Fighting future CPA!

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Problem 1
Cyan Company issued 200,000 shares of P5 par value at P10 per share. On January 1, 2017, the retained earnings amounted to
P3,000,000.
In March 2017, the entity reacquired 50,000 treasury shares at P20 per share. In June 2017, 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 current year was P600,000.

 What is the total amount of retained earnings at year- end?

 What amount should be reported as unappropriated retained earnings at year end?

Problem 2
Lauretta Company reported the following shareholders’ equity on January 1 , 2017:
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, 2017, 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, 2017, 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 2017 was P2, 500,000.

 What amount should be reported as unappropriated retained earnings on December 31, 2017?

Problem 3

At the beginning of the current year Sol Company declared a 10% share dividend. The market price of the entity’s 30,000
outstanding shares of P20 par value was P90 per share on that date.
The share dividend was distributed on July 1 when the market price was P100 per share.

 What amount should be credited to share premium for the share dividend?

Problem 4

At the current year- end, Grey Company Issued 4,000 ordinary shares of P100 par value in connection with a share dividend.
The market value per share on the date of declaration was P150.

The shareholders’ equity accounts immediately before issuance of the share dividend were:

Ordinary share capital P100 par, 50,000 shares authorized,

20,000 shares outstanding 2,000,000
Share premium 3,000,000
Retained earnings 1,500,000

 What amount should be reported as retained earnings immediately after the share dividend?

Problem 5

Ray company declared a 5% share dividend on 100,000 issued and outstanding shares of P20 par value which had a fair value
of P50 per share before the share dividend was declared . this share dividend was distributed 60 days after the declaration date.

 What is the increase in current liabilities as a result of the share dividend declaration?

Problem 6

Solace Company declared and distributed 10% share dividend with fair value of P1, 500,000 and par value of P1,000,000, and
25% share dividend with fair value of P4,000,000 and par value of 3, 500,000.

 What aggregate amount should be debited to retained earnings for the share dividends?

Problem 7

At the beginning of the current year, Flash Company had retained earnings of P4,000,000. during the year, the entity reported
net income of P2,000,000, sold treasury shares at a “gain” of P720,000, declared a cash dividend of P1,200,000, and declared
and issued a small share dividend of 60,000 with P10 par value when the fair value of the share was P20.

 What is the amount or retained earnings available for dividends at the end of the current year?
Problem 8

Katrina Company provided the following information on January 1, 2017:

Share capital, 250,000 shares authorized; 100,000 shares issued and outstanding 3,000,000
Share premium 4,000,000
Retained earnings 8,000,000

The entity declared a 10% share dividend on April 1, 2017 when the market value of the share was P70.
The share dividend was issued on July 1, 2017 when the market value of the share was P100. the share has a par value of P30.
The entity sustained a net loss of P1, 200, 000 for 2017.

 What amount should be reported as retained earnings on December 31, 2017?

Problem 9

12/ 31/2017 12/31/2018

Share capital (100 par value) 5,000,000 5,100,000
Share premium 2,500,000 2,900,000
Retained earnings 5,000,000 ?

During 2018, the entity declared and paid cash dividend of P750,000 and also declared and issued a share dividend.
There were no other changes in shares issued and outstanding during 2018.
The net income for 2018 was P1, 500,000

 What is the balance of retained earnings on December 31, 2018?

Problem 10
Zoe Company reported the following shareholders’ equity at the current year- end :

Share capital, par P25, authorized 150,000 shares,

55, 000 shares issued of which 5,000 shares are in treasury 1,375,000
Retained earnings 2,000,000
Treasury shares, at cost 150,000

A 100% share dividend was declared and all of the treasury shares were issued as share dividend and the balance from the
unissued shares. The share has market value of P40.

 What amount of retained earnings should be capitalized?

Problem 11

Multiple Company reported the following balances at year- end:

Share capital authorized, P100 par 5,000,000

Share capital unissued 2,000,000
Subscribed share capital 1,000,000
Treasury shares, 5,000 at cost 600,000
Share premium 500,000
Retained earnings 1,500,000

At this time, the board of directors declared and issued a dividend from the treasury shares of one share for each ten shares held.
The market value of the share is P150.

 What is the decrease in retained earnings as a result of the share dividend?

Problem 12

On December 31, 2017, Blake Mining Company declared a cash dividend of P800,000 to shareholders of record on January 15,
2018 and payable on February 15, 2018.

The entity reported the following information on December 31, 2017:

Accumulated depletion 200,000

Share capital 1,000,000
Share premium 300,000
Retained earnings 600,000

 What amount should be recognized as liquidating dividend?

Problem 13
OTSO Inc. Declared P2,400,000 cash dividends to its preference and ordinary shareholders out of its unappropriated retained
earnings in 2022. No dividends have been declared since 2020. OTSO’ shareholders’ equity before the dividend declaration is
as follows:

10% preference share capital (P300 par) P6,000,000

Ordinary share capital (P150 par) 3,000,000
Retained earnings 4,000,000
Ordinary share premium 800,000

 Compute the amount of dividends to be allocated to ordinary shareholders and preference shareholders under the
following assumptions:

a. The preference shares are non- cumulative and non- participating

b. The preference shares are cumulative but not participating
c. The preference shares are non- cumulative and fully participating
d. The preference shares are cumulative and fully participating