UGRD-ACTG6251 Intermediate Accounting 2

Midterm Exam

1 On November 1, 2018, Grande Company declared a property dividend of equipment

payable on March 1, 2019.
The carrying amount of the equipment is P3,000,000 and the fair value is P2,500,000 on
November 1, 2018.
However, the fair value less cost to distribute the equipment is P2,200,000 on December 31,
2018 and P2,000,000 on March 1, 2019.
What amount of loss on distribution of property dividend is recognized on March 1, 2019?
Select one:
200,000

2 Day Company held 10,000 shares of P10 par value as treasury reacquired for P120,000. On
December 31, 2018, the entity reissued all 10,000 shares for P190,000.
What is credited for the excess of the reissue price over the cost of treasury shares?
Select one:
Share premium P70,000

3 Global Company, a real estate developer, is owned by five founding shareholders.

On December 31, 2018, the entity declared a property dividend of a “one-bedroom flat” for
each shareholder. The property dividend is payable on January 31, 2019.
On December 31, 2018, the carrying amount of a one-bedroom flat is P1,000,000 and the
fair value is P1,500,000.
However, the fair value is P1,800,000 on December 31, 2018 and P1,900,000 on January 31,
2018.
What is the dividend payable on December 31, 2018?
Select one:
9,000,000

4 At the beginning of the current year, Ria company issued 10,000 ordinary shares of P20
par value and 20,000 convertible preference shares of P20 par value for a total of P800,000.
At this date, the ordinary share was selling for P36, and the convertible preference share was
selling for P27.
What amount of the proceeds should be allocated to the preference shares?
Select one:
480,000

5 Cyan Company issued 200,000 shares of P5 par value of P10 per share. On January 1,
2018, the retained earnings amounted to P3,000,000.
In March 2018, the entity reacquired 50,000 treasury shares at P20 per share. In June 2018,
the entity sold 10,000 of these shares to corporate officers for P25 per share. The entity used
the cost method to record treasury shares.
Net income for the year ended December 31, 2018 was P600,000.
What is the total amount of retained earnings at year-end?
Select one:
3,600,000

6 On November 1, 2018, Grande Company declared a property dividend of equipment

payable on March 1, 2019.
The carrying amount of the equipment is P3,000,000 and the fair value is P2,500,000 on
November 1, 2018.
However, the fair value less cost to distribute the equipment is P2,200,000 on December 31,
2018 and P2,000,000 on March 1, 2019.
What is the measurement of the equipment on December 31, 2018?
Select one:
2,200,000

7 During 2018, Hyatt Company issued P110 per share, 15,000 convertible preference shares
of P100 par value. One preference share may be converted into three ordinary shares of P25
par value at the option of the preference shareholder.
On December 31, 2018, all of the preference shares were converted into ordinary shares.
The market value of the ordinary share at the conversion date was P40.
What amount should be credited to share premium as a result of conversion?
Select one:
525,000

8 Mara Company provided the following data at year-end:

Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earnings unappropriated 600,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 100,000

What total amount should be reported as shareholders’ equity?

Select one:
5,100,000

9 Which dividends do not reduce stockholders' equity?

Select one:
Stock dividends

10 Lauretta Company reported the following shareholders’ equity on January 1, 2018:

Share capital 1,500,000
Share premium 3,000,000
Retained earnings 2,000,000

The entity had 400,000 authorized shares of P5 par value, of which 300,000 shares were
issued and outstanding.
On March 1, 2018, the entity acquired 50,000 shares for P10 per share to be held as
treasury. The shares were originally issued at P8 per share. The entity used the cost method
to account for treasury shares.
On December 31, 2018, the entity declared and distributed a property dividend of inventory.
The inventory had a P750,000 carrying amount and a P1,000,000 fair value. The net income
for 2018 was P2,500,000.
What amount should be reported as unappropriated retained earnings on December 31,
2018?
Select one:
3,000,000

11 An entry is not made on the

Select one:
date of record.

12 Total stockholders' equity represents

a claim against a portion of the total assets of an enterprise.

13 Negros Company was incorporated on January 1, 2018 with the following authorized
capitalization:
Ordinary share capital, 200,000 shares, no par, P100 stated value 20,000,000
Preference share capital, 200,000 shares, 10% fixed rate, P50 par value 10,000,000

During 2018, the entity issued 150,000 ordinary shares for a total of P18,000,000 and 50,000
preference shares at P60 per share. In addition, on December 15, 2018, subscriptions for
20,000 preference shares were taken at a purchase price of P100. These subscribed shares
were paid for on January 15, 2019. Net income for 2018 was P5,000,000.
What amount should be reported as total contributed capital on December 31, 2018?
Select one:
23,000,000

14 Global Company, a real estate developer, is owned by five founding shareholders.

On December 31, 2018, the entity declared a property dividend of a “one-bedroom flat” for
each shareholder. The property dividend is payable on January 31, 2019.
On December 31, 2018, the carrying amount of a one-bedroom flat is P1,000,000 and the
fair value is P1,500,000.
However, the fair value is P1,800,000 on December 31, 2018 and P1,900,000 on January 31,
2018.
What amount of gain is included in profit or loss as a result of the settlement of the
property dividend on January 31, 2019?

Select one:
4,500,000

15 At the beginning of current year, Hanna Company reported the following shareholders’
equity:
Share capital, P10 par, outstanding 225,000 shares 2,250,000
Share premium 900,000
Retained earnings 2,190,000

During the current year, the entity had the following share transactions:
* Acquired 6,000 treasury shares for P270,000.
* Sold 3,600 treasury shares at P50 a share.
* Sold the remaining treasury shares at P41 per share.
What is the total amount of share premium at year-end?
Select one:
908,400

16 East Company had sufficient retained earnings in 2018 as a basis for dividends but was
temporarily short of cash.
The entity declared a dividend of P1,000,000 on April 1, 2018, and issued promissory notes
to the shareholders in lieu of cash.
The notes, which were dated April 1, 2018, had a maturity date of March 31, 2019 and a 10%
interest rate.
How should the scrip dividend and related interest be accounted for?

Select one:
Debit retained earnings P1,000,000 on April 1, 2018 and debit interest expense P75,000 on
December 31, 2018.

17 On November 1, 2018, Grande Company declared a property dividend of equipment

payable on March 1, 2019.
The carrying amount of the equipment is P3,000,000 and the fair value is P2,500,000 on
November 1, 2018.
However, the fair value less cost to distribute the equipment is P2,200,000 on December 31,
2018 and P2,000,000 on March 1, 2019.
What is the dividend payable on December 31, 2018?

Select one:
2,200,000
18 At the beginning of the current year, Ashe Company was organized with authorized
capital of 100,000 shares of P200 par value.
January 10 Issued 25,000 shares at P220 a share.
March 25 Issued 1,000 shares for legal services when the fair value was P240 a
share.
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 a
share.
What amount should be reported for share premium?

Select one:
840,000

19 Which of the following represents the total number of shares that a corporation may
issue under the terms of its charter?

Select one:
authorized shares

20 In 2017, Rona Company issued 50,000 shares of P10 par value for P100 per share.
In 2018, the entity reacquired 2,000 shares at P150 per share and immediately canceled
these 2,000 shares.
In connection with the retirement of shares, what amount should be debited to retained
earnings?

Select one:
100,000

21 At the beginning of the current year, Ashe Company was organized with authorized
capital of 100,000 shares of P200 par value.
January 10 Issued 25,000 shares at P220 a share.
March 25 Issued 1,000 shares for legal services when the fair value was P240 a
share.
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 a
share.
What amount should be reported as share capital?
Select one:
6,200,000

22 If management wishes to "capitalize" part of the earnings, it may issue a

Select one:
stock dividend.

23 Glenn Company provided the following information at year-end:

Preference share capital, P100 par 2,300,000
Share premium – preference share 805,000
Ordinary share capital, P10 par 5,250,000
Share premium – ordinary share 2,750,000
Subscribed ordinary share capital 50,000
Retained earnings 1,900,000
Note payable 4,000,000
Subscription receivable – ordinary share 400,000

What is the amount of legal capital?

Select one:
7,600,000

24 At the beginning of the current year, Ria company issued 10,000 ordinary shares of P20
par value and 20,000 convertible preference shares of P20 par value for a total of P800,000.
At this date, the ordinary share was selling for P36, and the convertible preference share was
selling for P27.
What amount of the proceeds should be allocated to the ordinary shares?
Select one:
320,000

25 At the beginning of the current year, Cove Company, a closely held entity, issued 6%
bonds with a maturity value of P6,000,000, together with 10,000 ordinary shares of P50 par
value, for a combined cash amount of P11,000,000.
If issued separately, the bonds would have sold for P4,000,000 on an 8% yield to maturity
basis.
What amount of the proceeds should be allocated to the ordinary shares?
Select one:
7,000,000

26 Stock that has a fixed per-share amount printed on each stock certificate is called
Select one:
par value stock.

27 When treasury stock is purchased for more than the par value of the stock and the cost
method is used to account for treasury stock, what account(s) should be debited?
Select one:
Treasury stock for the purchase price.

28 Which of the following is not a legal restriction related to profit distributions by a

corporation?
Select one:
The amount distributed in any one year can never exceed the net income reported for that
year.

29 Cyan Company issued 200,000 shares of P5 par value of P10 per share. On January 1,
2018, the retained earnings amounted to P3,000,000.
In March 2018, the entity reacquired 50,000 treasury shares at P20 per share. In June 2018,
the entity sold 10,000 of these shares to corporate officers for P25 per share. The entity used
the cost method to record treasury shares.
Net income for the year ended December 31, 2018 was P600,000.
What amount should be reported as unappropriated retained earnings at year-end?
Select one:
2,800,000

30 Stockholders of a business enterprise are said to be the residual owners. The term
residual owner means that shareholders
Select one:
bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.

31 Cash dividends are paid on the basis of the number of shares

Select one:
outstanding.

32 A primary source of stockholders' equity is

Select one:
both income retained by the corporation and contributions by stockholders.

33 Vicar Company was organized on January 1, 2018 with 100,000 authorized shares of P100
par value. On January 5, the entity issued 75,000 shares at P140 per share.
On December 31, the entity purchased 5,000 shares at P110 per share. The entity used the
par value method to record the purchase of the treasury shares.
What is the balance of the share premium from the original issuance of shares on December
31, 2018?
Select one:
2,800,000

34 At the beginning of the current year, Ria company issued 10,000 ordinary shares of P20
par value and 20,000 convertible preference shares of P20 par value for a total of P800,000.
At this date, the ordinary share was selling for P36, and the convertible preference share was
selling for P27.
What is the share premium from the issuance of ordinary shares?
Select one:
120,000

35 The pre-emptive right enables a stockholder to

Select one:
share proportionately in any new issues of stock of the same class.

36 Vicar Company was organized on January 1, 2018 with 100,000 authorized shares of P100
par value. On January 5, the entity issued 75,000 shares at P140 per share.
On December 31, the entity purchased 5,000 shares at P110 per share. The entity used the
par value method to record the purchase of the treasury shares.
What is the balance of the share premium from treasury shares on December 31, 2018?
Select one:
150,000

37 At the beginning of the current year, Cove Company, a closely held entity, issued 6%
bonds with a maturity value of P6,000,000, together with 10,000 ordinary shares of P50 par
value, for a combined cash amount of P11,000,000.
If issued separately, the bonds would have sold for P4,000,000 on an 8% yield to maturity
basis.
What amount should be reported for share premium on the issuance of the ordinary shares?

Select one:
6,500,000

38 In a corporate form of business organization, legal capital is best defined as

Select one:
the par value of all capital stock issued.

39 In January 2018, Castro Corporation, a newly formed company, issued 10,000 shares of
its P10 par common stock for P15 per share. On July 1, 2018, Castro Corporation reacquired
1,000 shares of its outstanding stock for P12 per share. The acquisition of these treasury
shares
Select one:
decreased total stockholders' equity.

40 In 2017, Rona Company issued 50,000 shares of P10 par value for P100 per share.
In 2018, the entity reacquired 2,000 shares at P150 per share and immediately canceled
these 2,000 shares.
1. In connection with the retirement of shares, what amount should be debited to share
premium?
Select one:
180,000

41 Pryor Corporation issued a 100% stock dividend of its common stock which had a par
value of P10 before and after the dividend. At what amount should retained earnings be
capitalized for the additional shares issued?
Select one:
Par value

42 East Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours
of legal services performed.
Howe usually bills P160 per hour for legal services. On the date of issuance, the share was
trading on a public exchange at P140.
By what amount should the share premium account increase as a result of the transaction?
Select one:
135,000

43 Global Company, a real estate developer, is owned by five founding shareholders.

On December 31, 2018, the entity declared a property dividend of a “one-bedroom flat” for
each shareholder. The property dividend is payable on January 31, 2019.
On December 31, 2018, the carrying amount of a one-bedroom flat is P1,000,000 and the
fair value is P1,500,000.
However, the fair value is P1,800,000 on December 31, 2018 and P1,900,000 on January 31,
2018.
What is the dividend payable on December 1, 2018?
Select one:
7,500,000

44 The pre-emptive right of a common stockholder is the right to

Select one:
share proportionately in any new issues of stock of the same class.

45 During 2018, Hyatt Company issued P110 per share, 15,000 convertible preference shares
of P100 par value. One preference share may be converted into three ordinary shares of P25
par value at the option of the preference shareholder.
On December 31, 2018, all of the preference shares were converted into ordinary shares.
The market value of the ordinary share at the conversion date was P40.
What amount should be credited to ordinary share capital as a result of conversion?
Select one:
1,125,000

46 Stockholders' equity is generally classified into two major categories:

Select one:
earned capital and contributed capital.

47 At the beginning of the current year, Ria company issued 10,000 ordinary shares of P20
par value and 20,000 convertible preference shares of P20 par value for a total of P800,000.
At this date, the ordinary share was selling for P36, and the convertible preference share was
selling for P27.
What is the share premium from the issuance of preference shares?
Select one:
80,000

48 The residual interest in a corporation belongs to the

Select one:
common stockholders
49 Treasury shares are
Select one:
issued but not outstanding shares.
50 When a corporation issues its capital stock in payment for services, the least appropriate
basis for recording the transaction is the
Select one:
par value of the shares issued.