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P2 – Graded Quiz

NAME: Date:
Professor: Section: Score:

Part I: Conceptual: Multiple Choice

1. On settlement (distribution) date, any difference between the carrying amounts of the property
dividend payable and the non-cash asset distributed is
a. ignored
b. recognized in profit or loss
c. recognized directly in retained earnings
d. recognized but subject to a limit

2. If shareholders are given a choice of receiving either property dividends or cash dividends, the
entity shall
a. estimate the dividend payable by considering both the fair value of each alternative and
the associated probability of shareholders selecting each alternative.
b. treat the dividends declared as if they are cash dividends.
c. treat the dividends declared as if they are property dividends.
d. not account for the dividends until their final settlements

3. Imagine you are a CPA. You are preparing the financial statements of your company for the year
ended December 31, 20x1. The board of directors declared dividends on February 1, 20x2. The
dividend declaration is not subject to further approval. The financial statements were authorized
for issue on April 1, 20x2. How should the dividends declared be accounted for in the 20x1
financial statements?
a. included in current liabilities c. disclosed only
b. included in noncurrent liabilities d. neither accrued nor disclosed

4. Which of the following may cause a change in the total shareholders’ equity?
a. “small” share dividends d. “large” share dividends
b. share splits e. none of these
c. recapitalization

5. Non-current assets declared as property dividends are

a. reclassified as “non-current assets held for distribution to owners” if the conditions under
PFRS 5 are met.
b. reclassified as current assets.
c. not reclassified but presented separately from the other assets.
d. not reclassified but disclosed only.

6. A share-based payment transaction may be

a. equity-settled
b. cash-settled
c. the entity or the counterparty is given the choice of settlement between equity or cash
payment.
d. any of these
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7. When a share-based payment transaction is with a non-employee, the goods or services received
are measured at the
a. Fair value of the goods or services received
b. Fair value of the equity instrument granted
c. Choice (a) except when this cannot be determined reliably, then the goods or services
received are measured using choice (b)
d. a or b at the option of the entity

8. Intrinsic value is
a. Subscription price minus fair value of shares
b. Fair value of share minus subscription price
c. Subscription price minus fair value of share options
d. Fair value of share options minus subscription price

9. Measurement date is the date at which the fair value of the equity instruments granted is
measured for the purposes of PFRS 2.
I. For transactions with non-employees, the measurement date is the date when the goods or
services are obtained.
II. For transactions with employees and others providing similar services, the measurement
date is the grant date.
a. True, true b. True, false c. False, true d. False, false

10. Which of the following statements is incorrect?

a. Share-based compensation plan is a form of additional remuneration given to an
employee in return for services rendered which may be equity-settled (share option plan),
cash-settled (share appreciation rights), or a compensation plan with a choice of
settlement between equity and cash payment.
b. A corporation often grants share options to management personnel as additional
compensation.
c. Equity-settled share-based payments are recognized as increase in equity while Cash-
settled share-payments are recognized as liability.
d. Equity-settled share-based payments are recognized as expense while Cash-settled share-
payments are not recognized as expense.

Part II: Computational

1. Effective April 27, 20x1, the stockholders of Bennett Corporation approved a two-for-one split of the
company's common stock, and an increase in authorized common shares from 100,000 shares (par
value ₱20 per share) to 200,000 shares (par value ₱10 per share). Bennett's stockholders' equity
accounts immediately before issuance of the stock split shares were as follows:
Common stock, par value ₱20; 100,000 shares authorized;
50,000 shares outstanding ₱1,000,000
Share premium (₱3 per share on issuance of ordinary shares) 150,000
Retained earnings 1,350,000
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Requirement:
Immediately after the stock split is affected, compute for the balance of the following accounts:
a) Additional paid-in capital
b) Retained Earnings

2. The stockholders' equity section of Brown Co.'s December 31, 20x1, balance sheet consisted of the
following:
Ordinary shares, ₱30 par, 10,000 shares authorized and outstanding ₱300,000
Share premium
150,000
Retained earnings (deficit)
(210,000)

On January 2, 20x2, Brown put into effect a stockholder-approved quasi-reorganization by reducing

the par value of the stock to ₱5 and eliminating the deficit against share premium.

Immediately after the quasi-reorganization, what amount should Brown report as share premium?

3. On January 2, 20X6, Morey Corp. granted Dean, its president, 20,000 stock appreciation rights. On
exercise, Dean is entitled to receive cash for the excess of the stock’s market price on the exercise date
over the market price on the grant date. The rights are exercisable beginning on January 2, 20X8 and
expiring on December 31, 20X8. The market price of Morey’s stock was ₱30 on January 2, 20X6 and
₱45 on December 31, 20X6. Morey used the Black-Sholes-Merton pricing model and estimated the
values of each right at ₱16 each.
Requirement: Compute for the compensation expense for 20x6 as a result of the stock appreciation
rights.

"A cheerful heart is good medicine but a crushed spirit dries up the bones." - (Proverbs 17:22)

- END –
P2 – Graded Quiz

NAME: Date:
Professor: Section: Score:

ANSWER SHEET:

1) 2) 3) 4) 5)
6) 7) 8) 9) 10)

Show your Solutions here for the computational: