Course Code: BAM 201

Teacher’s Guide Module #22

Name: ______________________________________________ Class number: _________________
Section: ________________ Schedule: _________________ Date: ________________________

Lesson title: QUIZ 5 Materials:

Lesson Objectives: Module #22 - Quiz
1. Assess the understanding regarding accounting for
corporation. References:
2. Provide feedback that can then use to improve your Partnership and Corporation
understanding. Accounting by Win Ballada
3. Identify weaknesses and correct them.

I. Multiple Choices:

Directions: Read and understand each question carefully, and encircle in ink the letter that corresponds to
your answer. Erasures will be marked as wrong.

1. If shares are issued below par or issued value, the deficiency of the consideration received is recorded as
“discount on share capital.” The discount is presented in the statement of financial position
a. under current assets as a receivable from the shareholder concerned.
b. as a deduction in shareholders’ equity.
c. as an addition in shareholders’ equity.
d. a and b

2. Legal capital is the portion of contributed capital that cannot be distributed to the owners during the lifetime
of the corporation unless the corporation is dissolved and all of its liabilities are settled first. For no-par value
shares, legal capital is
a. the aggregate par value of shares issued and subscribed.
b. the total consideration received or receivable from shares issued or subscribed.
c. the aggregate stated value of shares issued and subscribed.
d. the aggregate market value of shares issued and subscribed.

3. How should the excess of the subscription price over the par value of ordinary subscribed be recorded?
a. As share premium when the subscription is received.
b. As share premium when the subscription is collected.
c. As retained earnings when the subscription is received.
d. As share premium when the capital stock is issued.

4. Share issuance costs are recognized directly in equity. If the related share premium is insufficient to offset
any share issuance costs, the issuance costs are
a. recognized as expense in profit or loss
b. charged directly to retained earnings
c. charged directly to share capital
d. a or b

5. Zinc Co.'s adjusted trial balance at December 31, 20x1, includes the following account balances:
Ordinary shares, ₱3 par ₱600,000
Share premium 800,000
 Course Code: BAM 201
Teacher’s Guide Module #22
Name: ______________________________________________ Class number: _________________
Section: ________________ Schedule: _________________ Date: ________________________

Treasury stock, at cost 50,000

Accumulated other comprehensive income (Debit) 20,000
Retained earnings appropriated for uninsured earthquake losses 150,000
Retained earnings - unappropriated 200,000

What amount should Zinc report as total stockholders' equity in its December 31, 20x1, balance sheet?
a. 1,680,000 b. 1,720,000 c. 1,780,000 d. 1,820,000

6. The stockholders' equity section of Peter Corporation's balance sheet at December 31, 20x2 was as follows:
Ordinary shares (₱10 par, authorized 1M sh., issued and outst. 900K sh.) ₱ 9,000,000
Share premium 2,700,000
Retained earnings 1,300,000

On January 2, 20x3, Peter purchased and retired 100,000 shares of its stock for ₱1,800,000. Immediately after
retirement of these 100,000 shares, the balances in the share premium and retained earnings accounts should
be
Share premium Retained earnings Share premium Retained earnings
a. ₱ 900,000 ₱1,300,000 c. ₱1,900,000 ₱1,300,000
b. ₱1,400,000 ₱ 800,000 d. ₱2,400,000 ₱ 800,000

7. On April 1, 20x9, Hyde Corp., a newly formed company, had the following stock issued and outstanding:
• Ordinary shares, ₱1 par value, 20,000 shares originally issued for ₱30 per share.
• Preference shares, ₱10 par value, 6,000 shares originally issued for ₱50 per share.

Hyde’s April 1, 20x9, statement of shareholders’ equity should report

Ordinary shares Preference shares Share premium
a. ₱20,000 ₱60,000 ₱820,000
b. ₱20,000 ₱300,000 ₱580,000
c. ₱600,000 ₱300,000 ₱0
d. ₱600,000 ₱60,000 ₱240,000

8. Asp Co. was organized on January 2, 20x1, with 30,000 authorized shares of ₱10 par ordinary shares. During
20x1 the corporation had the following capital transactions:
Jan. 5 Issued 20,000 shares at ₱15 per share.
July 14 Purchased 5,000 shares at ₱17 per share.
Dec. 27 Reissued the 5,000 shares held in treasury at ₱20 per share.

Asp used the cost method to record the purchase and reissuance of the treasury shares. In its December 31,
20x1, balance sheet, what amount should Asp report as additional paid-in capital in excess of par?
a. 100,000 b. 125,000 c. 140,000 d. 115,000
 Course Code: BAM 201
Teacher’s Guide Module #22
Name: ______________________________________________ Class number: _________________
Section: ________________ Schedule: _________________ Date: ________________________

9. On March 1, 20x1, Rya Corp. issued 1,000 shares of its ₱20 par value ordinary shares and 2,000 shares of
its ₱20 par value convertible preference shares for a total of ₱80,000. At this date, Rya’s ordinary share was
selling for ₱36 per share, and the convertible preference share was selling for ₱27 per share. What amount
of the proceeds should be allocated to Rya’s convertible preference share?
a. 60,000 b. 54,000 c. 48,000 d. 44,000

10. In 20x1, Fogg, Inc., issued ₱10 par value ordinary share for ₱25 per share. No other share transactions
occurred until March 31, 20x1, when Fogg acquired some of the issued shares for ₱20 per share and retired
them. Which of the following statements correctly states an effect of this acquisition and retirement?
a. 20x1 profit is decreased. c. Share premium is decreased.
b. 20x1 profit is increased. d. Retained earnings is increased.
 Course Code: BAM 201
Teacher’s Guide Module #22
Name: ______________________________________________ Class number: _________________
Section: ________________ Schedule: _________________ Date: ________________________

ANSWERS:
1. B
2. B
3. A
4. B
5. A
Ordinary shares, ₱3 par 600,000
Share premium 800,000
Treasury stock, at cost (50,000)
Accumulated other comprehensive income (Debit) (20,000)
Retained earnings appropriated for uninsured
earthquake losses 150,000
Retained earnings - unappropriated 200,000
Total shareholders' equity 1,680,000

6. D
Solution:
Jan. 2, Share capital (100,000 x ₱10) 1,000,000
20x3 Sh. premium – orig. issuance (2.7M x 100K/900K) 300,000
Retained earnings 500,000
Cash 1,800,000

Share premium Retained earnings

Dec. 31, 20x2 2,700,000 1,300,000
Debit (300,000) (500,000)
Jan. 2, 20x3 2,400,000 800,000

7. A
Ordinary Preference
Total issue price 600,000 300,000
Par value 20,000 60,000
Share premium 580,000 240,000 820,000

8. D
Solution:
Jan. 5, Cash (20,000 x 15) 300,000
20x1 Ordinary share (20,000 x 10) 200,000
Share premium 100,000
July 14, Treasury shares (5,000 x 17) 85,000
20x1 Cash 85,000
 Course Code: BAM 201
Teacher’s Guide Module #22
Name: ______________________________________________ Class number: _________________
Section: ________________ Schedule: _________________ Date: ________________________

Dec. Cash (5,000 x 20) 100,000

27, Treasury shares (5,000 x 17) 85,000
20x1 Share premium – Treasury shares 15,000

9. C
No. of sh. Fair value Totals Allocation
Ordinary sh. 1,000 36.00 36,000 32,000
Preference sh. 2,000 27.00 54,000 48,000
90,000 80,000

10. C