1. C 6. C 11. C 16.

A
2. A 7. A 12. B 17. D
3. B 8. C 13. D 18. A
4. D 9. A 14. B 19. C
5. B 10. C 15. C 20. D

PART I. THEORIES
Put the letter of your choice on the answer sheet provided.
1. An entity shall measure a noncurrent asset classified as held for distribution to owners at
a. Carrying amount
b. Fair value less cost to distribute
c. Lower of carrying amount and fair value less cost to distribute
d. Fair value

2. When an entity settles the property dividend payable, it shall recognize the difference between the carrying amount of the
distributed and the carrying amount of the dividend payable in
a. Profit or loss
b. Other comprehensive income
c. Equity
d. Retained earnings

3. An entity declared a dividend, a portion of which was liquidating. How would this declaration affect the contributed capital
retained earnings, respectively, of the corporation?
a. Decrease and no effect
b. Decrease and decrease
c. No effect and decrease
d. No effect and no effect

4. When an entity calls in all of the preference shares for more than the original issue price, the excess paid above the original
issue price should be
a. Accounted for as a loss on exchange
b. Charged against share premium of ordinary shares
c. Charged to discount on preference shares
d. Charged against retained earnings

5. Convertible preference shares

a. Are compound financial instruments
b. Include an option for the holder to convert preference shares into a fixed number of ordinary shares
c. Are accounted for as financial liability
d. All of the choices are correct

6. Redeemable preference share is:

I. A preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a future
date.
II. A preference share that gives the holder the right to require the issuer to redeem the instrument for a fixed or
determinable amount at a future date.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect
6. Redeemable preference share is:
I. A preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a future
date.
II. A preference share that gives the holder the right to require the issuer to redeem the instrument for a fixed or
determinable amount at a future date.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect

7. The declaration of scrip dividends must be debited to:

a. Accumulated profits
b. Interest expense
c. Interest payable
d. Dividend payable

8. This refers to a formal unconditional promise, made under seal, to pay a specified sum of money at a determinable future d
and to make a periodic interest payment at a stated rate until the principal sum is paid.
a. Scrip
b. Dividends
c. Bond
d. Stock

9. If there is a choice of cash dividend or a noncash asset as a property dividend, the entity shall estimate the dividend payable
considering all associated probabilities to be charged and debited to:
a. Accumulated profits
b. Interest expense
c. Interest payable
d. Dividend payable

9. If there is a choice of cash dividend or a noncash asset as a property dividend, the entity shall estimate the dividend payable
considering all associated probabilities to be charged and debited to:
a. Accumulated profits
b. Interest expense
c. Interest payable
d. Dividend payable

11. I. If an entity gives its owners a choice of either a noncash asset or a cash alternative, the entity shall estimate the dividend
payable by considering both the fair value of each alternative and the associated probabilities of owners selecting each
alternative.
II. At the end of each reporting period and at the date of settlement, the entity shall adjust the dividend payable based on the
alternative chosen through equity or retained earnings.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect

12. It represents the equity that an ordinary shareholder has in the net assets of the corporation from owning one share of cap
stock.
a. Earning per share
b. Book value per share
c. Liquidation value
d. Return on equity
12. It represents the equity that an ordinary shareholder has in the net assets of the corporation from owning one share of cap
stock.
a. Earning per share
b. Book value per share
c. Liquidation value
d. Return on equity

13. The expiration of share rights include a

a. Credit to retained earnings
b. Debit to share capital
c. Debit to share premium
d. None of the above

14. For the purpose of computing book value per share, what is the treatment of subscription receivable?
a. Deducted to arrive at total equity
b. Added to arrive at total equity
c. Not deducted to arrive at total equity
d. None of the above

15. I. If the aggregate stated value of the new shares is lower than the original issue price of the par value shares, the differenc
credited to the share premium on recapitalization account.
II. If the par value of the new shares is lower than the original stated value of the no-par value shares, the difference is charge
to the share premium on recapitalization account.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect

16. These are issued to shareholders entitling them to maintain a proportionate interest in the ownership of the corporation w
new shares are to be issued.
a. Share rights
b. Share warrants
c. Share dividends
d. Share split

17. The issuance of share rights includes a

a. Debit to retained earnings
b. Credit to share capital
c. Credit to share premium
d. None of the above

18. The declaration of dividends in a form of bonds must be debited to:

a. Accumulated profits
b. Interest expense
c. Interest payable
d. Dividend payable

19. I. Recapitalization occurs when there is a change in the capital structure of the corporation.
II. Recapitalization occurs through the cancellation of the old shares and the subsequent issuance of the new shares.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect
19. I. Recapitalization occurs when there is a change in the capital structure of the corporation.
II. Recapitalization occurs through the cancellation of the old shares and the subsequent issuance of the new shares.
a. Only Statement I is correct
b. Only Statement II is correct
c. Both statements are correct
d. Both statements are incorrect

20. On July 1, Alto Co. split its common stock 5 for 1 when the fair value was $100 per share. Prior to the split, Alto had 10,000
shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock
a. Remained at $10
b. Was reduced to $8
c. Was reduced to $5
d. Was reduced to $2
 n the carrying amount of the asset

affect the contributed capital and

excess paid above the original

shares

minable amount at a future

ent for a fixed or

minable amount at a future

ent for a fixed or

ney at a determinable future date,

estimate the dividend payable by

estimate the dividend payable by

tity shall estimate the dividend

owners selecting each

ividend payable based on the

from owning one share of capital

 from owning one share of capital

ceivable?

par value shares, the difference is

hares, the difference is charged

wnership of the corporation when

e of the new shares.

e of the new shares.

or to the split, Alto had 10,000

he stock
PART II. PROBLEMS
Put your answers on the answer sheet provided.
Put your answers on the answer sheet provided.

Kaya Ko Ito Ltd.

Cumulative preference share capital, 12%, P50 par, 20,000 shares P 1,000,000
Ordinary share capital, P25 par, 100,000 shares 2,500,000
Share premium 200,000
Retained earnings - unappropriated 400,000
Retained earnings - appropriated 100,000
Revaluation surplus 300,000
Total Shareholders' Equity P 4,500,000

1. Book value of preference shares P73

Equity related to preference share

liquidation value (20,000xP55) P 1,100,000
dividend in arrears (1,000,000x12%x3) 360,000
1,460,000
/20,000
P 73
Tama Ako Dito Ltd.

Issuance
Retained Earnings 1,500,000
Bond dividends payable 1,500,000

Bond dividend payable 1,500,000

Bonds payable 1,500,000

Periodic Interest Payament (2023-2025)

Interest expense (P1,500,000x15%) 225,000
Cash 225,000

Redemption
Bonds payable 1,500,000
Cash 1,500,000

2. 0
Papasa Ako Inc.

3. BVPS of ordinary share

10% Preference share, cumulative and non-participating, P100 par

with a liquidation value of P110, 20,000 shares P 2,000,000
Ordinary share, P100 par, 30,000 shares 3,000,000
Subscribed ordinary shares, 10,000 shares 1,000,000
Treasury share, 5,000 ordinary shares, at cost (400,000)
Share premium 660,000
Accumulated profits and losses 1,580,000
Total Shareholders' Equity 7,840,000
Less: Equity related to preference shares
liquidation value (20,000xP110) P 2,200,000
dividends in arrears (2,000,000x10%x3) 600,000 (2,800,000)
Equity related to ordinary shares 5,040,000
Divided by: No. of shares outstanding (30,000+10,000-5000) 35,000
Book value per ordinary share P 144
May Himala Corp.

Cash (10,000xP110) 1,100,000

Preference share capital (10,000xP100) 1,000,000
Share premium - preference 100,000

Preference share capital (10,000xP100) 1,000,000

Share premium - preference 100,000
Ordinary share capital (10,000x3xP25) 750,000
Share premium - ordinary 350,000

4. Credit share premium 350,000

Wag Susuko Inc.

1-Aug Issued 300,000 stock rights to shareholders of record giving them the
right to purchase one share of stock of P10 par ordinary share plus P20 cash
for every 10 rights submitted.

Cash (30,000xP30) 900,000

Ordinary share capital (300,000/10)xP10 300,000
Share premium 600,000

5. 0

6. P600,000

7. None
Easy Lang Co.

1-Jul Retained earnings 1,000,000

Scrip dividends payable 1,000,000

IF recording date is:

1-Dec Interest expense (1,000,000x10%x5/12) 41,667
Interest payable (1,000,000x10%x5/12) 41,667

IF recording date is:

31-Dec Interest expense (1,000,000x10%x6/12) 50,000
Interest payable (1,000,000x10%x6/12) 50,000

Maturity date
30-Jun Interest expense (1,000,000x10%x11/12) 91,667
Interest payable (1,000,000x10%x11/12) 91,667

Scrip dividends payable 1,000,000

Interest Payable 91,667
Interest expense 91,667
Cash 1,091,667

8. decrease by 1,000,000
Let's Party Inc.

% of ordinary shares outstanding market value (P) par value (P)

10 225,000 150,000
25 600,000 450,000

10% Retained earnings 225,000

Share dividends payable 150,000
Share premium 75,000

25% Retained earnings 450,000

Share dividends payable 450,000

9. Debit 675,000

10% Retained earnings 225,000

25% Retained earnings 450,000
P 675,000
Laban Lang Co.

1-Jun Retained Earnings (15%x30,000xP26) 117,000

Share Dividends Payable (15%x30,000xP20) 90,000
Share Premium 27,000

Share Dividends Payable (15%x30,000xP20) 90,000

Share Capital (15%x30,000xP20) 90,000

10. Total Contributed Capital

Ordinary shares, P20 par, 60,000 shares authorized,

30,000 shares issued and outstanding P 600,000
Share Premium 127,000
Share Dividends 90,000
P 817,000
Pasado Iyan Ltd.

2-Jan Retained earnings 425,000

Share Premium 175,000
Cash 600,000

11. P175,000
The Company

12. Outstanding shares

Beg. Issued 125,000

Treasury (25,000)
100,000
Reissued treasury 23,000
123,000
Stock-split x3
369,000
Reacquire treasury (5,000)
Outstanding shares 364,000
A company

1-Oct Retained earnings 1,050,000

Property dividends payable 1,050,000

Assets held for distribution 960,000

Accumulated depreciation 1,440,000
Equipment 2,400,000

31-Dec Property dividends payable 30,000

Retained earnings 30,000

31-Jan Retained earnings 90,000

Property dividends payable 90,000

Property dividends payable 1,110,000

Assets held for distribution 960,000
Gain on disposal of assets 150,000

13. 0

14. recognized P150,000

Bilib Ako Sa Iyo Co.

Cash 5,000,000
Redeemable preference share 5,000,000

Interest Expense (5,000,000x10%x2) 1,000,000

Cash 1,000,000

Interest Expense (6,000,000x10%x1/12) 1,050,000

Cash 1,050,000

Redeemable preference share 5,000,000

Loss on redemption 1,050,000
Cash 6,050,000

15. debit redeeemable preference shares 5,000,000

16. interest expense 1,050,000

An entity

17. decrease in retained earnings by 3,247,500

Retained earnings 3,247,500

Dividend payable 3,247,500
Cash alternative (55%xP3,450,000) 1,897,500
Non-cash alternative (45%xP3,000,000) 1,350,000
Dividend payable 3,247,500

18. 202,500

Cash alternative
Dividend payable 3,247,500
Retained earnings 202,500
Cash 3,450,000

Non-cash alternative
Dividend payable 3,247,500
Retained earnings 247,500
Non-cash 3,000,000
Pasado Na Company

19. increase by P1,200,000

Ordinary share capital (20,000xP150) 3,000,000

Share premium 200,000
Ordinary share capital (40,000xP50) 2,000,000
Share premium - recapitalization 1,200,000

20. increase by P1,000,000

Ordinary share capital (P150-P100)x20,000 1,000,000

Share premium - recapitalization 1,000,000