CPA REVIEW SCHOOL OF THE PHILIPPINES AP-7601 Manila AUDITING PROBLEMS CPA Review AUDIT OF SHAREHOLDERS’ EQUITY PROBLEM NO. 1 ACPA was engaged by BOOMPANES COMPANY in 2014 to examine its books and records and ‘to make whatever corrections are necessary. An examination of the accounts discloses the following: boa: a) Dividends had been declared on December 15 in 2012 and 2013 but had not been y “yo. entered in the books until paid. b) Improvements in buildings and equipment of P324,000 had been debited to expense at the end of April 2011. Improvements are estimated to have 12-year life. The company uses the straight-line method in recording depreciation and computes depreciation to , the nearest month. ») ‘6) The physical inventory of merchandise had been overstated by P96,000 at the end of ~) 2012 and by P42,500 at the end of 2013. ‘dy The merchandise inventories at the end of 2013 and 2014 did not include merchandise that was then in transit and to which the company had title. These shipments of \ P63,000 and P87,000 were recorded as purchases in January of 2014 and 2015, - Fespectively. ) The company had failed to record sales commissions payable of P98,000 and P33,000 at the end of 2013 and 2014, respectively. f) The company had failed to recognize supplies on hand of P25,500 and P51,700 at the end of 2013 and 2014, respectively. g) A delivery vehicle was sold for P100,000 on July 1, 2014, and the proceeds were credited to the Sales account. ‘The vehice was acquired on January 1, 2011, for 600,000. At that time, it had an estimated life of 6 years with no residual value. No depreciation was recorded on this vehicle in 2014, “‘The retained earnings account appeared as shown below on the date the CPA began the ‘examination. = Date Gredit_ | Balance a2 Jan. | Balance 195,000 Dec. 31” | Net income for year P344,000 | 539,000 (Jan. jividends paid oe P386,500 152,500, Mar. 6_, Stock sold ~ excess over par 123,000 | 275,500 Dec. 31 | Net income for year 269,000 | 544,500 2014 I Jan. 10_| Dividends paid 297,500 | 247,000 (Dec. 34 | Net loss for year 9,200 ___|- 237,800 (C1. What is the corrected 2012 net income? A. P413,000 B. P230,000 Cc. 221,000 D. P178,500CPAR - MANILA |AP7601 - AUDIT OF SHAREMOLDERS’ EQUITY, Py 2. What is the corrected 2013 net income? A. P116,000 B. P223,000 C. P4i9,000 D. P386,000 D3. Whatis the corrected 2014 net loss? A. P297,500 B. P254,900 C. P287,500 B. P202,500 % 4, What is the corrected retained earnings on December 31, 2013? A. P261,000 B. P279,000 C. P252,000 D. P270,000 5, What is the corrected retained earnings on December 31, 2014? A. P6,100 B. P58,500 C. P76,500 ‘D. P67,500 PROBLEM NO. 2 BERNADETTE CO. began operations on January 1, 2014. Authorized were 100,000 ordinary shares of P50 par value and 50,000 convertible preference shares of 10% P50 par value. The following transactions involving shareholders’ equity occurred during the first year of operations. © FY of prep. foqre received © FV op tne share inued Jan. 1. Issued 10,000 ordinary shares to the corporation promoters in exchange for property velued at P1,250,000 and services valued at 250,000, The property had cost the sae £200,000 three years before and was caried en the promoters’ books at 750,000. tage J fae 30 Feb. 22 Issued 15; 000 préference shares S ae price of P60 per share. Each share can be converted to five ordinary shares. The entity paid P25,000 to an agent for selling the shares, Oth OST x) "4a Pp ash 3, Mar. 10 Sold 25, mage gigary gre 0 per share. Issue costs were 100,000. 2, PHO | to i ‘April 10 20,000 ordinary were sold 5 ol share substriptions at P175 per share. No share certificates are Issued until a subscription contract is paid in full. No cash was: recelved. 92-3500” 5 feos 12 July 15 Exchanged 12/000 ordinary shares and 20,000 preference shares for a building with a fair value of P3,500,000. The building was originally purchased for P3,250,000 by the omer and has book valve of 2 400,00. In alton, 10,000 rcnary shares were - a B50 s0l for 4,500,000 in each, PE we ey io Se, Aug! 1 Recelved payments In ful for half the share! Bibseriptics and partial ndyments on the rest oft subserpions. Toe cash reelyed was 2,250,000. Share potfeaes were issued for the subscriptions paid in full. 52250" 520 455, Se {FASo? 150 Fo gi) ats 31. Received notice from holders of share subscriptions for 5,000 shares that they would not pay further on the subscriptions because the price of the share had fallen to P95. per share. The amount still due on those contracts was P750,000. Amount previously paid on the contracts are forfeited according to the agreement Tio Dec, 31 Net income for the first year of operations was P1,500,000. Pee Based on the preceding information, determine the correct balances of the following at December 31, 2104: fh 1. Ordinary share capital A, 2,850,000 8. P3,350,000 CC. P4,550,000 D. 2,750,000 © 2, Share premium — ordinary A. 5,775,000 B. 7,675,000 C. P6,975,000 D. P6,850,000CPAR MANILA ‘AUDIT OF SHAREHOLDERS’ EQUITY. fi 3. Share premium - preference ‘A. 825,000 B. P950,000 CC. P875,000 D. PA50,000 | 0 4, Subscriptions receivable | ‘A. P2,250,000 B, 750,000 C. P1,250,000 D. 500,000 6 5. Total shareholders’ equity A. P14,275,000 B, P12,775,000 C. P13,775,000 D. P15,275,000 —HOODO 000 Q——- = -nnnnnnnnnnnn nnn pyropriakon of RE PROBLEMNO.3 Yodel, ®& wiant ary) Diserch’ f Presented below are three (3) independert C2265 elating to the auelt of shareholders’ equity. Answer the question/s at the end of each case. 4 CHINITO COMPANY began operations on January 1, 2013. by Issuing at P15 per share one-half 75) of the 500,000 ordinary shares (P1 par value) that had teen authorized for issue. In addition, 0 Chinito has 250,000 6% preference shares (P5 par value) authorized. During 2013, Chinito (Im) reported net income of P620,000 and declared dividends of P130,000. ce phy Tih During 2014, Chinito completed the following transactions: Jan. 10 Issued an additional 40,000 ordinary shares for P18 per share. ye Apr. 2 Issued 115,000 preference shares for P7 per share. July 21 Authorized the acquisition of a custom-made: machine to be delivered in January — yaie 2015. Chinito appropriated P147,500 of reta ned earnings for the purchase of the gio machine. Oct. 25 Issued an additional 55,000 preference shares for P9 per share. Dec. 31 Reported P610,000 of net income and diaclared a dividend of P317,500 to “~~ shareholders of record on January 31, 2015, to be paid on February 4, 2015. OSL } 1. Whats the total shareholders’ equity on December 21, 2014? ney ba A. 6,552,500 B, P4,240,000 C. 76,405,000 D. 6,870,000 © 2. What is the unappropriated retained earnings balanc2 on December 31, 2014? py. A. 490,000 B. P952,500 C. P635,000 D. P782,500 2 BURITO CO. is authorized to issue 300,000 of P2 par value ordinary shares. The company has the following transactions: hoo (a) _ Issued 60,000 shares at P8 per share; received cash, - (b) Issued 750 shares, selling at P35 per share, to lawyers for services in connection with the organization of the corporation. The value of the legal services was P27,000, 2 (©) Issued 900 shares, valued objectively at P30,000), to the employees instead of paying them cash wages. “ey (d) Issued 70,000 shares in exchange for @ building valued at P885,000 and land valued at P240,000. (The building was originally acquired by the investor for P750,000 and 702 has 300,000 of accumulated depreciation; the land was originally acquired for 6) 90,000.) (e) Received cash for 19,500 shares issued at P38 per share. (A) Issued 12,000 shares at P45 per share; received cash. & 3. The statement of financial position will report share cremium of A, P2,591,200 B. P2,616,700 C. 22,588,500 D, 2,563,000350 So tte * Ho 4o2 xe, ays CPAR = MANILA ee —_EE—EEEE—EOe 3 CHIQUITO COMPANY has been paying regular quarterly cividends of P1.50 and wants to pay the same amount in the third quarter of 2014. The following Information relates to the ‘company’s equity: 35> Jan. 1 Shares outstanding, 350,000; P2 par (750,000 shares authorized). a Feb, 15 Issued 30,000 new shares at P10.50, pen Mar. 31 Paid quarterly dividends of P1.50 per share. gree ls May 12 Converted P1,000,000 of Pi,000 bonds to ondinary shares at the rate of 40 shares “510 peer P1,000 bond. June 15 Issued a 10% stock dividend. 30 Paid quarterly dividends of Pi.50 per share. D4. What is the total amount that Chiquito will have to pay in dividends in the third quarter in order to pay P1.50 per share? ‘A. P525,000 B. P627,000 C. F4570,000 D. P693,000 hy 5. What is the total amount of dividends to be distrlsuted during the year assuming no equity transactions occur after June 30? A. 2,280,000 B. P2,649,000 c 2,772,000 D.. P2,202,000 PROBLEM NO. 4 BEBE CO. was formed on July 1, 2011. It was authorizec to issue 1,800,000 shares of P10 par value ordinary shares and 600,000 shares of 8 )percent P25 par value, cumulative and nonparticipating preference shares. BEBE CO, has a July 1-June 30 fiscal year. The following information relates to the shareholders’ equi‘y accounts of BEBE CO. Ordinary Shares Prior to the 2013-2014 fiscal year, BEBE CO. had 660,000 ordinary shares issued as follows 1, 510,000 shares were issued for cash on July 1, 2014, at P31 per share. She, wae 2. On July 24, 2011, 30,000 shares were exchanged fer a plot of land which cost the seller 420,000 in 2005 and had an estimated market value cf P1,320,000 on July 24,2011. °°, 3, 120,000 shares were issued on March 1, 2012, for P42 per share. "3, 9" Spe, “ seo During the 2013-2014 fiscal year, the following transactions regarding ordinary shares took ae Feder) gare. 7 sued but nok ost nang November 30,2013 BEBE CO. purchased 12,000 of ius own shares on the open market at P39 per share. 7p T December 15,2013 BEBE CO. declared a 5% stock cividend for shareholders of record on January 15, 2014, to be issued an January 31, 2014. BEBE CO. was having a liquidity problem and co.ld not afford a cash dividend at the time. BEBE CO's ordinary shares were selling at P52 per share on December 15, 2013. “* ¢¢ ae ™ ol June 20, 2014 BEBE CO. sold 3,000 of its own crdinary shares that it had purchased on November 30, 2013, for P126,C 00, ny Preference Shares BEBE CO. issued 240,000 preference shares at P44 per stiwre on July 1, 2012. Cash Dividends BEBE CO. has followed a schedule of declaring cash dividends in December and June, with payment being made to shareholders of record in the following month. The cash dividendsCPAR - MANILA AP7601 — AUDIT OF SHAREHOLDERS’ EQUITY which have been declared since inception of the company through June 30, 2014, are shown below: 12/15/12 PO.30 per share P1,00 per share 2407! = 240 eu)ool, — 06/15/13 70,30 per share P1.00 per share 12/15/13, _ PL.00 per share or yycy cash + ‘No cash dividends were declared during June 2014 due to the company’s liquidity problems. Retained Earnings As of June 30, 2013, BEBE CO's retained earnings account had a balance of 4,140,000. For the fiscal year ending June 30, 2014, BEBE CO. reported net income of P240,000. 35 Required: Compute the adjusted balances of the foliowing as of June 30, 2014: a_| Share capital—preference Ga00, 00 b._| Share capital—ordinary ¢._| Share premium—preference = = a 4,560,000 d._| Share premium—ordinary Jy, 920 %0D e._| Share premium—treasury 40v0 f._ | Retained earnings (before appropriation for treasury shares) 1445100 g._| Treasury shares 31,000 h._ | Total shareholders’ equity Be, 518,000 PROBLEM NO. 5 ‘The shareholders’ equity section of BAHRAIN CORPORATION'S statement of financial position as of December 31, 2013, is as follows: Share capital—Ordinary (P10 par, 750,000 shares authorized, 412,500 issued and outstanding) 4,125,000 Share premium 825,000 Total paid-in capital 4,950,000 Unappropriated retained earnings 2,002,500 Appropriated retained earnings 750,000 Total-retained earnings : si Lee 2,252,500 Total shareholders’ equity PZ.202,500 hral ing shareholders’ equity transa ring 2014; Jan. 15 [Completed the building renovation for which P750,000 of retained earnings had been restricted. Paid the contractor P727,500, all of which is capitalized. "9,0. 77557 RE—dpp / (ash toe Mar. 3 Issued 150,000 additional ordinary shares for P18 per share, May 18 Declared a dividend of P1.50 per share to be palcion July 31, 2014, to shareholders of record on June 30, 2014. RE-uA oF June19 Approved additional building renovation to be funded internally. The estimated cost of the project is P600,000, and retained earnings are to be restricted for that amount. July 31° Paid the dividend, prCPA HLA. Nov.12 Declared a property dividend to be paid on January 5, 2015. The dividend is to consist Of equipment that has a carrying amount of P360,000 and a fair value of P472,500 on DecRan PDP Dec. 31 Net income for 2014 4 (before recognition of Impairment loss on the equipment declared as property dividend) is P1,327,500., The equipment’s fatr value less cost to distribute on December 31 is P330,000. 30 ss 1. Share capital—ordinary on December 31, 2014, is ‘A. P5,625,000 B, P4,125,000 C. P4,950,000 D. P7,650,000 © 2. Share premium on December 31, 2014, is A. P2,625,000 B. P825,000 C. P2,025,000 D. P1,200,000 D 3. Unappropriated retained earnings on December 31, 2014, is A, P2,163,750 B. 2,246,250 C. 2,133,750 D. P2,276,250 - [} 4. The total shareholders’ equity on December 31, 2014, is A, P10,376,250 B. P10,526,250 C. P9,926,250 D. P7,650,000 aannnnnannnnnnnannn-QOOOGRQ00- PROBLEM NO. 6 You were engaged by CITY CORPORATION, a publicly held company whose shares are traded , on the Philippine Stock Exchange, to conduct an audit of its 2014 financial statements. You were told by the company’s controller that there were numerous equity transactions that took place in 2014, The shareholders’ equity accounts at December 31, 2013, had the following balances: ‘Share capital--Preference, P100 par value, 6% cumulative; 30,000 shares authorized; 18,000 shares issued and outstanding oa + P1,800,000 Share capital~-Ordinary, P1 par value, 1,800,000 shares authorized; 1,200,000 shares issued and outstanding ~ 1,200,000. ‘Share premium f° 2,400,000°" Retained earnings 980,000 Total shareholders’ equity P6.380,000 You summarized the following transactions during 2014 and other information relating to the shareholders’ equity in your working papers as follows: © January 6, 2014 - Issued 45,000 ordinary.shares in exchange for land. On the date issued, the shares had a market price of R16.50 per share. The land had a carrying value of 40,000, and an assessed value for property taxes of P490,000. * January 31, 2014 — Sold 2,400, P1,000, 12% bonds due January 31, 2024, at 98 with one detachable share warrant attached to each bond. Interest is payable annually on January 31. The fair value of the bonds without the share warrants is.95, The detachable warrants have a fair value of P50 each and expire on January 31, 2015, Each warrant entitles the holder to purchase 10 ordinary shares at P10 per share. tp “Tay, bp + February 22, 2014 - Purchased 15,000 of its own ordinary stehBto be held $6 teasuny shares for P24 per share. 7° “ © February 28, 2014 ~ Subscriptions for 42,000 ordinary shares were received at P26 per share, payable 50% down and the balance by March 15.“ z © March 15, 2014 — The balance due on 36,000 ordinary shares was received and those shares were Issued. ‘The subscriber who defaulted on the 6,000 remaining shares forfeited the dowr: payment in accordance with the subscription agreement, 3SPAR = MANILA AP7601 - AUDIT OF SHAREHOLDERS’ EQUITY EW Cash Wwe * August 30, 2014 - Reissued 6,000 treasury shares for P20 per share. * September 14, 2014 — There were 1,890 warrants detached from the bonds and exercised. * November 30, 2014 - Declared a cash “dividend of aie per share to all ordinary shareholders of record December 15, 2014, The dividend was paid on December 30, 2014. * December 15, 2014 - Declared the required annual cash dividends on preference shares for 2014. The dividend was paid on January 15, 2015. ‘+ January 8, 2015 - Before closing the accounting records for 2014, CITY became aware that no depreciation had been recorded for 2013 for a machine purchased on July 1, 2013. The machine was properly capitalized at P960,000 and had an estimated useful life of eight * Adjusted net income for 2014 was P840,000. Based on the foregoing and the result of your audit, answer the following: (Ignore income tax implications.) 1. Share capital—ordinary at December 31, 2014, is i A. P1,280,900 B. P1,305,900 CC. P1,281,000 ©) )P1,299,500 2. How much is the total share premium as of December 31, 2014? A. P4,239,600 B, 4,317,600 CC, P4,363,200 D. P4,065,100 3. The unappropriated retained earnings on December 31, 2014, is A. P982,550 B, P622,550 C.)P766,550 D. P790,550 4. How much is the total shareholders’ equity on December 31, 2014? ‘A,) P8,184,050 B. 7,968,050 C. P8,168,750 D. P8,190,050 == OBODN0OO-—-=n- ann PROBLEM NO. 7 ‘At the beginning of 2014, an entity grants 300.share options each to 1,000 employees. The grant is conditional upon the employees remaining in the entity's employ during a vesting period of three years. “The exercise price at grant date is estimated at P30, “However, the exercise price drops to P20 if the entity's earnings increase by at least an average of 0% per year over the three-year period. On grant date, the entity estimates that the fair value of the share options, with an exercise price of P20, is P10 per option. If the exercise price Is P30, the entity estimates that the share options have a fair value of P9 per option, ‘The following actual events occurred: 2014 = 60 employees have left. The entity expects, on the basis of a weighted average probability, that a further 60 employees will leave during 2015 and 2016, respectively. = The entity's eamings increased by 12%, and the entity expects that earnings will continue to increase at this rate over the next two years. The entity therefore expects that the earnings teroet wi: br ative and -hancs, the share options will have an exercise price of P20, 63 ryean van ——e———————ee——E—E—E—S———_—_—— 2015 typaled = ‘* At year end, a further 70 employees have resigned. The entity expects that a further(60 ‘employees will leave during 2016. . > © The entity's earnings increased by 13%, and it continues to expect that the earnings target will be achieved i ¢ ; 7 Go gid HV = 10 2016 * A further 56 employees have left by the end the year. ‘+ Due to a general decrease in market demand, the entity's earnings increased by only 3%. Because the earnings target was not achieved, the #00 vested share options for each employee have exercise price of P30._ Based on the preceding information, determine the following: 1. Compensation expense for 2014 A. P810,000 B) P820,000 C. P577,800 D. P732,600 2. Compensation expense for 2015 A. P577,800 B. P820,000 C) P800,000 D. P8i0,000 3. Compensation expense for 2016 ‘A. P577,800 B, 820,000 C. 810,000 D. P800,000 4. Share options outstanding at the end of 2015 A. P2,430,000 B. P1,377,800 C. 800,000 D. /P 1,620,000 5. Share options outstanding at the end of 2016 A. 2,430,000 B. PO C. P2,460,000 D. )p2,197,800 PROBLEM NO. 8 ‘An entity grants 100 cash share appreciation rights (SARs) to each of its 500 employees, on condition that the employees remain in its employ for the next three years. During year 1, 35 employees have left. The entity estimates that a further 60 will leave during years 2and 3. During year 2, 40 employees have left and the entity estimates that a further 25 will leave durifig year 3. During year 3, 22 employees have left. At the end of year 3,150 employees exercised their SARs, another 140 employees exercised their SARs at the end of year 4 and the remaining 113 employees exercised their SARs at the end of year 5. ‘The entity estimates the fair value of the SARs at the end of each year In which a liability exists ‘as shown below. At the end of year 3, all SARs held by the remaining employees vested. The intrinsic values of the SARs at the date of exercise (which equal the cash paid out) at the end of years 3, 4 and 5 are also shown below, Year Fair Value Intrinsic Value 1 P14.40 100x"/s ~ a . 2-4 15.50 $00 ey, : 3 18.20 P15.00 49 21.40 20.00 Bit: 25,00 REQUIRED: i Compute the amounts of compensation expense and liability that the’ years 1 to 5. -900000000--—~---——----——PROBLEM NO.9 An entity grants to an employee the right to choose either 1,000 phantom shares (i.e., a right ‘to a cash payment equal to the value of 1,000 shares) or 1,200 shares with a par value of P10 per share. The grant is conditional upon the completion of three years’ service. If the employee chooses the share alternative, the shares must be held for three years after vesting date. f At grant date, the entity’s share price is P50 per share. At the end of years 1, 2 and 3, the share price is P52, P55 and P60 respectively. The entity does not expect to pay dividends in the next three years. After taking into account the effects of the post-vesting transfer restrictions, the entity estimates that the grant date fair value of the share alternative is P48 per share. yp Lou Y cy uphy ‘At the end of year 3, the employee chooses: Scenario 1: The cash alternative Scenario 2: The equity alternative Based on the preceding information, answer the foilowing: F{ 1. What is the total fair value of the equity component as a result of the share-based payment transaction with settlement alternatives? A, P7,600 B. P10,000 C. 2,400 D. PO 5 2. What is the compensation expense in year 1? A. PI7,333 B. P19,866 C. Pi9,333 D. P23,334 (C3. What Is the compensation expense in year 2? A, P19,866 B, P17,333 C._P21,867 D. P19,333 lh 4. What is the compensation expense in year 3? A. P23,334 B. P25,867 C. P19,333 D. P19,866 {)) 5. If the employee has chosen the cash alternative, the amount to be paid at the end of year 3 should be A. P55,000 B. P67,600 C. P52,000 D. P60,000 B 6 iF the employee has chosen the share alternative, the amount of share premium to be recognized is A P7,600 B. P55,600 D. P67,600 nernnnnmem mG OOODOD Oanannnnnnnnnnnnns a. ; ee Dudainer Gogh ( du dikye minubs 4 BOD PROBLEM NO. 10 f _2+_Inan examination of shareholders’ equity, an auditor is most concerned that A. Capital stock transactions are properly authorized. B. Stock splits are capitalized at par or stated value on the dividend declaration date. C. Dividends during the year under audit were approved by the shareholders. D. Changes in the accounts are verified by a bank serving as a registrar and stock transfer agent. fA 2. In an audit of a medium-sized manufacturing concern, which one of the following areas can be expected to require the least amount of audit time? A. Owner's equity C. Revenue B. Assets D. Liabilities 1D 3. When a corporate client maintains its own stock records, the auditor primarily will rely upon ‘A. Confirmation with the company secretary of shares outstanding at year-end.R CPAR - MANILA, ___-AB7601 — AUDIT OF SHAREHOLDERS! EQUITY B. Review of the corporate minutes for data as to shzres outstanding. C. Confirmation of the number of shares outstanding at year-end with the appropriate state official. D. Inspection of the stock book at year-end and accolinting for all certificate numbers. 4. When a client company does not maintain tts own stock records, the auditor should obtain written confirmation from the transfer agent and registrar concerning A. Restrictions on the payment of dividends. B. The number of shares Issued and outstanding. C. Guarantees of preferred stock liquidation value. D. The number of shares subject to agreement to recurchase. 5. The auditor is concerned with establishing that diviclends are paid to client corporation shareholders owning stock as of the A. Issue date C. Record date: B. Declaration date D. Payment dete 6. An audit program for the retained earnings account: should include a step that requires verification of the A. Fair value used to charge retained earnings to accpunt for a two-for-one stock split. B. Approval of the adjustment to the beginning balarice as a result of a write-down of an account receivable. C. Authorization for both cash and stock dividends. D. Gain or loss arising from disposition of treasury shares. 7. During an audit of an entity’s shareholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or law. This audit procedure most likely is intended to verify management's assertion of A. Existence B. Completeness C. Valuation D. Presentation and disclosure 8. If the auditee has a material amount of treasury stock on hand at year-end, the auditor should ‘A. Count the certificates at the same time other securities are counted. B, Count the certificates only if the company had traasury stock transactions during the year. C. Not count the certificates if treasury stock is a decuction from shareholders’ equity. D. Count the certificates only if the company classifies treasury stock with other assets. 9. In performing tests concerning the granting of stock options, an auditor should ‘A. Confirm the transaction with the Securities and Exchange Commission. B. Verify the existence of option holders in the entity's payroll records or stock ledgers. C. Determine that sufficient treasury stock is availabl2 to cover any new stock issued, D. Trace the authorization for the transaction to a vore of the board of directors. 10. The auditor would not expect the dient to debit retained earnings for which of the following transactions? ‘A 4-for-1 stock split. “Loss” arising from disposition of treasury shares. A 1-for-10 stock dividend. Correction of error affecting prior year’s earnings. poPpF END