution)

QUIZ 2:

2
1. SUCCOR HELP AID RELIEF Co. declared ₱3,600,000 cash dividends to its preference and
ordinary shareholders out of its profits in 20x3. No dividends have been declared since 20x1.
SUCCOR’s shareholders’ equity immediately before dividend declaration is as follows:
10% Preference share capital, ₱200 par 4,000,000 Ordinary share capital, ₱100 par 16,000,000
Retained earnings 10,000,000
Total shareholders’ equity 30,000,000

Requirements: Compute for the dividends to (1) Preference shareholders and (2) Ordinary
shareholders under each of the following scenarios: a. Preference share is noncumulative
b. Preference share is cumulative
c. Preference share is noncumulative and fully participating
d. Preference share is cumulative and fully participating
e. Preference share is cumulative and participating up to 16%

NUMBER 1:

Requirement (a) – Preference share is noncumulative

Total dividends declared 3,600,000
Allocation:
Allocation to preference shares: (4M par x 10% x 1 yr.) 400,000
Excess allocated to ordinary shares: (1.8M - 200,000) 3,200,000
Balance -

Requirement (b) – Preference share is cumulative

Total dividends declared 3,600,000
Allocation:
Allocation to preference shares: (4M par x 10% x 3 yrs.) 1,200,000
Excess allocated to ordinary shares: (1.8M - 200,000) 2,400,000
Balance -

Requirement (c) – Preference share is noncumulative and fully participating

Total dividends declared 3,600,000
Allocation:
Basic allocation to preference shares:
(4M par x 10% x 1 yr.) 400,000
Basic allocation to ordinary shares:
(16M par x 10% x 1 yr.) 1,600,000
Excess subject to participation (3.6M - .4 - 1.6) 1,600,000
Participation of preference shares
(1,600,000 x 4M par/ 20M par) 320,000

3
Participation of ordinary shares
(1,600,000 x 16M par/ 20M par) 1,280,000
Balance -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as:
Allocation to preference shares:
(400K basic + 320K participation) 720,000
Allocation to ordinary shares:
(1.6M basic + 1.28M participation) 2,880,000
As allocated 3,600,000

Requirement (d) – Preference share is cumulative and fully participating

Total dividends declared 3,600,000
Allocation:
Basic allocation to preference shares:
(4M par x 10% x 3 yrs.) 1,200,000 Basic allocation to ordinary shares:
(16M par x 10% x 1 yr.) 1,600,000
Excess subject to participation 800,000
Participation of preference shares (800,000 x 4M/20M) 160,000
Participation of ordinary shares (800,000 x 16M/20M) 640,000
Balance -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as:
Allocation to preference shares:
(1.2M basic + 160K participation) 1,360,000
Allocation to ordinary shares:
(1.6M basic + 640K participation) 2,240,000
As allocated 3,600,000

Requirement (e) – Preference share is cumulative and participating up to 16%

Total dividends declared 3,600,000
Allocation:
Basic allocation to preference shares:
(4M par x 10% x 3 yrs.) 1,200,000
Basic allocation to ordinary shares:
(16M par x 10% x 1 yr.) 1,600,000

4
Excess subject to participation 800,000
Participation of preference shares [4M par x (16% - 10%)*] 240,000
Excess allocated to ordinary shares (800,000 - 240,000) 560,000
Balance -

The allocated amounts are reconciled with the total dividends declared as follows:
Total dividends declared 3,600,000
Total dividends allocated as:
Allocation to preference shares:
(1.2M basic + 240K participation) 1,440,000
Allocation to ordinary shares:
(1.6M basic + 560K participation) 2,160,000
As allocated 3,600,000

NUMBER 2:

Total dividends declared 8,000,000

Allocation:
Basic allocation to 10% preference shares:
(4M par x 10% x 3 yrs.) 1,200,000
Basic allocation to 12% preference shares:
(12M par x 12% x 1 yr.) 1,440,000
Basic allocation to ordinary shares:
(16M par x 10% x 1 yr.) 1,600,000
Excess subject to participation 3,760,000
Participation of 10% preference shares
(3,760,000 x 2M/16M) 470,000
Participation of 12% preference shares
(3,760,000 x 6M/16M) 1,410,000
Participation of ordinary shares (3,760,000 x 8M/16M) 1,880,000
Balance -
The allocated amounts are reconciled with the total dividends declared as
follows:
Total dividends declared 8,000,000
Total dividends allocated as:
Allocation to 10% preference shares: (1.2M + 470K) 1,670,000
Allocation to 12% preference shares: (1.440M +1.410M) 2,850,000
Allocation to ordinary shares: (1.6M + 1.880M) 3,480,000
As allocated 8,000,000