PART I:

The following transactions occurred during the year:

Jan 10- Declared a P20 cash dividend per share to shareholders of record as of January 25

Retained Earnings 200,000

Dividends Payable 200,000

10,000 x 20 = 200,000

Feb 10- Paid the dividends declared on January 10

Dividends Payable 200,000

Cash 200,000

June 1- Declared a 10% scrip dividend to shareholders of record as of July 1. Dividends are to be
distributed on November 1 plus 18% interest.

Retained Earnings 50,000

Scrip Dividends Payable 50,000

10% x 500,000= 100,000

Nov 1- Paid for the scrip dividends

Scrip Dividends Payable 50,000

Interest Expense 3,750
Cash 53,750

50,000 x 18% x 5/12= 3,750

5 months (June 1 to Nov1)

Dec 31- Net income for the year amounted to P250, 000

Revenue ***
Income Summary 250,000
Expenses ***

PART II:

The following is the abstract of the shareholder's equity of Shake Corporation before the
declaration of cash dividends:

Preference share is non-cumulative and non-participating

Preference Ordinary Total

15% x 3,000,000 450,000 450,000
Remainder 750,000 750,000
TOTAL 450,000 750,000 1,200,000
Dividends per Share 15 37.50

A. Preference share is participating

Preference Ordinary Total

15% x 3,000,000 450,000 450,000
15% x 1,000,000 150,000 150,000
Remainder 450,000 150,000 600,000
TOTAL 900,000 300,000 1,200,000
Dividends Per Share 30 15

600,000 x (3M/4M) = 450,000 600,000 x (1M/4M) = 150,000

 B. Preference Share is Cumulative

Preference Ordinary Total

15% x 3,000,000x 2 900,000 900,000
Remainder 300,000 300,000
Total 900,000 300,000 1,200,000
Dividends Per Share 30 15

C. Preference share is both cumulative and participating

Preference Ordinary Total

15% x 3,000,000x 2 900,000 900,000
15% x 1,000,000 150,000 150,000
Remainder 112,500 37,500 150,000
Total 1,012,500 187,500 1,200,000
Dividends Per Share 33.75 9.375 or 9.38

150,000 x (3M/4M) = 112,500 150,000 x (1M/4M) = 37,500

D. Preference share is participating only up to 18%

Preference Ordinary Total

15% x 3,000,000x 2 900,000 900,000
15% x 1,000,000 150,000 150,000
3% x 3,000,000 90,000 90,000
Remainder 60,000 60,000
TOTAL 990,000 210,000 1,200,000
Dividends Per Share 33 10.50