POST-TEST IN CORPORATION

Name: ______________________________________________________________ Date: ___________________

Direction: Read each item carefully. Select the BEST ANSWER for each of the following questions and
write the letter of your choice on the table provided below. STRICTLY NO ERASURES ALLOWED.

1. 6. 11. 16.
2. 7. 12. 17.
3. 8. 13. 18.
4. 9. 14. 19.
5. 10. 15. 20.

1. Jack-jack Inc. has its following balances for the fiscal year ended May 26, 2022:

Ordinary share capital, P5 par, 500,000 shares authorized 750,000

Subscribed ordinary share capital 25,000
Share premium - ordinary 50,000
5% Preference share capital, P25 par, 25,000 shares authorized 300,000
Share premium - preference 30,000
Retained earnings appropriated for contingencies 150,000
Retained earnings appropriated for sinking fund 100,000
Retained earnings - unappropriated 450,000
Share dividends payable 105,000
Share premium - share dividends 63,000

Which of the following is true?

a. The total amount of retained earnings is P450,000.
b. The total share premium is P80,000.
c. The total amount of legal capital is P1,180,000.
d. The total shareholder’s equity is P1,710,000.

2. It refers to the document issued by appropriate government agencies as a permit to a newly formed
corporation to engage in a particular industry. It is issued in order for those corporations to legally
transact their business.
a. Certificate of incorporation or registration or primary franchise
b. Secondary license or secondary franchise
c. Articles of incorporation
d. By-Laws

3. Gain and loss on retirement of treasury shares shall not be included in profit or loss. If the
retirement results in a gain, such gain shall be credited to
a. Share premium
b. Retained earnings
c. Share capital
d. Income

4. The following are the attributes of a private corporation, except

a. Its owners are liable beyond their capital contribution.
b. Its owners are generally allowed to transfer their interests even without the consent of the other
owners.
c. It enjoys the right of succession.
d. It may exist in perpetuity under RA 11232 unless a fixed term is stated in the articles of
incorporation.

1|Page
5. Luna Corporation was incorporated on January 1, 2023 and was authorized to issue 100,000
ordinary shares with a par value of P20. The following are the equity transactions of the corporation
during the year:

• April 16 – Issued 20,000 shares for a total issue price of P800,000.

• June 3 – Purchase its own 8,000 ordinary shares for P120,000.
• September 22 – Reissued 2,800 treasury shares for P44,800.
• December 5 – Reissued 4,100 treasury shares for P36,900.

On year-end, Luna Corporation reported a net income of P740,000 and declared cash dividends of
P95,000.

On December 31, 2023:

I. The ordinary share capital is P378,000.
II. The total decrease in retained earnings is P116,800.
III. The amount of treasury shares is P38,300.
IV. The total share premium is P400,000.
V. The appropriated retained earnings is P120,000.

a. Only I, II, and V are true.

b. Only II and IV are true.
c. Only III, IV, and V are true.
d. All are true.

6. On May 26, 2022, Princess Corporation was authorized to issue 50,000 ordinary shares and 20,000
preference shares of P10 and P50 par value, respectively. During the year, one-fourth of the ordinary
shares were subscribed for P25 per share and 30% of the preference shares were issued for a
building with a fair value of P450,000. The preference shares have a quoted market price of P65. Half
of the subscription on ordinary shares were collected.

Statement I: The building is to be recorded at P390,000.

Statement II: The share premium arising from the issuance of preference shares is P150,000.
Statement III: The total contributed capital is P762,500.
Statement IV: The cash account increased by P156,250 as of year-end.

a. Only one statement is true.

b. Half of the statements are true.
c. Three of the statements are true.
d. None of the statements are true.

7. When the entity declared and paid a share dividend, the distribution resulted in a decrease in
a. Neither paid in capital nor retained earnings
b. Both share capital and retained earnings
c. Retained earnings and share premium
d. Retained earnings only

8. Which of the following does not have juridical personality as a corporation?

a. Corporation by prescription
b. De facto corporation
c. Ostensible corporation or corporation by estoppel
d. De jure corporation

9. The residual interest in a corporation belongs to

a. Management
b. Creditors
c. Ordinary shareholders

2|Page
d. Preference shareholders

10. Total shareholders’ equity represents

a. A claim against specific assets contributed by the owners
b. The maximum amount that can be borrowed by the entity
c. A claim against a portion of the total assets of an entity
d. Only the amount of retained earnings

For Items 11-12: Theia Company, which was authorized to issue 50,000 ordinary shares (par value,
P50), provided you the following transactions during the year 2022:
January 18 Issued 2,000 ordinary shares in exchange for legal services rendered by Atty.
Chan to the company. The market price of the shares on that date was P55.
March 29 Issued 6,500 ordinary shares for a total consideration of P377,000. Paid stock
transaction cost amounted to P32,000.
June 4 Acquired 1,800 ordinary shares for P40 per share.
October 16 Reissued 600 treasury shares for P52 per share.
December 28 Issued 9,000 ordinary shares, P459,000.

11. What is to be credited on March 29 transaction?

a. Cash of P345,000.
b. Share premium – ordinary of P20,000.
c. Ordinary share capital of P377,000.
d. None of the above.

12. Which of the following is incorrect with regards to the company’s treasury share transactions?
a. On June 4, treasury shares is to be debited at P72,000.
b. The total cash received from reissuance of treasury shares on October 16 was P31,200.
c. If the cost is greater than the issue price of the treasury shares, a share premium is to be credited.
d. The share capital account is unaffected by the company’s reissuance of treasury shares.

13. On December 31, 2022, Zeph Company reported the following equity items:

Ordinary share capital (2,000,000 issued, P5 par) 10,000,000

Share premium-ordinary 27,000,000
Retained earnings 4,500,000

The following transactions affected equity during 2023:

Jan. 1 20,000 ordinary shares were issued at P22 per share.
Apr. 1 10,000 ordinary shares were subscribed at P20 per share.
June 30 ¼ of the above subscription was collected.
July 1 5,000 ordinary shares were issued in exchange for an equipment costing P40,000 and
with a market value of P35,000. The shares have a fair value of P21 on that date.
Aug. 1 7,000 ordinary shares were issued at P28 per share. Share issue costs incurred
amounted to P5,000 has been paid.
Oct. 30 The subscribed shares last April 1 have been fully paid. Share certificates were issued.
Dec. 31 Net income for the year is P9,000,000.

Which of the following is inaccurate?

a. The net income on December 31 is always an addition to retained earnings account.
b. Subscribed share capital plus share premium arising from the related subscription is equal to total
subscription price on April 1.
c. The shares issued in July 1 in exchange for an equipment, the first priority is the fair value of the
property received.
d. Share capital account will increase on the collection of subscription on June 30.

3|Page
14. Nonstock dividends shall be recognized as liability on the
a. Date of declaration
b. Date of record
c. Date of payment
d. Date of issuing check

15. Ianna Inc. presented some items in its statement of financial position containing the following
accounts among others:

Subscription receivable, P160,000; 12% Preference share capital, P100 par, 22,000 shares issued and
outstanding, P2,200,000; Ordinary share capital, P10 par value, 24,000 shares issued and
outstanding, P240,000; Ordinary share capital subscribed, 24,000 shares, P240,000; Retained
earnings, P500,000; Share premium - preference, P180,000; Share premium – ordinary, P80,000; and
Treasury shares, 6,000 ordinary shares issued, P72,000.

At year-end, Ianna Inc. reported a net income after tax of P2,100,000.

Statement I: If the company declared P2 per share dividends to its ordinary shareholders, the total
amount of dividends was P96,000.
Statement II: If the company declared share dividends to its preference shareholders, the total
amount of dividends was P264,000.
Statement III: If the company declared a P5 per share dividends to its ordinary shareholders and to
preference shareholders based on the preference rate, the decrease in retained earnings was
P474,000.

a. One of the statements is incorrect.

b. Two of the statements are incorrect.
c. Three of the statements are incorrect.
d. All of the statements are incorrect.

16. An entity issued what is called a “20% share dividend”. At what amount should retained earnings
be reduced for the transaction?
a. Zero
b. Par value
c. Fair value at the declaration
d. Fair value at the date of issuance

17. Pia Company reported the following balances on its fiscal year ended July 27, 2022:

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, 2023 when the market value of the share was
P50. The share dividend was issued on July 1, 2023 when the market value of the share was P60. The
share has a par value of P30. The entity sustained a net loss of P1,200,000 for 2023.

a. The retained earnings to be debited on April 1, 2023 was P300,000.

b. The share capital to be credited on July 1, 2023 was P750,000.
c. There is no share premium to be recorded on July 1, 2023.
d. The balance of the retained earnings as of the fiscal year ended July 27, 2023 was P6,300,000.

4|Page
For Items 18-19: Queen Inc. was incorporated on November 2021. The company opted to use
calendar method of reporting. After three years of operations, the shareholders’ equity section of
Queen Inc.’s statement of financial position as of December 31, 2024, is as follows:

Ordinary shares, P200 par value, authorized, 300,000

shares; issued 50,000 shares P10,000,000
Preference shares, P500 par value, authorized, 100,000
shares; issued 30,000 shares 15,000,000
Share premium – ordinary 3,200,000
Share premium – preference 1,900,000
Retained earnings 8,800,000

The following transactions occurred during 2025:

January 8 Queen Inc. issued for P2,350,000, 10,000 ordinary shares. The company incurred
share issue cost at P40,000.
February 21 5,000 preference shares were subscribed at P520 per share.
March 17 2,000 previously unissued ordinary shares were issued in exchange of an
equipment having a fair market value of P520,000. The ordinary shares were
currently selling at P240 per share.
April 2 Queen Inc. issued for P2,800,000, 5,000 ordinary shares. The company incurred
share issue cost of P10 per shares issued.
May 11 Reaquired 6,000 ordinary shares as treasury shares at P900,000.
June 30 Queen Inc. declared and paid P5 cash dividends to ordinary shares and P10 per
share cash dividends to preferences shares.
July 27 Reissued 2,500 treasury shares at P155 per share.
August 12 A 15% ordinary share dividend was declared and issued to ordinary shares.
Market value is currently at P290 per share.
September 1 Collected 75% of the preference shares subscribed on February 21.
October 15 15,000 ordinary shares were subscribed at P230 per share. Half of the
subscription price was paid.
November 15 Collected full payment on the ordinary shares subscribed on October 28.
December 31 Queen Inc. declared and paid P5 cash dividends to ordinary shares and P10 per
share cash dividends to preferences shares.

Adjusted net income for the year is at P2,580,000.

18. The entry to record the stock dividends on August 12 requires a:

a. Credit to share dividends payable of P2,755,000.
b. Debit to retained earnings of P1,905,000.
c. Credit to share capital of P2,762,250.
d. Credit to share premium of P857,250.

19. The entry to record cash dividends on December 31 requires a debit to retained earnings at:
a. P440,125
b. P790,125
c. P650,875
d. P720,875

20. Contributed capital does not include

a. Share premium on ordinary and preference shares
b. Preference share capital
c. Capital resulting from reissuance of treasury shares at a price above acquisition price
d. Capital accumulated by retention of earnings

Prepared by: Bernard Rodney D. Alvarez, CAT, CTT, CB, RCA, MICB, MRITax

5|Page