A company declared a cash dividend on its ordinary share in December 2019 payable in January

2020. Retained earnings would

a.
Increase on the date of declaration
b.
Not be affected on the date of payment
c.
Decrease on the date of payment
d.
Not be affected on the date of declaration
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A company issued rights to its existing shareholders to acquire, at P15 per share, 5,000 unissued
shares of ordinary share with a par value P10 per share. Ordinary share will be credited at

a.
P15 per share when the rights are exercised
b.
P15 per share when the rights are issued
c.
P10 per share when the rights are exercised
d.
P15 per share when the rights are issued
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A company issued rights to its existing shareholders to purchase for par unissued shares of ordinary
share with a par value of P10 per share. When the market value of the ordinary share was P12 per
share, the rights were exercised. Ordinary share should be credited at P10 per share and

a.
Paid-in Capital from share rights credited at P2 per share
b.
Retained earnings credited at P2 per share
c.
No credit made to Additional Paid-In Capital or Retained Earnings
d.
Additional Paid-in capital credited at P2 per share
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A company issued rights to its existing shareholders to purchase, for P30 per share, unissued shares
of P15 par value ordinary share. When the rights lapse

a.
Additional paid-in-capital will be credited
b.
No entry will be made
c.
Share rights outstanding will be debited
d.
Additional paid-in-capital will be debited
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A restriction of retained earnings is most likely to be required by

a.
Purchasing treasury share
b.
Reissuing treasury share
c.
Incurring a net loss in the prior year
d.
Incurring a net loss in the current year
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Aguanta Co. decided to split its P25 par value common stock for a 5-for-1 scheme. Which of the
following is true?

a.
The firm’s stockholders’ equity will increase because the firm has more shares of stock outstanding

b.
A shareholder that held two shares before the split will have fifty share after the split
c.
The firm’s paid-in capital will increase because the firm has more shares of stock outstanding

d.
The new common stock will have a par value of P5 per share after the split
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At the date of financial statements, ordinary share shares issued would exceed ordinary share shares
outstanding as a result of the

a.
Declaration of a share dividend
b.
Payment in full of subscribed share
c.
Declaration of a share split
d.
Purchase of treasury share
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At the start of current year, Saionra Co. was organized with authorized capital of 200,000 shares of
P100 par value. On January 10, it issued 50,000 shares at P110 per share. On March 25, 2,000 shares
were issued when the shares were quoted at P120 a share in the stock market. The company acquired
land having a fair value of P1,300,000 in exchange for issuing 10,000 shares which was quoted in the
stock exchange at P110 per share. What amount should be reported as share capital?

a.
7,640,000
b.
5,000,000
 c.
6,200,000
d.
7,440,000
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At the start of current year, Saionra Co. was organized with authorized capital of 200,000 shares of
P100 par value. On January 10, it issued 50,000 shares at P110 per share. On March 25, 2,000 shares
were issued when the shares were quoted at P120 a share in the stock market. The company acquired
land having a fair value of P1,300,000 in exchange for issuing 10,000 shares which was quoted in the
stock exchange at P110 per share. What amount should be reported as share premium?

a.
840,000
b.
800,000
c.
500,000
d.
540,000
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At the start of the current year, Saionaini Co. was authorized by the SEC to issue 800,000 shares.
Immediately after, the company issued 600,000 shares. In the middle of the year, the company
reacquired but did not cancel 50,000 shares. Then a month before the year ended the company
declared a two for one stock split. At the end of the year the company declared dividends. How many
shares are entitled to receive dividends at year end?

a.
1,150,000
b.
1,200,000
c.
1,500,000
d.
1,100,000
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At the start of the year, Cassiaion Co. issued 500,000 shares of P1 par value for P10 per share.
During the year, the company reacquired and retired 20,000 shares at P15 per share. As a result of the
retirement, what amount should be debited to share premium?

a.
280,000
b.
20,000
c.
180,000
d.
100,000
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At the start of the year, Cassiaion Co. issued 500,000 shares of P1 par value for P10 per share.
During the year, the company reacquired and retired 20,000 shares at P15 per share. As a result of the
retirement, what amount should be debited to retained earnings?

a.
280,000
b.
100,000
c.
180,000
d.
20,000
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Cassaionoi Co. was incorporated October 2020 and issued 200,000 shares par value of P10 at P15
per share. During the period October 2020 to December 31, 2021, the company reported a profit of
P750,000 and paid cash dividends of P380,000. In the same period, the company also reacquired
12,000 shares at P12 per share and subsequently reissued 8,000 shares for P8 per share and retired
the remaining treasury shares. What is the total shareholders’ equity on December 31, 2021?

a.
3,338,000
b.
3,370,000
c.
3,306,000
d.
3,290,000
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During the year, Casaionbaani Co. issued P110 per share, 150,000 convertible preference shares with
P100 par value. One preference share may be converted into three ordinary shares of P25 par value at
the option of the preference shareholder. At year-end, all the preference shares were converted into
ordinary shares. The market value of the ordinary share at the conversion date was P40. What
amount should be credited to ordinary share capital as a result of conversion?

a.
15,000,000
b.
18,000,000
c.
11,250,000
d.
16,500,000
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During the year, Casaionbaani Co. issued P110 per share, 150,000 convertible preference shares with
P100 par value. One preference share may be converted into three ordinary shares of P25 par value at
the option of the preference shareholder. At year-end, all the preference shares were converted into
ordinary shares. The market value of the ordinary share at the conversion date was P40. By what
amount did share premium increase as a result of conversion?
 a.
3,750,000
b.
1,500,000
c.
5,250,000
d.
0
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Easybreezy Co. held 100,000 shares of P1 par value as treasury reacquired for P120,000. At year-
end, the entity reissued all 100,000 shares for P190,000. What is credited for the excess of the reissue
price over the cost of treasury shares?

a.
Share capital P100,000
b.
Retained earnings P70,000
c.
Gain on sale of investment P70,000
d.
Share premium P70,000
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 Question text
Famous Company has not declared or paid dividends on its cumulative preference share in the last
three years. These dividends should be reported

a.
As a noncurrent liability
b.
In a note to the financial statements
c.
As a reduction in shareholders’ equity

d.
As a current liability
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Five thousand (5,000) shares of ordinary share with a par value of P10 per share were issued initially
at P12 per share. Subsequently, one thousand (1,000) of these shares were acquired as treasury share
at P15 per share. Assuming that the cost method of accounting for treasury share transactions is used,
what is the effect of the acquisition of the treasury share on the share premium and retained earnings,
respectively?

a.
Decrease, decrease
b.
Increase, decrease
c.
No effect, no effect
d.
Decrease, increase
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Fully participating preference share means that:

a.
The ordinary shareholders receive a dividend rate per share equal to the preference and all excess
dividends are given to the ordinary shareholders
b.
The preference shareholders receive their full dividend and any excess dividends on the ordinary
shareholders.
c.
The ordinary shareholders receive a dividend rate per share equal to the preference and all excess
dividends are share proportionately between the two classes.
d.
The ordinary shareholders receive a dividend rate per share equal to the preference and all excess
dividends go to the preference.
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Gains and losses on the purchase and resale of treasury shares may be reflected only in

a.
Income, paid-in capital, and retained earnings accounts
b.
Paid in capital accounts
c.
Income and paid-in capital accounts
d.
Paid in capital and retained earnings accounts
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How would a share split affect the company’s assets, total shareholders’ equity and share premium,
respectively?

a.
Decrease, decrease, decrease
b.
No effect, no effect, increase
c.
No effect, no effect, no effect
d.
Increase, increase, no effect
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How would retained earnings be affected by the declaration stock dividend and share split,
respectively?

a.
No effect, no effect
b.
Decrease, decrease
c.
Decrease, no effect
 d.
No effect, decrease
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How would the declaration of a 20% stock dividend by a Corporation affect it’s retained earnings
and total shareholders’ equity respectively?

a.
Decrease, no effect
b.
No effect, no effect
c.
No effect, decrease
d.
Decrease, decrease
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In accordance with PIC Q&A No. 2011-04, the following are generally treated as deduction to
equity, except

a.
SEC registration fees for new shares
b.
Stock exchange listing fees
 c.
Newspaper publication fees
d.
Underwriting fees
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Leesudni Company issued 200,000 shares of P100 par, 10% cumulative preference shares for
P25,000,000. One detachable warrant was attached to each preference share issued. Each warrant
gives the holder the right to purchase one ordinary share, P50 par value, for P100. The market value
of the warrant after the preference shares were issued was P15. The proceeds to be allocated to the
preference shares is

a.
22,000,000
b.
25,000,000
c.
21,000,000
d.
20,000,000
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Naglaum Co. 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
P3,500,000. What aggregate amount should be debited to retained earnings for the share dividends?
 a.
4,500,000
b.
3,500,000
c.
5,000,000
d.
5,500,000
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NoBae Co. provided the following information at year end: Preference share capital, P100 stated
value, P4,600,000; Share premium on preference share, P1,610,000; Ordinary share capital, P10 par,
P10,500,000; Share premium on ordinary share P5,500,000; Subscribed ordinary share capital,
P100,000; Subscription receivable on ordinary shares, P75,000; Bonds payable, P5,000,000;
Premium on bonds payable, P1,000,000; Appropriated retained earnings, P2,000,000;
Unappropriated retained earnings, P1,800,000. What is the amount of legal capital?

a.
15,200,000
b.
22,310,000
c.
16,810,000
d.
22,235,000
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On February 1, 2020, authorized ordinary share was sold on a subscription basis at a price in excess
of par value, and 20% of the subscription price was collected. On May 1, 2020 the remaining 80% of
the subscription price was collected. Share premium would increase on February 1 or May 1,
respectively?

a.
YES, NO
b.
NO, NO
c.
NO, YES
d.
YES, YES
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On February 28, 2020, Wailisod Co. declared a 10% share dividend. On this date, the company’s
30,000 outstanding shares with par value of P20 was quoted in the stock exchange at P90 per share.
The share dividends were distributed on September 30 when the quote price went up to P100 per
share. What amount should be credited to share premium resulting from the share dividend?

a.
300,000
b.
270,000
c.
240,000
d.
210,000
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On January 1, 2019, Confidentcaio Co. had 100,000 outstanding shares and 25,000 shares held in
treasury. During the first quarter, the company distributed 13,000 treasury shares to its officers. It
declared a 3 for 1 stock split which took effect on October 31. In November 2, the company
purchased 5,000 of its own shares to stop a company takeover. How many shares were issued on
December 31, 2019?

a.
300,000
b.
375,000
c.
450,000
d.
125,000
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On January 1, 2019, Confidentcaio Co. had 100,000 outstanding shares and 25,000 shares held in
treasury. During the first quarter, the company distributed 13,000 treasury shares to its officers. It
declared a 3 for 1 stock split which took effect on October 31. In November 2, the company
purchased 5,000 of its own shares to stop a company takeover. How many shares were outstanding
on December 31, 2019?
 a.
334,000
b.
300,000
c.
285,000
d.
324,000
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On January 1, 2019, Confidentpa Co. had 20,000 treasury shares of P100 par value that have been
acquired at P120 per share. In December, the company reissued 15,000 of these treasury shares at
P150 per share. What amount should be reported as appropriated retained earnings for treasury share
transactions?

a.
600,000
b.
1,800,000
c.
2,400,000
d.
500,000
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 Question text
On January 1, 2019, Massaion Co. reported P1,750,000 of appropriated retained earnings for the
construction of a new building which was completed in 2019 at a total cost of P1,500,000. During the
year the company appropriated P1,200,000 of retained earnings for the construction of a new
warehouse. Also, P2,000,000 of cash was restricted to cover the partial retirement of bonds in 2020.
What amount of appropriated retained earnings should be reported on the December 31, 2019
financial statements?

a.
1,450,000
b.
1,200,000
c.
2,950,000
d.
3,200,000
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On July 31, 2011, ACD Corporation purchased 500,000 shares of XYZ Corporation.  On December
31,2012 ACD distributed 250,000 shares of XYZ share as a dividend to ACD’s shareholders.  This is
an example of a

a.
Liquidating dividend
b.
Investment dividend
c.
Property dividend
d.
Stock dividend
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On June 30, 2020, Steelheart Mining, Inc. declared a cash dividend of P8,000,000 to shareholders of
July 15, 2020 and payable on September 1, 2020. As at June 30, the company reported share capital
of P100,000,000, share premium of P3,000,000 and retained earnings of P6,000,000. It also reported
an accumulated depletion of P2,000,000. What amount should be recognized as liquidating dividend?

a.
6,000,000
b.
2,000,000
c.
3,000,000
d.
8,000,000
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On October 31, 2019, Saionni? Co. declared a property dividend consisting of inventories payable on
March 31, 2020. The carrying amount of the inventories at the date of declaration is P3,000,000 and
the fair value is P2,500,000. However, the fair value less cost to distribute the inventory is
P2,200,000 on December 31, 2019 and P2,000,000 on March 31, 2020. What is the dividend payable
on December 31, 2019?

a.
2,200,000
b.
3,000,000
c.
2,500,000
d.
0
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On October 31, 2019, Saionni? Co. declared a property dividend consisting of inventories payable on
March 31, 2020. The carrying amount of the inventories at the date of declaration is P3,000,000 and
the fair value is P2,500,000. However, the fair value less cost to distribute the inventory is
P2,200,000 on December 31, 2019 and P2,000,000 on March 31, 2020. What amount of loss on
distribution of dividend is recognized on March 31, 2020?

a.
0
b.
200,000
c.
300,000
d.
500,000
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Pinacasaionjud Co. provided the following data at year end: Authorized share capital, P10,000,000;
Issued share capital, P6,000,000; Subscribed share capital, P2,000,000;  Subscription receivable,
collectible within one year, P800,000;  Share premium, P1,000,00; Appropriated retained earnings,
P1,200,000;  Unappropriated retained earnings, P600,000;  Revaluation surplus, P400,000; Treasury
shares, at cost, P200,000. What amount should be reported as total shareholders’ equity?

a.
9,800,000
b.
10,200,000
c.
9,000,000
d.
11,000,000
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Saionasad Co. issued 8,000 convertible preferred shares with P100 par value at P105. One preferred
share can be converted into three common shares with P25 par value at the option of the stockholder.
Subsequently, all of the preferred shares were converted into common shares. The fair value of the
common shares on the date of conversion was P30. What amount should be credited to share
premium or additional paid in capital as a result of the above transactions.

a.
80,000
b.
240,000
c.
120,000
d.
200,000
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Select the statements that is incorrect concerning the appropriations of retained earnings:

a.
Appropriations of retained earnings do not change the total amount of shareholders’ equity

b.
Appropriations of retained earnings reflect funds set aside for a designated purpose, such as plant
expansion
c.
Appropriations of retained earnings can be made at the discretion of the board of directors
d.
Appropriations of retained earnings can be made as a result of contractual requirements
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The directors of Nolovelife, Inc. have decided to issue a share dividend. The P50 par value share is
currently selling at P60. The selling price is not expected to be affected by the share dividend. The
company which has an authorized capital of 1,000,000 shares had issued 500,000 shares, of which
100,000 shares are in treasury. In order to capitalized P2,400,000 of retained earnings, what
percentage should be declared as share dividends by the directors?

a.
6%
b.
4%
c.
10%
d.
8%
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The entry to record the issuance of ordinary share for fully paid share subscription is

a.
Debit Ordinary Share Subscribed: Credit Ordinary Share and Additional Paid-in Capital
b.
A memorandum entry
c.
Debit Ordinary Share Subscribed: Credit Subscription Receivable
d.
Debit Ordinary Share Subscribed: Credit Ordinary Share
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The equity section of Loveless Co revealed the following information on December 31, 2019:
Preference share capital, P100 par, P5,000,000; Share premium-preference shares, P2,000,000;
Ordinary share capital, P50, P3,200,000; Share premium-ordinary shares, P500,000; Subscribed
ordinary share capital, P800,000; Appropriated retained earnings, P250,000; Unappropriated retained
earnings, P3,500,000; Subscription receivable ordinary shares, P400,000; OCI-Unrealized loss on
IESFVOCI, P600,000; Treasury shares ordinary, P1,000,000. How much is the contributed capital of
Loveless Co. as of December 31, 2019?

a.
10,500,000
 b.
10,100,000
c.
11,100,000
d.
11,500,000
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The par value of ordinary shares represents

a.
The liquidation value of the shares
b.
The legal nominal value assigned to the shares
c.
The amount received by the corporation when the share was originally issued.
d.
The book value of the shares
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The residual interest in a corporation belongs to the

a.
Creditors.
 b.
Ordinary shareholders.
c.
Management.
d.
Preference shareholders.
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Unlike a stock split, a share dividend requires a formal journal entry in the financial accounting
records because

a.
Stock dividends increase the relative book value of an individual’s share holdings

b.
Stock dividends increase the shareholders’ equity in the issuing firm

c.
Stock dividends are payable on the date they are declared
d.
Stock dividends represent a transfer from retained earnings to capital share
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When a portion of shareholders’ original investment is returned in the form of a dividend, it is called
a
 a.
Property dividend
b.
liquidating dividend
c.
compensating dividend
d.
equity dividend
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Which of the following actions or events does not result in an addition to retained earnings?

a.
Correction of an error in which ending inventory was understated in a previous year
b.
A quasi reorganization
c.
Earnings of net income for the period
d.
Issuance of a 3-for-1 share split
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Which of the following is NOT considered a type of preference share?
 a.
Cumulative preference share
b.
Participating preference share
c.
Premium preference share
d.
Redeemable preference share
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Which of the following statements is correct?

a.
When a corporation declares a small stock dividend, it should capitalize the par value of the shares.
b.
A stock dividend and a stock split are identical in all respects for the corporation issuing the dividend
or splitting the stock.
c.
A stock dividend (declared and issued) does not change the total assets, total liabilities, or total
stockholders equity of the issuing corporation.
d.
A large stock split should be accounted for by capitalizing the current market value of the stock.
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 Question text
Which statement is incorrect regarding measurement of a liability to distribute non-cash assets as
dividend to the entity’s owners?

a.
None of the above.
b.
If an entity gives its owners a choice of receiving either a non-cash asset or a cash alternative, the
entity shall estimate the dividend payable by considering both the fair value of each alternative and
the associated probability of owners selecting each alternative.
c.
An entity shall measure a liability to distribute non-cash assets as a dividend to its owners at the fair
value of the assets to be distributed.
d.
At the end of each reporting period and at the date of settlement, the entity shall review and adjust
the carrying amount of the dividend payable, with any changes in the carrying amount of the
dividend payable recognized in profit or loss.