De La Salle University, Inc.

Ramon V. del Rosario - College of Business

ACTPACO - Accounting for Partnership and Corporation
2nd Term, AY 2012-2013 Dominguez,CPA
Answer Sheet SCORE
Name: Test I
ID No.: Test II
Section: Test III
TOTAL
Test I Multiple Choice Theories (10 points) - use scannable answer sheet
Test II Problem Solving and Preparation of Journal Entries. Final answer for problem solving
below, journal entries on the worksheet.
13
14
15
III. Preparation of journal entries and Statement of Realization and Liquidation
of the partnership.
De La Salle University, Inc.
Ramon V. del Rosario - College of Business
ACTPACO - Accounting for Partnership and Corporation
Q6 - Accumulated Profits, Incorporating a Partnership and Special Topics
INSTRUCTIONS TO THE EXAMINEE:
1 Only three (3) worksheets, calculator, ballpen and ruler are allowed at your desks. All others should be
placed at the side/platform of the room.
2 The examination is good for one and a half hours (1.5 hours).
3 Check the completeness and clarity of the questionnaire.
4 Read and follow instructions carefully. Ask questions only to the teacher.
5 You may write on any portion of the questionnaire.
6 CHEATING is a MAJOR offense, as provided for in Section 13.3.1.1 of the Student Handbook. In addition
to the major offense, anybody caught cheating will automatically receive a FINAL GRADE of 0.0.
I. Multiple Choice Theories: One (1) point each.
1 Dividends other than shares shall be recognized as liabilities on the
a. Date of declaration c. Date of payment
b. Date of record d. Date of issuance
2 If share dividend is less than 20%, how much of the accumulated profits should be capitalized?
a. Par value of the shares on the date of declaration
b. Fair value of the shares on the date of declaration
c. Fair value of the shares on the date of record
d. Par value of the shares on the date of record
3 An entity declared a cash dividend on its share capital in December of the current year, payable in January
of the next year. Accumulated profits would
a. Increase on the date of declaration c. Not be affected on the date of payment
b. Not be affected on the date of declaration d. Decrease on the date of payment
4 The actual amount of cash dividend to be paid is determined on the date of
a. Record c. Declaration or record, whichever is earlier
b. Declaration d. Payment
5 A dividend which is a return to shareholders of a portion of their original investment is
a. Liquidating dividend c. Property dividend
b. Investment dividend d. Share dividend
6 For which of the following purposes should an appropriation for possible loss contingencies be established?
a. To match applicable costs with current revenue
b. To reduce fluctuations in net income in order to lend stability to the entity
c. To charge operations in periods of rising prices for the losses which may otherwise be
absorbed in periods of falling prices
d. To inform shareholders that a portion of accumulated profits should be set aside from
amounts available for dividends because of such contingencies
7 An entity issued a 20% share dividend, at what amount per share, if any, should accumulated profits
be reduced for this transaction?
a. Market value c. Zero, because no entry is made
b. Par value d. Book value
8 How would the declaration of a 15% share dividend affect the following?
Accumulated profits Total shareholders' equity
a. No effect No effect
b. No effect Decrease
c. Decrease No effect
d. Decrease Decrease
9 How would the declaration and subsequent issuance of a 10% share dividend by the issuer affect each of
the following when the market value of shares exceed its par value?
Share capital Share premium
a. No effect No effect
b. No effect Increase
c. Increase No effect
d. Increase Increase
10 For an entity that has only ordinary shares outstanding, total shareholders' equity divided by the number
of shares outstnading represents
a. Return on equity c. Book value per share
b. Stated value per share d. Price-earnings ratio
II. Problem Solving and Preparation of Journal Entries.
On December 1, 2012, the board of directors authorized the payment of P2 per share, cash dividends
to shareholders on record on the same day. Outstanding shares are 10,000 as of December 1. Payment
will be made on January 31, 2013. Also declared on December 1 is the distribution of share dividends
of 1,900 for shareholders on record on December 31. Fair value of each share capital is P10 and the
corresponding par value is P9.75.
11 Prepare all the necessary journal entries on the date of declaration, record and payment
12 Compute for the amount to be debited to the account accumulated profits on January 31, 2013
The following shareholders' equity section from SM La Salle Company were provided:
Ordinary share capital, P10 par value, 80,000 shares outstanding P
10% Preference share capital, P20 par value, 20,000 shares outstanding
Dividends are in arrears for two years. Cash dividends declared amounted to P148,000.
13 Compute for the dividends to be received by BOTH ordinary and preference shareholders as well as
dividends per share on each of the below independent assumptions
14 Prepare the entry to journalize the payment of the P148,000 cash dividend
Arena Corporation has been in operation since 2009 and results of each year of business are as follows
2009 Net loss P 20,000
2010 Net income 50,000
2010 Dividends 10,000
2011 Net income 100,000
2011 Dividends 20,000
2012 Net income 200,000
2012 Dividends 30,000
2012 Appropriation for treasury share 10,000
15 Compute the balance of accumulated profits at the end of 2012
Dissolving Partnership has the following account balances as of December 31, 2012:
Book Value Fair Value
Land P 210,000 500,000
Buildings 250,000 400,000
Equipment 250,000 350,000
Merchandise Inventory 100,000 100,000
Accounts Payable 50,000 50,000
Mortgage Payable 100,000 100,000
Interest Payable 5,000 5,000
16 The New Corporation will take over by issuing 10,000 shares of its 50,000 authorized shares, P100 par
value. Provide the memo entry upon authorization of shares to New Corporation
17 Journalize the transfer of assets and liabilities to New Corporation
Unfriend Corporation shows the following shareholders' equity balances at its year end:
Share capital, P100 par value P 2,500,000
Share premium 500,000
Accumulated profits 750,000
Net income for the year 250,000
18 Compute for book value per share
19 Compute for basic earnings per share
Only three (3) worksheets, calculator, ballpen and ruler are allowed at your desks. All others should be
CHEATING is a MAJOR offense, as provided for in Section 13.3.1.1 of the Student Handbook. In addition
An entity declared a cash dividend on its share capital in December of the current year, payable in January
Not be affected on the date of payment
Decrease on the date of payment
Declaration or record, whichever is earlier
For which of the following purposes should an appropriation for possible loss contingencies be established?
To charge operations in periods of rising prices for the losses which may otherwise be
To inform shareholders that a portion of accumulated profits should be set aside from
An entity issued a 20% share dividend, at what amount per share, if any, should accumulated profits
How would the declaration and subsequent issuance of a 10% share dividend by the issuer affect each of
For an entity that has only ordinary shares outstanding, total shareholders' equity divided by the number
On December 1, 2012, the board of directors authorized the payment of P2 per share, cash dividends
to shareholders on record on the same day. Outstanding shares are 10,000 as of December 1. Payment
will be made on January 31, 2013. Also declared on December 1 is the distribution of share dividends
of 1,900 for shareholders on record on December 31. Fair value of each share capital is P10 and the
800,000
400,000
Arena Corporation has been in operation since 2009 and results of each year of business are as follows
The New Corporation will take over by issuing 10,000 shares of its 50,000 authorized shares, P100 par
De La Salle University, Inc.
Ramon V. del Rosario - College of Business
ACTPACO - Accounting for Partnership and Corporation
Q6 - Accumulated Profits, Incorporating a Partnership and Special Topics Dominguez, CPA
Answer Key
I. Multiple choice theories: One (1) point each.
1 A
2 B
3 C
4 A
5 A
6 D
7 B
8 C
9 D
10 C
II. Problem solving and journalizing solutions. (49 points)
11 OR
Declaration Accumulated profits 20,000 Accumulated profits 39,000
1.5 points Dividends payable 20,000 1.5 points Dividends payable 20,000
10,000 shares x P2/share Share dividends distributable 19,000
10,000 shares x P2/share
Accumulated profits 19,000 1,900 shares x P10/share
Share dividends distributable 19,000
1,900 shares x P10/share
Record No entry
.5 point
Payment Dividends payable 20,000
1 point Cash 20,000
12
Jan 31 Zero
2 points
13 A Non cumulative and non participating
Dividends declared P 148,000
Preference share (P400,000 x 10%) (40,000)
Ordinary share 108,000
Preference share 40,000 2 points 2.00 2 points
Ordinary share 108,000 2 points 1.35 2 points
B Cumulative and non participating
Dividends declared P 148,000
Preference share (P400,000 x 10%)2 years (80,000)
Balance 68,000
Preference share 80,000 2 points 4.00 2 points
Ordinary share 68,000 2 points 0.85 2 points
C Cumulative and participating
Dividends declared P 148,000
Preference share (P400,000 x 10%)2 years (80,000)
Balance 68,000
Preference share (P400,000/1,200,000)P68,000 22,667
Ordinary share (P800,000/1,200,000)P68,000 45,333
68,000
Preference share 102,667 2 points 5.13 2 points
Ordinary share 45,333 2 points 0.57 2 points
D Non cumulative and participating
Dividends declared P 148,000
Preference share (P400,000 x 10%) (40,000)
Balance 108,000
Preference share (P400,000/1,200,000)P108,000 36,000
Ordinary share (P800,000/1,200,000)P108,000 72,000
108,000
Preference share 76,000 2 points 3.80 2 points
Ordinary share 72,000 2 points 0.90 2 points
14 Dividends payable 148,000
Payment 1 point Cash 148,000
15 P270,000
2 points 2009 Net loss P (20,000)
2010 Net income 50,000
2010 Dividends (10,000)
2011 Net income 100,000
2011 Dividends (20,000)
2012 Net income 200,000
2012 Dividends (30,000)
270,000
16 The entity was authorized to issue P5,000,000, 50,000 shares, P100 par value.
.5 point
17 Land 500,000 18 P150
4.5 points Buildings 400,000 Share capital, P100 par value P 2,500,000
Equipment 350,000 Share premium 500,000
Merchandise Inventory 100,000 Accumulated profits 750,000
Accounts Payable 50,000 Shareholders' equity 3,750,000
Mortgage Payable 100,000 Outstanding shares (P2,500,000/P100 par) 25,000
Interest Payable 5,000 Book value per share P 150
Share capital 1,000,000
Share premium 195,000 19 P10
Share capital =10,000 shares x P100/share Net income for the year P 250,000
Share premium=Assets - Liabilities - Share Capital Outstanding shares (P2,500,000/P100 par) 25,000
Basic earnings per share P 10