FINALS EXAMINATION

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MULTIPLE CHOICE: Shade the best answer On December 31, 2021, how much would be
for every question. the restriction on Retained Earnings as a
result of the 2 transactions?
1-3. A corporation issued 400,000 ordinary
shares in 2020. In the middle of 2021, a. P0
50,000 treasury shares were acquired. In b. P50,000
the third quarter of 2021, additional 300,000 c. P61,500
ordinary shares and 100,000 preference d. P62,500
shares convertible into 200,000 ordinary
shares were issued. 10-12. Golf Company issued 200,000
ordinary shares when it began operations
On December 31, 2021, how many ordinary last year and issued an additional 100,000
shares were outstanding? shares this year. Golf also issued preference
shares convertible to 100,000 ordinary
shares. Last year, Golf purchased 75,000
a. P900,000
ordinary shares and held them in treasury.
b. P850,000
c. P700,000 At December 31 this year, how many
d. P650,000 ordinary shares of Golf were outstanding?

4-6. Ordinary treasury shares acquired for a. P225,000

P20,000 were sold by the corporation to new b. P300,000
shareholders for P30,000. c. P325,000
d. P400,000
To record the foregoing transaction:

a. Ordinary treasury shares would be

credited for P30,000
b. Ordinary treasury share premium would
be credited for P30,000
c. Ordinary treasury share premium would
be credited for P10,000
d. Ordinary share capital would be credited
for P20,000

13-15. Mega corporation has 100,000 shares

of P50 par value authorized share capital.
The corporation complied with the minimum
requirements for the share subscription and
payment thereof.

7-9. On June 1, 2021, a corporation acquired How much is the minimum paid up capital of
at P120 per share its own 200 ordinary the corporation?
shares with a par value of P100 per share. a. P5,000,000
On October 1, another 300 shares were b. P1,250,000
acquired at P125 per share.
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c. P312,500 What would be the increase in the
d. P5,000 Subscribed ordinary share capital and
Ordinary share premium accounts,
16-18. Virma corporation sold to subscriber respectively, as a result of the transaction?
500 shares of its P30 par value ordinary
a. P0 and P1,200
shares at P32 per share receiving a 30%
b. P0 and P9,200
down payment.
c. P8,000 and P1,200
d. P9,200 and P0
In recording this transaction:
28-30. Owners of a corporation whose
a. Ordinary share capital will be credited in names are mentioned in the articles of
the amount of P15,000. incorporation are called:
b. Ordinary share capital will be credited in
the amount of P16,000. a. Shareholders
c. Ordinary share premium will be credited in b. Members
the amount of P4,500. c. Promoters
d. Subscribed ordinary share capital will be d. Incorporators
credited in the amount of P15,000.
31-33. The document that is required to be
19-21. Leon corporation sold 500 shares of submitted by a corporation to the SEC for
its P40 par value preference shares for cash approval that enumerates its power and
at P50 per share. authority is called:

In recording this transaction, there would be a. By-laws

a: b. Treasurer's affidavit
c. Articles of incorporation
a. Credit to Preference share capital for d. Stock certificate
P20,000
b. Credit to Preference share capital for 34-36. Which of the following is an example
P25,000 of a quasi-public corporation?
c. Credit to Preference share capital in
excess of stated value for P5,000 a. City of Manila
d. Credit to Subscribed preference share b. PLDT
capital for P20,000 c. SM
d. Department of Agriculture
22-24. Luningning Corporation sold for cash
400 preference shares with a par value of 37-39. A corporation which is controlled by
P50 per share at P56 per share. Also, 600 another corporation is called:
ordinary shares with no par value but with
stated value of P100 per share were sold for a. Parent corporation
P102 per share. b. Subsidiary corporation
c. Holding corporation
What would be the effect of the transaction
d. Neither in any of the choices
on the total share premium account?

a. P0
b. P1,200 40-42. How many of the following
c. P2,400 statements is/are true?
d. P3,600
*A de jure corporation has a legal
personality
25-27. Mario Corporation received
subscription for 400 ordinary shares with a *A de facto corporation has a legal
par value of P20 per share. The subscription personality
price was P23 per share.

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*A public corporation can issue shares of On the date of declaration, how much should
stock be charged to Retained earnings?

*A subsidiary corporation has a legal a. P0

personality separate from the parent b. P20,000
corporation c. P100,000
d. P120,000
a. One
b. Two 55-57. On June 30, 2020, a corporation
c. Three declared a 10% ordinary stock dividend on
d. Four its 100,000 ordinary shares issued and
outstanding with a par value of P10 per
43-45. A corporation is authorized to issue share. The fair value of the ordinary shares
15,000 ordinary shares with a par value of was P30 per share.
P100 per share. 11,000 shares are issued
and 1,000 of which are in the treasury. The foregoing stock dividend would be:

How many shares are outstanding (entitled a. No effect in total SHE

to receive dividends)? b. Decrease the total SHE by P100,000
c. Decrease the total SHE by P200,000
a. 1,000 d. Decrease the total SHE by P300,000
b. 10,000
c. 11,000
58-60. Which of the following does not affect
d. 15,000
Retained earnings?
FOR THE NEXT 2 QUESTIONS: A
corporation declared a cash dividend on its a. Actual payment/distribution of dividends
ordinary shares on December 31, 2020, b. Adjustment of prior period error
payable on January 31 2021 to all c. Recapitalization
shareholders of record as at January 15, d. Profit during the period
2021.
61-63. A change from a higher par value to a
46-48. How would this dividend declaration lower par value share capital:
affect the total shareholders' equity on
December 31, 2020. January 15, 2021 and a. Decrease total assets
January 31, 2021 respectively? b. Decrease total SHE
c. Increase total SHE
a. No effect; No effect; and Decrease
d. Does not affect SHE
b. No effect; Decrease; and No effect
c. Decrease; No effect; and No effect
d. Neither in any of the choices

49-51. When will the liability for the dividend

be settled?
a. Declaration date
b. Recording date
c. No liability will be recognized
d. Neither in any of the choices

64-66. On July 1, 2020, a corporation

52-54. On December 31, 2020, a corporation declared 5 for 1 share split on its
declared a property dividend (merchandise) outstanding 10,000 ordinary shares with a
to be distributed on January 31, 2021 to par value of P10 per share. On this date, the
shareholders of record as at January 15, fair value of the shares was P16.
2021. On December 31, 2020, goods costing
P100,000 with a fair value of P120,00 were After the share split, the par value of the
set aside for distribution. shares:
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a. Would not be affected On January 10 this year, India purchased
b. Would be P2 per share 5,000 of its ordinary shares at P10 per
c. Would be P8 per share share. On December 29 this year, India
d. Would be P50 per share received subscription to 50,000 shares for
40% down at P14 per share. On December
67-69. On September 3, 2020, the 31 this year, 3,000 treasury shares were
shareholders approved a 2 for 1 share split sold at P15 per share and retired the
of the corporation's ordinary shares. On this remaining treasury shares.
date, the shareholders' equity accounts of
the corporation were as follows: What is the total Shareholders’ Equity on
December 31 this year?
Ordinary share capital, P20 par P600,000
Ordinary share premium P150,000
a. P1,725,000
Retained earnings
b. P1,900,000
P1,350,000
c. P2,100,000
The new shares were issued on October 15, d. P2,145,000
2020
79-81. Juliet Company had 20,000
As a result of the foregoing share split, what
outstanding 11% preference shares with par
would be the balance of Retained earnings as
value of P50 per share. On August 8 this
at October 15, 2020?
year, Juliet redeemed and retired 25% of
these shares for P225,000. On that date,
a. P350,000
Juliet’s preference share premium totaled
b. P500,000
P300,00.
c. P850,000
d. P1,350,000
To record this transaction, Juliet should debit
70-72. Quasi-reorganization is allowed: (credit) its preference share capital,
preference share premium, and retained
a. For both financially troubled and stable earnings accounts as follows:
companies
b. For financially troubled entities a. P250,000; P75,000 and (P0)
c. For stable companies b. P250,000; P0; and P25,000
d. When approved by the BOD c. P250,000; (P25,000); and (P0)
73-75. On December 1, this year, Hotel d. P250,000; P0; and (P0)
Company received a donation of its 2,000
ordinary shares with a par value of P50 per 82-84. Kiss Company received a building in
share. On that date, the fair value of the exchange for the company's 6,000 ordinary
shares was P350 per share. The shares were shares with the par value of P1,000 per
originally issued for P250 per share. share. On the date of exchange, the carrying
amount of the building was P3,850,000 while
By what amount would the foregoing its fair value was P6,400,000. The shares
donation cause total Shareholders’ Equity to were trading in the stock exchange at
decrease? P1,100 per share.

a. P0
b. P200,000
c. P500,000
d. P400,000

76-78. India Company was organized on What would be the effect of the foregoing
January 1 last year. On that date, it issued transaction on the total share premium?
at P12 per share 100,000 ordinary shares
with a par value of P10 per share (200,000 a. P400,000 increase
shares were authorized). During the period
b. P600,000 decrease
January 1 last year through December 31
c. P6,000,000 increase
this year, India earned profit of P400,000
and paid cash dividends of P150,000. d. P6,400,000 increase

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85-87. Nel Corporation's general ledger this year?
accounts show among others, the following:
a. P500,000
Preference share capital (20,000 b. P540,000
authorized shares, parP200) P3,400,000 c. P800,000
Preference share premium P200,000 d. P840,000
Ordinary share capital (100,000
authorized shares, stated 94-96. How much is the paid in share
value P80) P4,000,000 capital?
Ordinary share capital in excess
of stated value P100,000 a. P5,000,000
b. P6,200,000
The issued preference and ordinary shares, c. P6,540,000
respectively, are: d. P20,000,000

a. 17,000 and 50,000 FOR THE NEXT TWO QUESTIONS: The

b. 17,000 and 51,250 shareholder's equity section of Charlies
c. 18,000 and 50,000 Company's balance sheet revealed the
d. 20,000 and 100,000 following information:

88-90. Sweety Corp. sold 4,000 ordinary Preference share capital,

shares with a par value of P100 per share to par P100 P2,300,000
a subscriber for P105 per share receiving an Preference share premium P805,000
initial payment of 30% of the subscription Ordinary share capital P5,250,000
price. After repeated demands for the Ordinary share premium P2,750,000
subscriber to pay the remaining balance but Subscribed ordinary shares P50,000
to no avail, the corporation was forced to sell Retained earnings P1,900,000
the delinquent shares at a public auction, Ordinary subscription
incurring advertising costs of P24,000. receivable P400,000

What should be the minimum bid price for 97-99. How much is the legal capital?
the delinquent shares?
a. P7,550,000
a. P280,000 b. P7,600,000
b. P294,000 c. P11,150,000
c. P304,000 d. P13,055,000
d. P318,000
100-102. How much is the total
Shareholders' equity?
FOR THE NEXT TWO QUESTIONS: Bravo
Company was organized at the beginning of
a. P7,550,000
this year with authorized capital of 100,000 b. P11,105,000
ordinary shares with a par value of P200 per c. P12,655,000
share. During the year, Bravo had the d. P13,455,000
following transactions affecting the
shareholder's equity:

Jan. 10 - Issued 25,000 shares at P220 per

share.

Mar. 25 - Issued 1,000 shares for legal FOR THE NEXT TWO QUESTIONS: The
services when the fair value was P240 per shareholders' equity accounts of XOX
share. Corporation on December 31, 2021 were as
Sep. 30 - Issued 5,000 shares for a tract of follows:
land when the fair value was P260 per share.
12% Preference share capital,
91-93. What amount should Bravo report for P40 par P2,000,000
Ordinary share premium for December 31

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Ordinary share capital, P20 par P8,000,000 c. P22.50
Retained earnings P5,000,000 d. P10

On this date, the board of directors declared 116-120. If the preference shares are not
50% of the retained earnings as cash preferred as to assets, how much dividends
dividend. No dividends declared in 2019 and per share would be given to the preferred
2020. shares?

103-106. If the preference shares are non- a. P100

cumulative and non-participating, the b. P75
dividend per ordinary share is: c. P70
d. P22.50
a. P1.25
b. P5.65
c. P6.25 “Whenever someone has a ready heart for
d. P20 this, the insights and understanding flows
freely. But if there is no readiness, any trace
107-110. If the preference shares are of receptivity soon disappears.”
cumulative and fully participating, the – Mat. 13:12 (MSB)
dividend per preference share is:
+++ Nothing Follows +++
a. P17.68
b. P40
c. P48 Mr. Julius B. Opriasa, CPA, MBA
d. P50 Faculty, College of Accountancy

FOR THE NEXT TWO QUESTIONS: XYZ Reviewed by:

Corporation was dissolved and liquidated. On
June 30, the following equity balances Dr. Joannamarie C. Uy, CPA
appeared in the books: Program Head, College of Accountancy

8% Preference share capital,

P100 par P500,000
Ordinary share capital,
P30 par P300,000

On this date, cash of only P600,000 was

available for distribution to the shareholders.

111-115. If the preference shares are

preferred as to assets, how much dividends
per share would be given to the ordinary
shares?

a. P100
b. P30

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