Shareholders' Equity

On December 31, 20CY, Tiangsing Corp.
’s board of directors canceled 50,000

shares of P2.50 par value common stock held in treasury at an average cost of P13
per share. Before recording the cancellation of the treasury shares, Tiangsing had
the following balances in its shareholders’ equity accounts:
Ordinary shares P540,000

Share premium 750,000
Retained earnings 900,000
Treasury shares, at cost 650,000
In its statement of financial position at December 31, 20cy, Tiangsing should report at
ordinary share balance of
P250,000
P0
P540,000
P415,000
Ans.
P415,000
Macar Company provided the following information on December 31, 2015.

Preference Subscribed
share ordinary
capital, P100 share capital
par 2,300,000 50,000
Share Retained
premium – earnings
preference
share 805,000 1,900,000
Ordinary Note payable
share
capital, P10
par 5,250,000 4,000,000
Share Subscription
premium – receivable –
ordinary ordinary
share 2,750,000 400,000
What is the amount of legal capital?
7,550,000
13,055,000
7,600,000
11,150,000
Ans.
7,600,000
Tommy Company was incorporated on January 1, 2016 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 2016, 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, 2016,
subscriptions for 20,000 preference shares were taken at a purchase price of P100. These
subscribed shares were paid for on January 15, 2017. Net income for 2016 was
P5,000,000. What amount should be reported as total contributed capital on December 31,
2016?
28,000,000
23,000,000
21,000,000
26,000,000
Ans.
23,000,000
Common shares issued would exceed common shares outstanding as a result of
Purchase of treasury stock

Payment in full of subscribed stock
Declaration of stock dividend
Declaration of stock split
Ans.
On July 1, 20Y1, the Beauty Corporation was registered with the SEC. Its authorized
share capital consists of 100,000 ordinary shares with par value P20.00 per share.
On July 15, 20Y1, it issued 10,000 shares at P23 per share. On October 15, 20Y1, the
Beauty Corp. paid to the majority shareholder the sum of P80,000 for a certain parcel
of land; and issued 5,000 ordinary shares for the building on the land. The land was
appraised at P130,000. The building has a cost of P150,000 and its depreciated value
is P90,000. It was appraised at P120,000.
On April 15, 20Y2, the corporation purchased 5,000 of its own ordinary shares for
P100,000. On June 15, 20Y2, 2,000 of the treasury shares were sold at P24 per share.
How much is the total share premium of Beauty Corp. on June 30, 20Y2?
P108,000
P 88,000
P 58,000
P100,000
Ans.
P 58,000
On December 31, 20CY, Tiangsing Corp.’s board of directors canceled 50,000

shares of P2.50 par value common stock held in treasury at an average cost of P13
per share. Before recording the cancellation of the treasury shares, Tiangsing had
the following balances in its shareholders’ equity accounts:
Ordinary shares P540,000

Treasury shares, at cost 650,000
In its statement of financial position at December 31, 20cy, Tiangsing should

report at ordinary share balance of
P250,000
P0
P540,000
P415,000
Ans.
P415,000
On January 1, 2014, Gilas Corp had 125,000 shares issued which included 25,000
shares held as treasury
January 1 through 13,000 treasury shares were distributed to officers as
October 31 part of a share compensation plan
November 1 A 3 for 1 share split took effect
December 1 The entity purchased 5,000 of its own shares to
discourage an unfriendtly takeover. These shares were
not retired.
On December 31, 2014, how many shares were issued and outstanding, respectively?
375,000 and 334,000

334,000 and 334,000
375,000 and 324,000
324,000 and 324,000
Ans.
375,000 and 334,000
Common shares issued would exceed common shares outstanding as a result of
Select one:

Payment in full of subscribed stock
Declaration of stock dividend
Declaration of stock split
Ans.
TBB Company was organized on January 1, 2016 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 Issued 5,000 shares for a tract of land when the fair value was
30 P260 a share
What amount should be reported for share premium?
840,000
540,000
800,000
500,000
Ans
840,000
Helu Corporation was organized on January 1, 20CY, with an authorization of

1,000,000 ordinary shares with a par value of P5 per share.
During 20CY, the corporation had the following equity transactions:

Jan. 4 - Issued 200,000 shares @ P5 per share.
April 8 - Issued 100,000 shares @ P7 per share.
June 9 - Issued 30,000 shares @ P10 per share
July 29 - Purchased 50,000 shares @ P4 per share.
Dec. - Sold 50,000 shares held in treasury @ P8 per
31 share.
What should be the balance in the Share Premium account as of December 31, 20CY?
P400,000
P450,000
P500,000
P550,000
Ans.
P550,000
The analysis of shareholders’ equity of CPA Company at January 1, 2016 showed the
following:
Ordinary share, par value P20, authorized 200,000 shares
issued and outstanding, 120,000 shares P2,400,000
Accumulated profits or losses 1,540,000
The company uses the cost method of accounting for treasury share and the following
transactions took place:
· Acquired 2,000 shares of its shares for P70,000.
· Sold 1,200 treasury shares at P40 per share.
· Retired the remaining treasury shares.
What is the amount of the Share Premium at the end of the accounting period?
P462,000
P476,800
P474,000
P480,000
Ans.
P476,800
When collectability is reasonably assured, the excess of the subscription price over
the stated value of the no-par subscribed share capita shall be reported as
Select one:
No par share capital

Share premium when the subscription is recorded
Share premium when the share capital is issued
Share premium when the subscription is collected
Ans.
On December 1, 20CY, Gates Corp. received a donation of 2,000 shares of its P5 par
value ordinary shares from a shareholder. On that date, the share’s fair value was P35
per share. The share was originally issued for P25 per share. By what amount would
this donation cause total shareholders’ equity to decrease?
P70,000
P50,000
P20,000
P 0
Ans.
P 0
When collectability is reasonably assured, the excess of the subscription price over
the stated value of the no-par subscribed share capita shall be reported as
No par share capital

Share premium when the share capital is issued
Share premium when the subscription is collected
Ans.
On July 1, year 1, Cove Corp., a closely held corporation, issued 6% bonds with a
maturity value of 60,000, together with 1,000 shares of its 5 par value ordinary share, for
a combined cash amount of 110,000. The market value of Cove’s stock cannot be
ascertained. If the bonds were issued separately, they would have sold for 40,000 on an
8% yield to maturity basis.
What amount should Cove report for share premium on the issuance of the stock?
75,000
65,000
55,000
45,000
Ans.
65,000
Hiro Corp. issues 1,000 5 par value ordinary shares and 1,000 20 par value preference shares for
a lump sum of 60,000. At the issue date, the ordinary shares were selling for 36 and the
preference shares were selling for 28. The Share Premium—Ordinary account will be credited for
31,000
36,000
26,250
28,750
Ans.
28,750
In 2016, Tax Company issued 50,000 shares of P10 par value for P100 per share. In 2015, the
company reacquired 2,000 shares at P150 per share and immediately canceled these 2,000 shares.
In connection with the retirement of these shares, what amount should be debited to share
premium and retained earnings, respectively?
20,000 and 280,000

180,000 and 100,000
100,000 and 180,000
280,000 and 0
Ans.
180,000 and 100,000
At the start of the current year, Lyn Company’s stockholders equity accounts appeared as
follows:
Common stock, P15 par value; authorized 200, 000
share; issued and outstanding, 150, 000 shares P2, 250, 000
Paid-in-Capital in excess of par 300, 000
Retained earnings 5, 00,0 000
Total P7, 550, 000
During the year, Lyn Company entered into the following transactions:
· May 1 Acquired 30, 000 shares of its stock for P1, 600, 000
· June 1 Reissued 15, 000 treasury shares at P19 per share
· July 1 Declared a cash dividend of P1.50 for holders on record on
July 30 to be distributed on January of next year.
· October 1 Reissued 10,000 treasury shares at P16 per share
· Retired the remaining treasury shares
The total stockholder’s equity reported in the current year statement of financial position
is
Select one:
6, 95,000
6,170 000
6,215,000
6,192,500
Ans.
6,192,500
Anil Company was organized on January 1, 20Y1. On that date it issued 500,000, P10 par value,
ordinary shares at P15 per share. During the period January 1, 20Y1 through December 31,
20Y3, Anil reported profit of P3,000,000 and paid cash dividends of P500,000. On January 5,
20Y3, Anil purchased 50,000 ordinary shares at P20 per share. On December 31, 20Y3, 45,000
treasury shares were sold at P30 per share and retired the remaining treasury shares. What is the
total shareholders’ equity on December 31, 20Y3?
P10,350,000
P10,850,000
P10,250,000
P10,500,000
Ans.
P10,350,000
Pointer Company issued all of its outstanding shares for P390 per share in 2009. On
January 1, 2010, Pointer acquired 200,000 shares at P360 per share and retired them.
The shareholders’ equity accounts as at December 31, 2009 follows:
Retained earnings 75,000,000
Share premium 162,000,000
Share capital, P300 par value,
2,000,000 shares
Authorized, 1,800,000 shares issued 540,000,000
and outstanding
What should be the balance in the share premium account immediately after the
retirement of the shares?
156,000,000
150,000,000
144,000,000
168,000,000
Ans.
150,000,000
Day Company holds 10,000 shares of P10 par value as treasury reacquired in 2008 for P120,000.
On December 31, 2009, Day issued all 10,000 shares for P190,000. Under the cost method of
accounting for treasury shares, the reissuance would result in a credit to
Share capital of P100,000

Retained earnings of P70,000
Gain on sale investment of P70,000
Share premium of P70,000
Ans.
Share premium of P70,000
At the start of the current year, Lyn Company’s stockholders equity accounts
appeared as follows:
Common stock, P15 par value; authorized 200, 000
share; issued and outstanding, 150, 000 shares P2, 250, 000
Paid-in-Capital in excess of par 300, 000
Retained earnings 5, 00,0 000
Total P7, 550, 000
During the year, Lyn Company entered into the following transactions:
· May 1 Acquired 30, 000 shares of its stock for P1, 600, 000
· June 1 Reissued 15, 000 treasury shares at P19 per share
· July 1 Declared a cash dividend of P1.50 for holders on record on
July 30 to be distributed on January of next year.
· October 1 Reissued 10,000 treasury shares at P16 per share
· Retired the remaining treasury shares
The total stockholder’s equity reported in the current year statement of financial position
is
6, 95,000
6,170 000
6,215,000
6,192,500
Ans.
6,192,500
Macar Corp.’s outstanding share capital at December 15, 20CY consisted of the
following:
· 30,000 shares of 5% cumulative preference shares, par value P10 per
share, fully participating as to dividends. No dividends were in arrears.
· 200,000 shares of ordinary shares, par value P1 per share.
On December 15, 20CY, Macar declared dividends of P100,000.
What was the amount of dividends payable to Macar’s ordinary shareholders?
P47,500
P40,000
P34,000
P10,000
Ans.
P40,000
Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 20Y1 and
20Y2, respectively. The corporation has not paid any other dividends since its organization on
January 1, 20Y1. The outstanding shares are 200,000, 12% preference shares, par P100 and
300,000 ordinary shares, par P100. If the preference shares are cumulative but nonparticipating,
ordinary shareholders will receive in 20Y2
P1,800,000
P 600,000
P200,000
P 0
Ans.
P200,000
An entity declared a cash dividend on a certain date payable on another date. What
would be the effect on retained earnings?
Increase on the date of declaration

Not be affected on the date of declaration
Decrease on the date of payment
Not be affected on the date of payment
Ans.
Bristol Corp.’s outstanding capital stock at December 15, 2011 consisted of the
following:
· 30,000 shares of 5% cumulative preferred stock, par value P10 per share,
fully participating as to dividends. No dividends were in arrears.
· 200,000 shares of common stock, par value P1 per share.
On December 15, 2011, Bristol declared dividends of P100,000. The amount of
dividends payable to Bristol’s common stockholders is
P10,000
P34,000
P40,000
P60,000
Ans.
P40,000
Chupachups Company had the following classes of shares outstanding as of December 31,
2016:
Ordinary shares, P20 par value, 20,000 shares outstanding; Preference shares, 6%, P100
par value, cumulative and fully participating, 1,000 shares were outstanding.
The last payment of preference dividend was on December 31, 2013. On December 31,
2016, a total cash dividend of P90,000 was declared. What are the amounts of dividends
payable on both the ordinary and preference shares, respectively?
P57,600 and P32,400

P67,200 and P22,000
P62,400 and P27,600
P72,000 and P18,000
Ans.
P62,400 and P27,600
An entity declared a cash dividend on a certain date payable on another date. What
would be the effect on retained earnings?
Select one:
Increase on the date of declaration

Not be affected on the date of declaration
Decrease on the date of payment
Ans.
At what amount per share should retained earnings be reduced for a 20% stock
dividend?
Select one:
Market value of the date of declaration

Par value
Zero
Market value of the date of issuance
Ans.
Par value
The directors of Reno Corp., whose P50 par value ordinary share is currently selling at P70 per
share, have decided to issue a share dividend. Reno has an authorization for 250,000 ordinary
shares, has issued 100,000 shares of which 10,000 shares are now held in treasury, and desires to
capitalize P630,000 of the Retained Earnings balance. To accomplish this, the percentage of
share dividend that the directors should declare is
14%.
10%.
8%.
6%.
Ans.
10%.
Salvatore Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares
of P20 par value common stock, which had a fair value of P50 per share before the stock
dividend was declared. This stock dividend was distributed 60 days after the declaration
date. Salvatore’s current liabilities increase as a result of the stock dividend declaration
by
P25,000
P10,000
P5,000
P0
Ans.
P0
On May 1, 2014 Lett Corp. declared and issued a 15% share dividend. Prior to this dividend,
Lett had 100,000, P1 par value, ordinary shares issued and outstanding. The fair value of Lett's
ordinary share was P20 per share on May 1, 2014. As a result of this share dividend, Lett's
retained earnings
increased by P300,000.
decreased by P300,000.
did not change.
Ans.
On January 2, 2015, Regina Co. declared and distributed its only investment in available
for sale security as dividend. At the time of declaration, the available for sale security has
a carrying value of P500,000 and a related unrealized loss of P100,000.
By what amount should Regina Co. charge its Accumulated Profits and Losses as a result
of the property dividend declaration?
100,000
400,000
500,000
600,000
Ans.
500,000
On November 1, 2014, Grande Company declared a property dividend of equipment

payable on March 1, 2015. The carrying amount of the equipment is P3,000,000 and
the fair value is P2,500,000 on November 1, 2014.
However, the fair value less cost to distribute the equipment is P2,200,000 on
December 31, 2014 and P2,000,000 on March 1, 2015.
What is the dividend payable on December 31, 2014?
2,500,000
2,200,000
3,000,000
0
Ans.
2,200,000
Dooku Corp., a calendar-year company, had sufficient retained earnings in 2015 as a basis for
dividends, but was temporarily short of cash. Dooku declared a dividend of P100,000 on April 1,
2015, and issued promissory notes to its shareholders in lieu of cash. The notes, which were
dated April 1, 2015, had a maturity date of March 31, 2016, and a 10% interest rate. How should
Dooku account for the scrip dividend and related interest?
Debit retained earnings for P110,000 on April 1, 2015.
Debit retained earnings for P110,000 on March 31, 2016.
Debit retained earnings for P100,000 on April 1, 2015, and debit interest expense for P10,000 on
March 31, 2016.
Debit retained earnings for P 100,000 on April 1, 2015, and debit interest expense for P7,500 on
December 31, 2016.
Ans.
Debit retained earnings for P 100,000 on April 1, 2015, and debit interest expense for P7,500 on
December 31, 2016.
Sagana Corp. declared and paid a liquidating dividend of P100,000. This distribution
resulted in a decrease in Sagana’s Paid-in Capital and Retained Earnings
No, Yes
Yes, No
Yes, Yes
No, Yes
Ans.
Yes, No
On January 2, 2014, Simpson Co.'s board of directors declared a cash dividend of

P400,000 to shareholders of record on January 18, 2014, payable on February 10,
2014. Selected data from Simpson's December 31, 2013 statement of financial
position are as follows:
Accumulated depletion P100,000
Share capital 500,000
The P400,000 dividend includes a liquidating dividend of
P 0
P100,000
P150,000
P300,000
Ans.
P100,000
Angel Company had the following information in relation to its inventory accounts in
2012
Increase in Raw materials: P 14,000
Increase in Work in process: P 24,000
Decrease in Finished goods: P 33,500
Likewise the following costs & expenses were incurred in 2012
Raw materials purchased P 150,000
Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Freight-out 3,000
Freight-in 4,000
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20% to 25,000
office)
Angel Company’s cost of goods sold for the year is
P249,500
P197,500
P264,500
P244,500
Ans.
P264,500
Mount Company provided the following account balances on December 31, 20CY:
Retained earnings, January 1 3, 000, 000

Dividends declared 1, 000, 000
Sales 8, 350, 000
Dividend income 100, 000
Merchandise Inventory, January 1 1, 040, 000
Purchases 3, 720, 000
Salaries 1, 540, 000
Contribution to employee's pension fund 280, 000
Distribution cost 205, 000
Miscellaneous expense 125, 000
Doubtful accounts expense 10, 000
Depreciation expense 85, 000
Loss on sale of securities 40, 000
Loss from write down of obsolete
inventory 150, 000
Income tax 105, 000
Inventory on December 31, 20CY was valued at P700, 000 (P850, 000 less P150,
000 write down of obsolete inventory). What is the balance of retained earnings on
December 31, 20CY?
Select one:
5, 000, 000
2, 000, 000
3, 850, 000
4, 000, 000
Ans.
4, 000, 000
The December 31, 20Y2 balance sheet of Macar Corp. showed shareholders’
equity of P448,700. Transactions during 20Y2 which affected the shareholders’
equity were: (1) an adjustment to Retained Earnings for an overstatement of
depreciation in 20Y1 P10,000; (2) gain on the sale of treasury shares, P9,000; (3)
declared dividends of P60,000 of which P40,000 were paid during the year; and
(4) profit after tax of P75,500. The share capital balance of P300,000 remain
unchanged during the year.
The retained earnings balance on January 1, 20Y2 was

Select one:
P134,200
P132,300
P123,200
P114,200
Ans.
P114,200
On December 31, 2014, the statement of financial position of Legend Corporation

shows a total equity of P1,260,000. During 2014, the shareholders’ equity was
affected by:
Adjustment to retained earnings for the P17,500
overstatement of 2013 net income
Cash dividend declared and paid in 10%
2014
Net income of 2014 P65,000
The share capital of P1,000,000 remained unchanged during the year.
What is the balance of retained earnings on January 1, 2014?
P360,000
P312,500
P295,000
P260,000
Ans.
P312,500
accumulated profits - unappropriated accumulated profits - Q9623 - Q9657

Mount Company provided the following account balances on December 31, 20CY:
Retained earnings, January 1 3, 000, 000

Dividends declared 1, 000, 000
Sales 8, 350, 000
Dividend income 100, 000
Merchandise Inventory, January 1 1, 040, 000
Purchases 3, 720, 000
Salaries 1, 540, 000
Contribution to employee's pension fund 280, 000
Distribution cost 205, 000
Miscellaneous expense 125, 000
Doubtful accounts expense 10, 000
Depreciation expense 85, 000
Loss on sale of securities 40, 000
Loss from write down of obsolete
inventory 150, 000
Income tax 105, 000
Inventory on December 31, 20CY was valued at P700, 000 (P850, 000 less P150, 000
write down of obsolete inventory). What is the balance of retained earnings on December
31, 20CY?
5, 000, 000
2, 000, 000
3, 850, 000
4, 000, 000
Ans.
4, 000, 000
Cerritos Corporation began operations on January 1, 20Y1. During its first three
years of operations, Cerritos reported net income and declared dividends as follows:
Net income Dividends declared

20Y1 P 80,000 P 0
20Y2 250,000 100,000
20Y3 300,000 100,000
The following information related to 20Y4:
Income before income tax P480,000

Prior period adjustment:
understatement of 20Y2
depreciation expense (before 40,000
taxes)
Cumulative decrease in income
from change in inventory
methods (before taxes) 70,000
Dividends declared (of this amount,
P50,000 will be paid on January
15, 20Y5) 200,000
Effective tax rate 35%
As at December 31, 20Y4, the retained earnings of Cerritos Corporation is
P520,500
P484,500
P430,000
P470,500
Ans.
P470,500
Kitty Company provided the following information for the year ended December 31,
2016:
Retained earnings – unappropriated,
January 1 200,000
Overdepreciation of 2015 due to prior 100,000
period error
Net income for 2016 1,300,000
Retained earnings appropriated for
treasury shares (original balance is
P500,000. It is reduced by P200,000
by reason of reissuance of the
treasury shares) 300,000
Retained earnings appropriated for
contingencies (beginning balance,
P700,000. It is increased by current
appropriation of P100,000) 800,000
Cash dividends paid to shareholders 500,000
Change in accounting policy from
FIFO to weighted average method –
credit adjustment 150,000
What amount should be reported as unappropriated retained earnings on December 31,

2016?
1,150,000
1,950,000
1,350,000
1,750,000
Ans.
1,350,000
Leyte Corporation has incurred losses from operations for several years. At the
recommendation of the newly hired president, the board of directors voted to
implement a quasi-reorganization, subject to shareholder approval. Immediately prior
to the restatement, on June 30, Leyte's balance sheet was as follows:
Current assets P 550,000

Property, plant, and equipment (net) 1,350,000
Other assets 200,000
P2,100,000
Total liabilities P 600,000
Share capital 1,600,000
Retained earnings (deficit) (400,000)
P2,100,000
The shareholders approved the quasi-reorganization effective July 1, to be

accomplished by a reduction in other assets of P150,000; a reduction in property,
plant, and equipment (net) of P350,000; and appropriate adjustment to the capital
structure. To implement the quasi-reorganization, Leyte should reduce the share
capital account in the amount of
P 0
P100,000
P400,000
P600,000
Ans.
P600,000
The Bagumbayan Company has sustained heavy losses over a period of time and
conditions warrant that Bagumbayan undergo a quasi-organization at December 31,
20CY.
Selected statement of financial position items prior to the quasi-reorganization are as

follows:
· Inventory was recorded in the accounting records at December
31, 20CY, at its net realizable value of P6,000,000. Cost was P6,500,000.
· Property, plant and equipment were recorded in the accounting
records at December 31, 20CY at P12,000,000, net of accumulated
depreciation. The fair value is P9,000,000 (cost to sell is P1,500,000). The
expected discounted net future cash inflows from the continued use and
eventual disposal is P8,000,000.
· Shareholders’ equity on December 31, 20CY, was as follows:
Share capital, par value P10 per share;
authorized, issued and outstanding, 700,000
shares P7,000,000
Retained earnings (deficit) (900,000)
P7,700,000
Under the terms of the quasi-reorganization, the par value of the ordinary share is to be
reduced from P10 per share to P5 per share.
Immediately after the quasi-reorganization has been accomplished, retained earnings

(deficit) should be
Select one:
P(4,400,000)
P0
P(200,000)
P(4,900,000)
Ans.
P0
Rica Corporation is under protection of the bankruptcy court and has the
following account balances at June 30, 20CY:
Cash P (5,000) Accounts payable P450,000

Accounts receivable 320,000 Notes payable 605,000
Inventory 450,000 Taxes and wages 60,000
Equipment 860,000 Mortgage payable 150,000
Accum. Depreciation (525,000) Ordinary shares 50,000
Intangible 80,000 Accumulated profits (135,000)
Total P1,180,000 Total P1,180,000
The court has accepted the following proposed settlement of the company’s affairs:
Write down the assets by the following amounts:
Accounts receivable P40,000

Inventory 160,000
Intangibles 80,000
The trade creditors (accounts payable) will reduce their claim by 30%, will accept
one-year notes for 50%, and retain their current claim for the remaining 20%. The
tax, wage, and mortgage claims will remain unchanged. The current ordinary
shares will be surrendered to the corporation and cancelled. In consideration
thereof, the current shareholders shall be held harmless from any possible personal
liability. The current holder of the note payable shall receive 1,000 shares of no
par ordinary shares in full satisfaction of the note payable. After these adjustments
have been made, the Accumulated Profits and Losses shall be raised to zero by a
change against invested capital.
How much is the total shareholders’ equity after the quasi-reorganization?
P375,000
P325,000
P400,000
P350,000
Ans.
P375,000
On December 30, 2013, Super Corp. paid P400,000 cash and issued 80,000, P1 par
value, ordinary shares to its unsecured creditors on a pro rata basis pursuant to a
reorganization plan. Super owed these unsecured creditors a total of P1.2
million. Super’s ordinary share was trading at P1.25 per share on December 30,
2013. As a result of this transaction, Super’s total shareholder’s equity had a net
increase of
P1,200,000
P100,000
P 800,000
P 80,000
Ans.
P 800,000
The following information pertains to Columbia Corp.:

· No dividend declaration or payment for 3 years on its 2,000 shares of 6%,
P30 par value cumulative preferred stock
· Gain on disposal of Columbia’s computer division of P90,000.
· Treasury stock, costing P100,000 were issued for P30,000.
The amount of retained earnings that should be restricted as a result of these items
is
P90,000
P70,000
P10,800
P0
Ans.
P0
At December 31, 20Y1, Afro Corp. reported P1,750,000 of appropriated retained earnings for the
construction of a new office building, which was completed in 20Y2 at a total cost of
P1,500,000. In 20Y2, Afro appropriated P1,200,000 of retained earnings for the construction of
a new plant. Also, P2,000,000 of cash was restricted for the retirement of bonds due in 20Y3. In
its 20Y2 balance sheet, Afro should report what amount of appropriated retained earnings?
P1,200,000
P1,450,000
P2,950,000
P3,200,000
Ans.
P1,200,000
The following changes in Spiderman Company’s assets and liabilities during the year are as
follows:
Increase Increase
(Decrease) (Decrease)
Cash and cash equivalents P 300,000 Accounts payable 80,000
Accounts receivables (190,000) Salaries payable (90,000)
Allowance for bad debts (30,000) Utilities payable 70,000
Inventory 170,000 Notes payable 110,000
Allowance for inventory 20,000 Deferred tax liability (50,000)
decline
Trading securities 100,000 Bonds payable (200,000)
Available-for-sale 120,000 Discount on bonds (40,000)
securities payable
Land (60,000) Ordinary shares 120,000
Building 130,000 Premium on ordinary 40,000
shares
Accm. Depreciation – 25,000 Treasury shares 50,000
Building
Equipment (40,000) Revaluation surplus 100,000
Accm. Depreciation – (5,000) Retained earnings- (80,000)
Equipment appropriated
The net income for the year is
270,000
350,000
430,000
480,000
Ans.
350,000
Which of the following is not included as components of other comprehensive

income?
Select one:
Gains and losses on remeasuring available-for-sale financial assets
The effect of asset ceiling on prepaid defined benefit cost
Gains and losses arising from translating the financial statements of a foreign operation
The ineffective portion of gains and losses on hedging instruments in a cash flow hedge
Ans.
A company buys ten shares of securities at P1,000 each on January 15, year 1. The securities are
classified as available for- sale. The fair value of the securities increases to P1,250 per share as
of December 31, year 1. The company does not elect to use the fair value option for reporting
available for-sale securities. Assume no dividends are paid and that the company has a 30% tax
rate. What is the amount of the holding gain arising during the period that is classified in other
comprehensive income for the period ending December 31, year 1?
0
P1,750
P2,500
P7,500
Ans.
P1,750
On January 2, 20CY, Power Company, a medium size entity, purchased 20% of
Plant Corporation’s 200,000 ordinary shares for P3,000,000 including a P50,000
transaction cost. This investment gives Power the ability to exercise significant
influence over Plant Corporation. During 20CY, plant reported profit of
P1,750,000 and paid cash dividends of P1,000,000 on its ordinary shares. As of
December 31, 20CY, the shares of Plant Corporation are traded and are currently
selling at P81.25 per share. What amount of unrealized gain or loss should Power
Company recognize in its December 31, 20CY statement of comprehensive
income?
P250,000
None
P350,000
P300,000
Ans.
P300,000
Madsen Company reported the following information for 2014:

Sales revenue 510,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on available-for-sale securities 40,000
Cash dividends received on the securities 2,000
For 2014, Madsen would report other comprehensive income of
137,000
135,000
42,000
40,000
Ans.
40,000
Other comprehensive income includes all of the following excepts

Select one:
Unrealized gain on available for sale financial asset

Loss from translating the financial statements of a foreign operations
Share premium
Actuarial gain on defined benefit plant that is fully recognized
Ans.
Share premium
Merlita Company accounts for noncurrent assets using the cost model. On October
30, 20CY, Merlita classified a noncurrent asset as held for sale. At the date, the
asset’s carrying amount was P1, 500,000; its fair value was estimated at P1,
100,000 and the cost to sell at P150, 000. On November 20, 20CY, the asset was
sold for net proceeds of P800, 000. What amount should be included as loss on
disposal in Merlita’s statement of comprehensive income for the year ended
December 31, 20CY?
0
550,000
700,000
150,000
Ans.
150,000
Which of the following is not included as components of other comprehensive income?
Gains and losses on remeasuring available-for-sale financial assets

The effect of asset ceiling on prepaid defined benefit cost
Gains and losses arising from translating the financial statements of a foreign operation
Ans.
During year 1, the “other revenues and gains” section of Totman Company’s Statement of
Earnings and Comprehensive Income contains P5,000 in interest revenue, P15,000 equity in
Harpo Co. earnings, and P25,000 gain on sale of available-for sale securities. Assuming the sale
of the securities increased the current portion of income tax expense by P10,000, determine the
amount of Totman’s reclassification adjustment to other comprehensive income.
P 5,000
P 2,500
P35,000
P15,000
Ans.
P15,000
A company buys ten shares of securities at P2,000 each on December 31, year 1. The securities
are classified as available for sale. The company does not elect to use the fair value option for
reporting its available-for-sale securities. The fair value of the securities increases to P2,500 on
December 31, year 2, and to P2,750 on December 31, year 3. On December 31, year 3, the
company sells the securities. Assume no dividends are paid and that the company has a tax rate
of 30%. What is the amount of the reclassification adjustment for other comprehensive income
on December 31, year 3?
P 7,500
P (7,500)
P 5,250
P (5,250)
Ans.
P (5,250)
An entity has not declared or paid dividends on its cumulative preference shares in the last three
years. These dividend shall be reported
In a note to the financial statement

As a reduction in shareholder equity
As a current liability
As a non current liability
Ans.
In a note to the financial statement
The shareholders’ equity of Windy Company on December 31, 20CY, consists of the
following capital balances:
Preference share capital, 10%

cumulative, 3 years in arrears,
P100 par, P110 liquidation
price 150,000 shares P15,000,000
Ordinary share capital, P100
par, 200,000 shares 20,000,000
Subscribed ordinary share
capital, net of subscription
receivable of P4,000,000 6,000,000
Treasury shares-ordinary,
50,000 shares at cost 4,000,000
The book value per share of ordinary is
P156.00
P190.00
P172.00
P286.67
Ans.
P172.00
Space Corporation’s current balance sheet reports the following shareholders’

equity:
5% cumulative preference share, par value, P100 per share; 25,000 shares
issued and outstanding, P2,500,000; Ordinary share, par value P35 per
share; 100,000 shares issued and outstanding, P3,500,000; Share premium
in excess of par value of ordinary share, P1,250,000; Accumulated profits
and losses, P3,000,000.
Dividends in arrears on the preference share amount to P250,000. If Space were to

be liquidated, the preference shareholders would receive par value plus a premium
of P500,000.
How much would be the book value per share of ordinary share?
Select one:
P70.00
P77.50
P72.50
P75.00
Ans.
P70.00
As of December 31, 2013, the shareholders’ equity of Grace Co. follows:

Authorized share capital, 500,000 shares at P10 par value P5,0
Unissued share capital (50,000 shares) 5
Share premium 1
Treasury shares, 15,000 shares at cost 1
Deficit 2
The book value per share is
P9.34
P9.36
P9.60
P9.66
Ans.
P9.66
Which of the following features of preference share would most likely be opposed by ordinary
shareholder?
Par or stated value

Callable
Redeemable
Participating
Ans.
Participating
Equity balances of Honey Company as of the end of the reporting period follow:
12% preference share capital, 200,000 P20,000,000
shares, par P100
Ordinary share capital, 500,000 shares, 50,000,000
par P100
The preference shares have a call price of 130, a liquidation price of 115 and dividends
have not been paid for 3 years. The book value per share of preference shares should be
P127
P112
P151
P115
Ans.
P127
The equity section of the statement of financial position of the Guts Company on
December 31, 2013 shows following items:
6% Cumulative preference share capital, P100 par value (liquidation

value, P115 per share); Authorized, 6,000 shares; issued, 4,000 shares; P400,0
in treasury, 600 shares
Ordinary share capital, P100 par value, authorized, 20,000 shares; issued
and outstanding, 8,000 shares 800,0
Share premium – preference shares 150,0
Share premium – ordinary shares 165,0
Reserve for bond retirement 320,0
Treasury shares - preference, at cost 84,0
Assuming the preference share is participating, the book value per share of ordinary is
P204.35
P223.70
P189.35
P187.56
Ans.
P189.35
On December 31, 2013 Hanani Company had 50,000, P50 par value, ordinary shares outstanding
and 30,000, P100 par value, 10% noncumulative preference shares. The current market price of
the ordinary share is P80 per share and total shareholders’ equity amounted to P10,000,000. The
preference shareholders have a liquidation preference of P150 per share. No dividends on
preference shares were declared on December 31, 2013. The book value per share of ordinary
should be
P110
P140
P104
P200
Ans.
P110
Hoyt Company’s December 31, 2019 statement of financial position reported the
following shareholders’ equity:
5% cumulative preference share capital, par value P100 per 2,500,000
share; 25,000 shares issued and outstanding
Ordinary share capital, par value P35 per share; 100,000 3,500,000
shares issued and outstanding
Dividends in arrears on the preference share amount to P250,000. If hoyt were plus a
premium of P500,000. The book value per ordinary share is
77.50
75.00
72.50
70.00
Ans.
70.00
Katrina Co. had 5,000, P500 par value, ordinary shares outstanding and 500, P1,000 par,
preference shares outstanding. The current market price of the ordinary share is P1,200 per share
and total shareholders’ equity amounts to P3,600,000. The preference shareholders have a
liquidation preference of P1,400 per share and for dividends that are in arrears. The book value
per ordinary share is currently
P510
P520
P580
P818
Ans.
P580
The shareholders’ equity of Retro Company on December 31, 2019 includes the
following:
12% Preference share capital, 20,000 shares, P100 par value 2,000,000
14% Preference share capital, 10,000 shares, P300 par value 3,000,000
Ordinary share capital, 50,000 shares, P100 par value 5,000,000
The 12% preference share is cumulative and fully participating. The 14% preference
share is noncumulative and fully participating. Dividends have not been paid for 3 years.
What is the book value per ordinary share?
132
126
100
112
Ans.
132
Jacqueline Company’s equity balances on December 31, 2013 are:

10% noncumulative preference share capital, P100 P10,000,000
par, 100,000 shares
Ordinary share capital, P100 par value, 500,000 50,000,000
shares
Dividends in arrears on the preference shares are for 5 years. If the company were to be
liquidated, the preference shareholders would receive par plus a premium of P1,000,000.
The book value per share of ordinary shares is
P118
P128
P126
P120
Ans.
P126
Trojan Company was organized on January 1, 2019 with the following capital
structure:]
10% cumulative preference share capital, par value P10, liquidation value P12,
authorized, issied and outstanding 100,000 share P1,000,000
Ordinary share capital, par value P100, authorized 40,000 shares, issued and
outstanding 30,000 shaires, P3,000,000.
The net income for the year ended December 31, 2019 was P6,000,000 and no dividends
were declared. What is the December 31, 2019 book value per ordinary share?
290
293
300
333
Ans.
290
The equity section of the statement of financial position of the Guts Company on
December 31, 2013 shows following items:
6% Cumulative preference share capital, P100 par value (liquidation value, P115 per
share); Authorized, 6,000 shares; issued, 4,000 shares; in treasury, 600 shares P4
Ordinary share capital, P100 par value, authorized, 20,000 shares; issued and
outstanding, 8,000 shares 8
Share premium – preference shares 1
Share premium – ordinary shares 1
Retained earnings 4
Reserve for bond retirement 3
Treasury shares - preference, at cost
P121.00
P223.70
P224.78
P223.65
Ans.
P224.78
The equity of Simplex Company on December 31, 2019 consists of the folowing
capital balance:
Preference share capital, 10% cumulative and 2,000,000
nonparticipating, P100 par, 20,000 shares
Ordinary share capital, P100 par, 40,000 shares 4,000,000
Subscribed ordinary share capital, 20,000 shares 2,000,000
Subscription receivable 500,000
Treasury ordinary shares, 10,000 at cost 800,000
The preference dividends are in arrears for 2007, 2008 and 2009. The book value per
ordinary share on December 31, 2009 should be
172
200
160
150
Ans.
160
Cyril Co. had the following equity balances at the end of its first fiscal year:
Preference share capital, P50 par, 6% cumulative, liquidation value P55 P100
Ordinary share capital, P10 par 200
Retained earnings 256
If no dividends are declared, the book value of a share of a preference share is
P105
P 58
P55
P50
Ans.
P 58
Boe Company’s shareholders’ equity at December 31, 2019 was as follows:

6% noncumulative preference share capital, 1,000,000
P100 par, liquidation value of P105 per
share
Ordinary share capital, P100 par 3,000,000
Preference dividends have been paid up to December 31, 2019. At December 31, 2009,
Boe’s book value per ordinary share was
131.70
130.00
190.70
128.00
Ans.
130.00
Which of the following shareholder rights is most commonly enhanced in an issue of preference
shares?
The right to both for the board of director
The right to maintain ones proportional interest in the corporation
The right to received a full cash dividend before dividend are paid to other classes of share
capital
The right to vote on major corporate issues

Ans.
The right to received a full cash dividend before dividend are paid to other classes of share
capital
The equity balances of Simon Company as of the end of the reporting period are:
Ordinary share capital, P100 par, 360,000 shares
Subscribed ordinary share capital, 60,000 shares
Subscription receivable
Treasury shares, 20,000 shares, at cost
Retained earnings
122.50
130.00
117.50
125.00
Ans.
122.50
Nova Company has an authorized capital of 10,000 8% cumulative preference shares of

P100 par value and 20,000 ordinary shares of P100 par value. The equity account
balances at December 31, 2019 are as follows:
Cumulative preference share capital 500,000
Ordinary share capital 1,100,000
Treasury ordinary shares – 1,000 at cost (150,000)
1,910,000
Dividends on preference share are in arrears for 2018 and 2019. The book value of an
ordinary share at December 31, 2019 should be
125
191
133
141
Ans.
133
Dix Company’s equity at December 31, 2019 consisted of the following:

8% cumulative preference share capital, P50 par; 1,000,000
liquidating value P55 per share; authorized, issued and
outstanding 20,000 shares
Ordinary share capital, P25 par; 200,000 shares 2,500,000
authorized; 100,000 shares issued and outstanding
Divideds on preference share have been paid through 2017 but have not been declared for
2018 and 2019. At December 31, 2019, Dix’s book value per ordinary share was
25.00
27.20
26.40
29.00
Ans.
26.40
Edgar Company reported shareholders’ equity on December 31, 20Y2 which

comprised the following capital balances:
Preference share capital, 12% cumulative and

participating up to 16%, P100 par, 25,000 shares 2,500,000
Share premium-preference 500,000
Share premium-ordinary 1,000,000
The preference dividends are in arrears for 20Y1 and 20Y2 and the preference share has a
call price and liquidation value of P120 and P110, respectively. What is the book value
per ordinary share on December 31, 20Y2?
73.50
76.50
74.00
75.50
Ans.
76.50
The shareholders’ equity for the Analyn Foods, Inc. on December 31, 2013 follows:
12% Preference share capital, P100 par, 20,000 shares P2,000,000
Total shareholders’ equity P8,250,000
Preference shares have a liquidation value of P110; shares are cumulative, with dividends
in arrears for 3 years including the current year and fully payable in the event of
liquidation. The book value of an ordinary share is
P28.85
P25.35
P26.65
P22.90
Ans.
P26.65
Tarr Company’s shareholders’ equity at December 31, 2019 consisited of the

following:
Preference share capital – 12%, P50 par, 20,000 shares issued 1,000,000
Ordinary share capital, P25 par, 100,000 shares issued 2,500,000
Retained earnings appropriated 100,000
Revaluation surpuls 300,000
Dividends on preference share have not been paid since 2017. The preference share has a
liquidating value of P55 and a call price of P58. What is the book value per preference
share?
61
56
55
58
Ans.
61
The effect of recording a 100% stock dividend would be to
Decrease the current ratio , decrease working capital and decrease book value per share
Leave inventory turn over unaffected , increased earnings per share and increase book value per share
Leave working capital unaffected ,decrease earnings per share and decrease book value for share
Ans.
Leave working capital unaffected ,decrease earnings per share and decrease book value for share
Fantasy Company has the following capital structure at the beginning of 2011
6% Cumulative, fully-participating preferred stock, P50 par value,
50,000 shares authorized, 12,000 shares issued and outstanding P 600,000
Common stock, P10 par value, 200,000 authorized; 147,500 issued 1,475,000
and outstanding
Additional paid-in capital in excess of par – preferred 180,000
Additional paid-in capital in excess of par – common 1,180,000
Retained earnings (P2,500,000 appropriated for plant expansion) 4,500,000
7,935,000
During 2011 the following transactions occurred:
February Fantasy Company acquired 6,000 preferred shares at P70 per share
11 and 40,000 common shares at P22 per share. Fantasy Company is
using the cost-method in recording treasury shares
March 31 Issued 2,000 preferred treasury shares at P73 per share
April 7 Issued 15,000 common shares at P25 per share
July 1 Issued 1,500 preferred treasury shares at P68 per share & 20,000
common shares at P19 per share
August 15 Retired the remaining preferred and common treasury shares
September Plant expansion was completed

1
November Board of directors appropriated P2,000,000 for plant expansion in

22 Mactan, Cebu. Likewise, the Board issued a 3-year, 10% P1,500,000
face value bonds to partially fund the construction. A sinking fund
was set-up for the extinguishment of the bonds at their maturity
December Net income for the period P1,400,000. Total cash dividend declared
31 and paid P500,000. No dividends have been declared in 2010. A
property dividend was likewise declared, the distribution of which is
on January 6, 2012. The carrying amount of the property declared as
dividend was P800,000; the fair value of which was P1,000,000
The total stockholders’ equity at December 31, 2011 is
7,538,000
7,738,000
7,118,000
8,038,000
Ans.
7,538,000
For an entity that has only ordinary shares outstanding total shareholder equity dividend by the
number of shares outstanding represent the
Return on equity
Stated value per share
Book value per share
Price – earnings ratio
Ans.
Book value per share
Baker Company had 5,000 ordinary shares of P500 par value outstanding and 500
preference shares of P1,000 par value outstanding. The current market price of the
ordinary share is P1,200 and total equity amounts to P3,600,000. The preference
shareholders’ have a liquidation preference of P1,400 per share and no dividends are in
arrears. What is the book value per ordinary share?
510
520
580
818
Ans.
580
The shareholders’ equity of Kristine Company on December 31, 2013 consisted of the
following:
Preference share capital, P100 par value, 12% annual dividend P 5,00
Ordinary share capital, P100 par 15,00
Share premium 3,00
The preference share is noncumulative and nonparticipating with a liquidation value of
P120 per share. Preference dividends have been paid up to December 31, 2013. What is
the book value per share of ordinary?
P140.00
P136.00
P146.67
P142.67
Ans.
P140.00
On January 1, 20CY, Hope Corporation had 240,000 shares of common stock

outstanding) on April 1, it reacquired 24,000 shares; on July 1, it issued 108,000
shares; On October 1, it issued another 96,000 shares; and on December 1, it
reacquired 6,000 shares. The weighted average number of common shares
outstanding for 20CY was
Select one:
289, 000
414, 000
299, 500
269, 500
Ans.
299, 500
On January 1, 20CY Lim Company had 300,000, P100 par, ordinary shares outstanding or a total
par value of P30,000,000. During 20CY, Lim issued rights to acquire one ordinary share at P100
in the ratio of one share for every 5 shares held. The rights are exercised on March 31, 20CY.
The market value of each ordinary share immediately prior to March 31, 20CY was P160. The
profit for 20CY was P6,000,000. The 20CY income statement should report basic earnings per
share at
P17.14
P18.75
P16.67
P17.39
Ans.
P17.14
On December 31, 2012, Bedrock, Inc. had 300,000 shares of common stock issued and
outstanding. Bedrock issued a 10% stock dividend on July 1, 2013. On October 1, 2013,
Bedrock purchased 24,000 shares of its common stock. The number of shares that should
be used in computing earnings per share for the year ended December 31, 2013 is
306,000
309,000
324,000
330,000
Ans.
324,000
With respect to the computation of earnings per share, which of the following would
be most indicative of a simple capital structure?
Common stock, preferred stock, and convertible securities outstanding

Earnings derived from one primary line of business
Ownership interest consisting solely of common stock
Equity represented materially by liquid assets
Ans.
Ownership interest consisting solely of common stock
On January 1, 20CY, Hope Corporation had 240,000 shares of common stock

outstanding) on April 1, it reacquired 24,000 shares; on July 1, it issued 108,000
shares; On October 1, it issued another 96,000 shares; and on December 1, it
reacquired 6,000 shares. The weighted average number of common shares
outstanding for 20CY was
289, 000
414, 000
299, 500
269, 500
Ans.
299, 500
The following information pertains to Astoria Corp.’s outstanding stock for 2013:
Common stock, P5 par value
Shares outstanding, 1/1/2013 40,000
2-for-1 stock split, 4/1/2013 40,000
Shares issued, 7/1/2013 20,000
Preferred stock, P10 par value, 5% cumulative

Shares outstanding, 1/1/2013 8,000
The number of shares Astoria should use to calculate 2013 basic earnings per share is
80,000
90,000
100,000
108,000
Ans.
90,000
Rockford Corp. had the following capital structure during 2012 and 2013:
Preferred stock, P10 par, 4%
cumulative, 25,000 shares issued and outstanding P 250,000
Common stock, P5 par, 200,000 shares issued and outstanding 1,000,000
Rockford reported net income of P500,000 for the year ended December 31, 2013. Silver
paid no preferred dividends during 2012 and paid P16,000 in preferred dividends during
2013.
In its December 31, 2013, income statement, Rockford should report earnings per share of
P2.42
P2.45
P2.48
P2.50
Ans.
P2.45
Faith Co. had 200,000 ordinary shares, 20,000 convertible preference shares, and
P1,000,000 of 10% convertible bonds outstanding during 2009. The preference share is
convertible into 40,000 ordinary shares. During 2009, Faith paid dividends of P1.20 per
share on ordinary shares and P4.00 per share on preference shares. Each P1,000 bond is
convertible into 45 ordinary shares if converted before 2011 and 40 shares if converted
after 2011. The profit for 2009 was P800,000 and the income tax rate was 30%.
Basic earnings per share for 2009 is
P4.00
P3.76
P3.60
P3.25
Ans.
P3.60
When earnings per share is computed, dividends on preferred stock are
Added because they represent earnings to the preferred stockholders

Reported separately on the income statement
Subtracted because they represent earnings to the preferred stockholders
Ignored because they do not pertain to the common stock.
Ans.
Subtracted because they represent earnings to the preferred stockholders
Lapasan Company had the following capital during 20Y1 and 20Y2:
Preference share capital,

P100 par, 10%
cumulative, 100,000 P10,000,000
shares
Ordinary share capital, P100
par, 400,000 shares 40,000,000
Lapasan reported profit of P8,000,000 for the year ended December 31, 20Y2.
Lapasan paid no preference share dividends during 20Y1 and paid P1,500,000
preference share dividends during 20Y2. On January 31, 20Y3, prior to the date that
the financial statements are authorized for issue, Lapasan distributed 10% ordinary
share dividend.
In its 20Y2 income statement, what amount should Lapasan report as basic earnings
per share?
P17.50
P15.91
P16.25
P14.77
Ans.
P15.91
Information concerning the capital structure of Marc Corporation is as follows:

December 31
20Y3 20Y2
Common stock 150,000 shares 150,000 shares
Convertible preferred stock 15,000 shares 15,000 shares
6% convertible bonds P2,400,000 P2,400,000
During 20Y3, Marc paid dividends of P0.80 per share on its common stock and
P2.00 per share on its preferred stock. The preferred stock is convertible into
30,000 shares of common stock. The 6% convertible bonds are convertible into
75,000 shares of common stock. The profit for the year ended December 31, 20Y1,
was P400,000. Assume that the income tax rate was 30%.
What should be the diluted earnings per share for the year ended December 31, 20Y3,
rounded to the nearest peso?
P2.13
P1.96
P1.57
P1.89
Ans.
P1.96
On January 1, 20Y1, TB Co had P2·5 million of equity share capital (shares of 50

cents each) in issue. No new shares were issued during the year ended December
31, 20Y2, but on that date there were outstanding share options which had a
dilutive effect equivalent to issuing 1·2 million shares for no consideration. TB’s
profit after tax for the year ended December 31, 20Y2 was P1,550,000. In
accordance with IAS 33 Earnings Per Share, what is TB’s diluted earnings per
share for the year ended December 31, 20Y2?
P0·25
P0·42
P0·41
P0·31
Ans.
P0·25
Faith Co. had 200,000 ordinary shares, 20,000 convertible preference shares, and
P1,000,000 of 10% convertible bonds outstanding during 2009. The preference share is
convertible into 40,000 ordinary shares. During 2009, Faith paid dividends of P1.20 per
share on ordinary shares and P4.00 per share on preference shares. Each P1,000 bond is
convertible into 45 ordinary shares if converted before 2011 and 40 shares if converted
after 2011. The profit for 2009 was P800,000 and the income tax rate was 30%.
Diluted earnings per share for 2009 is
P2.77
P3.05
P2.81
P3.08
Ans.
P3.05
Which of the following is incorrect in relation to earnings per share?

Select one:
In computing for diluted earnings per share, current year dividends on cumulative, non-
convertible preference shares are not deducted from profit.
When an entity presents both consolidated financial statements and separate financial
statements, EPS disclosures need be presented only on the basis of the consolidated
information.
Earnings per share computation applies to entities whose ordinary shares or potential
ordinary shares are traded in a public market or entities that file, or are in the process of
filing, their financial statements with a securities commission or other regulatory
organization for the purpose of issuing ordinary shares in a public market
Basic earnings per share shall be calculated by dividing profit or loss attributable to
ordinary equity holders of the parent entity (the numerator) by the weighted average
number of ordinary shares outstanding (the denominator) during the period.
Ans.
In computing for diluted earnings per share, current year dividends on cumulative, non-
convertible preference shares are not deducted from profit.
Crossroad Corp. had 300,000 shares of common stock issued and outstanding at
December 31, 2012. On July 1, 2013, an additional 50,000 shares of common stock were
issued for cash, Crossroad also had unexercised stock options to purchase 40,000 shares
of common stock at P15 per share outstanding at the beginning and end of 2013. The
average market price of Crossroad’s common stock was P20 during 2013. The number of
shares that should be used in computing diluted earnings per share for the year ended
December 31, 2013 is
325,000
335,000
360,000
365,000
Ans.
335,000
Urdaneta Company reported the following capital structure at year-end.

2015 2016
Ordinary shares 500,000 500,000
Convertible 100,000 100,000
preference shares
10% convertible P3,000,000 P3,000,000
bonds payable
During 2016, the entity paid the annual dividend of P5 per share on the preference share.
The preference shares are convertible into 200,000 ordinary shares and the 10% bonds are
convertible into 100,000 ordinary shares. Net income for 2016 was P5,000,000. The tax
rate is 30%. What amount should be reported as diluted earnings per share?
6.51
6.25
7.85
9.00
Ans.
6.51
The Palau Company has issued a range of share options to employees. In accordance
with PFRS2 Share-based payment, what type of share-based payment transaction does
this represent?
Asset-settled share-based payment transaction

Cash-settled share –based payment transaction
Equity-settled share-based payment transaction
Liability -settled share – based payment transaction
Ans.
Are the following statements about share options granted to employees in exchange for
their services true or false, according to IFRS2 Share-based payment?
(1) The services received should be measured at the fair value of the employees' services.
(2) Fair value should be measured at the date the options vest.
Statement (1) Statement (2)
False False
False True
True False
True True
Ans.
False False
For transactions with employees and others providing similar services, the measurement
date of the equity-settled share-based payment transactions is the
Select one:
Settlement date
End of the reporting period
Date the entity obtains the goods or the counterparty renders the service
Grant date
Ans.
Grant date
Jay, a public limited company, has granted 20 share appreciation rights to each of its
500 employees on January 1, 20Y1. The rights are due to vest on December 31, 20Y4
with payment being made on December 31, 20Y5. Assume that 80% of the awards
vest. Share prices are:
January 1, 20Y1 P15

December 31, 20Y1 18
What liability will be recognized on December 31, 20Y4, for the share appreciation
rights?
P 60,000
P210,000
P 48,000
P150,000
Ans.
P 48,000
In connection with a share option plan for the benefit of key employees, WALTER
Company intends to distribute treasury shares when the options are exercised. These
shares were bought in 2012 at P 42 per share. On January 1, 2013, Walter granted share
options of 100,000 shares at an option price of P 38 per share as additional compensation
for services to be rendered over the next three years. The options are exercisable during a
2-year period beginning January 1, 2016, by grantee still employed by Walter. Market
price of Walter’s share was P 47, at the grant date. The fair value of the share option is P
12 on grant date. No share options were terminated during 2013. In Walter’s 2013 income
statement, what amount should be reported as compensation expense pertaining to the
options?
600,000
400,000
300,000
450,000
Ans.
400,000
Jay, a public limited company, has granted 20 share appreciation rights to each of its
500 employees on January 1, 20Y1. The rights are due to vest on December 31, 20Y4
with payment being made on December 31, 20Y5. Assume that 80% of the awards
vest. Share prices are:
January 1, 20Y1 P15

How should the settlement of the transaction be accounted for on December 31,
20Y5?
Payment to employees of P32,000, no gain recorded

Payment to employees of P16,000, gain of P32,000 is recorded
Payment to employees of P48,000, no gain recorded
Ans.
JOHN Company granted 10,000 share options to each of its five directors on January 1,
2013. The options vest on January 1, 2017. The fair value of each option on January 1,
2013 is P 50 and it is anticipated that all of the share options will vest on January 1,
2017. What will be the increase in expense and equity for the year ended December 31,
2013?
750,000
500,000
625,000
125,000
Ans.
625,000
The TBB Company has entered into a contract with The Galilee Company. Galilee
will supply TBB with a range of services. The payment for those services will be in
cash and based upon the price of TBB's ordinary shares on completion of the contract.
In accordance with IFRS2 Share-based payment , what type of share-based payment
transaction does this represent?
Asset-settled share-based payment transaction

Cash-settled share-based payment transaction
Liability-settled share-based payment transaction
Ans.
Cash-settled share-based payment transaction
In connection with a stock option plan for the benefit of key employees, Tawilis
Corp. intends to distribute treasury shares when the options are exercised. These
shares were bought in 2015 at P42 per share. On January 1, 20Y1, Tawilis granted
stock options for 10,000 shares at P38 per share as additional compensation for
services to be rendered over the next three years. The options are exercisable
during a four-year period beginning January 1, 20Y6, by grantees still employed
by Tawilis. Market price of Tawilis’s stock was P47 per share at the grant date.
The fair value of a similar stock option with the same terms was P12 at the grant
date. No stock options were terminated during 20Y1In Tawilis’s December 31,
20Y1 income statement, what amount should be reported as compensation expense
pertaining to the options?
Select one:
P90,000
P40,000
P0
P30,000
Ans.
P40,000
In accordance with IFRS2 Share-based payment, how, if at all, should an entity recognise
the change in the fair value of the liability in respect of a cash-settled share-based
payment transaction?
Should not recognise in the financial statements but disclose in the notes thereto
Should recognise in the statement of changes in equity
Should recognise in other comprehensive income
Should recognise in profit or loss
Ans.
Should recognise in profit or loss
Under IFRS2 Share-based payment, in which ONE of the following will a cash-settled
share-based payment give rise to an increase?
A current asset
A non-current asset
Equity
A liability
Ans.
A liability
In connection with a stock option plan for the benefit of key employees, Tawilis
Corp. intends to distribute treasury shares when the options are exercised. These
shares were bought in 2015 at P42 per share. On January 1, 20Y1, Tawilis granted
stock options for 10,000 shares at P38 per share as additional compensation for
services to be rendered over the next three years. The options are exercisable
during a four-year period beginning January 1, 20Y6, by grantees still employed
by Tawilis. Market price of Tawilis’s stock was P47 per share at the grant date.
The fair value of a similar stock option with the same terms was P12 at the grant
date. No stock options were terminated during 20Y1In Tawilis’s December 31,
20Y1 income statement, what amount should be reported as compensation expense
pertaining to the options?
P90,000
P40,000
P0
P30,000
Ans.
P40,000
In accordance with PFRS 2 Share-based payment, how, if at all, should an entity

recognize the change in the fair value of the liability in respect of a cash-settled share-
based payment transaction?
Should not recognize in the financial statements but disclose in the notes thereto
Should recognize in the statement of changes in equity
Should recognize in other comprehensive income
Should recognize in profit or loss
Ans.
Should recognize in profit or loss
Under PFRS 2, which of the following valuation techniques should not be used as a first-
instance measure of fair value for shares and share options not traded in an active
market?
Black-Scholes model
Intrinsic model
Binomial model
Monte-Carlo model
Ans.
Intrinsic model
On January 1, 2013, MARS Company purchased an equipment for the cash price of P
5,000,000. The supplier can choose how the purchase is to be settled.
The choices are 50,000 shares with par value of P 50 in one year’s time, or a cash
payment equal to the market value of 40,000 shares on December 31, 2013.
At grant date on January 1, 2013, the market price of each share is P 110 and on the date
of settlement on December 31, 2013, the market price of each share is P 130.
What is the equity component arising from the purchase of equipment with share and cash
alternative?
500,000
400,000
600,000
0
Ans.
600,000
On January 1, 20Y1, MIT Corporation granted Silicon Valley, its president a

compensatory stock option plan to purchase 8, 000 shares of MIT’s P10 par
common stock. The option price is P25 per share and the option has a fair value of
P7 per option, which is exercisable on January 1, 20Y5, after four years of service.
How much compensation expense should MIT recognize on December 31, 20Y1?
None
P80, 000
P14, 000
P56, 000
Ans.
P14, 000
On January 1, 2013, MARS Company purchased an equipment for the cash price of P
5,000,000. The supplier can choose how the purchase is to be settled.
The choices are 50,000 shares with par value of P 50 in one year’s time, or a cash
payment equal to the market value of 40,000 shares on December 31, 2013.
At grant date on January 1, 2013, the market price of each share is P 110 and on the date
of settlement on December 31, 2013, the market price of each share is P 130.
What is the interest expense to be recognized on December 31, 2013 if the supplier has
chose the “cash alternative”?
600,000
400,000
800,000
0
Ans.
800,000

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On December 31, 20CY, Tiangsing Corp.

’s board of directors canceled 50,000

Ordinary shares P540,000

Macar Company provided the following information on December 31, 2015.

What is the amount of legal capital?

Common shares issued would exceed common shares outstanding as a result of

Purchase of treasury stock

On December 31, 20CY, Tiangsing Corp.’s board of directors canceled 50,000

Ordinary shares P540,000

In its statement of financial position at December 31, 20cy, Tiangsing should

375,000 and 334,000

Common shares issued would exceed common shares outstanding as a result of

Purchase of treasury stock

What amount should be reported for share premium?

Helu Corporation was organized on January 1, 20CY, with an authorization of

During 20CY, the corporation had the following equity transactions:

No par share capital

No par share capital

20,000 and 280,000

Share capital of P100,000

On December 15, 20CY, Macar declared dividends of P100,000.

What was the amount of dividends payable to Macar’s ordinary shareholders?

Increase on the date of declaration

P57,600 and P32,400

Increase on the date of declaration

Market value of the date of declaration

On November 1, 2014, Grande Company declared a property dividend of equipment

What is the dividend payable on December 31, 2014?

Debit retained earnings for P110,000 on April 1, 2015.

Debit retained earnings for P110,000 on March 31, 2016.

On January 2, 2014, Simpson Co.'s board of directors declared a cash dividend of

The P400,000 dividend includes a liquidating dividend of

Retained earnings, January 1 3, 000, 000

The retained earnings balance on January 1, 20Y2 was

On December 31, 2014, the statement of financial position of Legend Corporation

The share capital of P1,000,000 remained unchanged during the year.

What is the balance of retained earnings on January 1, 2014?

accumulated profits - unappropriated accumulated profits - Q9623 - Q9657

Retained earnings, January 1 3, 000, 000

Net income Dividends declared

The following information related to 20Y4:

Income before income tax P480,000

As at December 31, 20Y4, the retained earnings of Cerritos Corporation is

What amount should be reported as unappropriated retained earnings on December 31,

Current assets P 550,000

The shareholders approved the quasi-reorganization effective July 1, to be

Selected statement of financial position items prior to the quasi-reorganization are as

Immediately after the quasi-reorganization has been accomplished, retained earnings

Cash P (5,000) Accounts payable P450,000

Accounts receivable P40,000

How much is the total shareholders’ equity after the quasi-reorganization?

The following information pertains to Columbia Corp.:

Which of the following is not included as components of other comprehensive

Gains and losses on remeasuring available-for-sale financial assets

The effect of asset ceiling on prepaid defined benefit cost

Madsen Company reported the following information for 2014:

For 2014, Madsen would report other comprehensive income of

Other comprehensive income includes all of the following excepts

Unrealized gain on available for sale financial asset

Which of the following is not included as components of other comprehensive income?

Gains and losses on remeasuring available-for-sale financial assets

In a note to the financial statement

Preference share capital, 10%

Shareholders' Equity

Shareholders' Equity