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Name: Rating:Instructor: Date:G E N E R A L D I R E C T I O N SREAD THIS PAGE BEFORE STARTING THE ASSESSMENTThis is a 12 paged test and is composed of 2 sections and has a total score of eighty (80) points. You have eighty (80) Minutes to finish this examination. The breakdown of the exam is as foll...

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

Name:

Rating:

Instructor:

Date:

G E N E R A L D I R E C T I O N S READ THIS PAGE BEFORE STARTING THE ASSESSMENT This is a 12 paged test and is composed of 2 sections and has a total score of eighty (80) points. You have eighty (80) Minutes to finish this examination. The breakdown of the exam is as follows: (1) Multiple-choice Theory Section. The questions in this section is with four answer choices. The test is composed of 30 questions and is rated as 1 point each. (2) Multiple-choice Problem Section. The questions in this section is with four answer choices. The test is composed of 25 questions and is rated as 1 point each. No solution, no points. All things unnecessary for the test must be put in front of the testing area. Use BLACK or BLUE ink ballpen only. Write all your answers on the designated answer sheet. Further, erasures are strictly NOT allowed and will invalidate your answers.

LEARNING OBJECTIVE: This assessment measures the competence of the student in terms of his/her application of knowledge and skills in the following topics: 1. Shareholder’s Equity 2. Share-based payment 3. Book Value per share 4. Earnings per share 5. Diluted Earnings per share

You may NOT use smart phones or reference materials during the testing session. Only the allowed calculators should be used. Try to answer all questions. In general, if you have some knowledge about a question, it is better to try to answer it. You will not be penalized for guessing. Be sure to allocate your time carefully so you can complete the entire test within the exam session. You may go back and review your answers at any time during the exam session. Those who are caught cheating or doing acts not allowed during the exam shall be instructed to surrender their test papers and shall leave the testing room immediately. Subsequently, their papers shall be rated as ZERO. This concludes the instruction page. You may now begin answering.

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

PART I. THEORIES ________1. Equity is generally classified into two major categories namely a. Contributed capital and appropriated capital. b. Appropriated capital and retained earnings. c. Retained earnings and unearned capital. d. Earned capital and contributed capital. ________2. Which is not a basic right of a shareholder? a. The right to participate in earnings. b. The right to vote in the election of directors and in the determination of policies. c. The right to share in the net assets of the corporation upon liquidation d. The right to inspect the accounting records of the corporation. ________3. The preemptive right of an ordinary shareholder is the right to a. Share proportionately in corporate assets upon liquidation. b. Share proportionately in any new issue of shares of the same class. c. Receive cash dividends before they are distributed to preference shareholders. d. Exclude preference shareholders from voting rights. ________4. When collectability is reasonably assured, the excess of the subscription price over the stated value of the no par share capital subscribed should be recorded as a. No par share capital b. Share premium when the subscription is recorded c. Share premium when the subscription is collected. d. Share premium when the shares are issued. ________5. Which of the following best describes a possible result of treasury share transactions? a. May increase but not decrease retained earnings. b. May increase net income if the cost method is used. c. May decrease but not increase retained earnings. d. May decrease but not increase net income. ________6. Redeemable preference shares should be a. Included with ordinary shares. b. Included as liability. c. Excluded from the statement of financial position. d. Included as a contra item in shareholders’ equity. ________7. Cumulative preference dividends reported as a. An increase in current liabilities. b. An increase in equity. c. A footnote.

in

arrears

should

be

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

d. An increase in current liabilities for the current portion and noncurrent liabilities for the long-term portion. ________8. The features frequently associated with preference shares include all, except a. Callable at the option of the shareholder b. Convertible into ordinary shares c. Nonvoting d. Preference as to assets in the event of liquidation ________9. The declaration and issuance of a 25% share dividend a. Increases ordinary shares outstanding and increases total equity. b. Decreases retained earnings but does not change total equity. c. May increase or decrease share premium but does not change total equity. d. Increases retained earnings and increases total equity. ________10. Which of the following is not a legal restriction related to profit distribution? a. The amount distributed must be in compliance with the laws governing corporations. b. The amount distributed can never exceed the net income reported for the year. c. Profit distribution must be formally approved by the board of directors. d. Dividends must be in full agreement with the capital contracts as to preferences. ________11. Which statement is incorrect in relation to appropriations of retained earnings? a. Appropriations do not reduce total retained earnings. b. The only proper way to eliminate an appropriation of retained earnings after it has served its purpose is to credit the unappropriated retained earnings account. c. An appropriation of retained earnings does not mean that assets are segregated. d. When treasury shares are purchased, retained earnings must be appropriated equal to the par or stated value of such shares. ________12. Share capital is said to be “watered” when a. It is sold at a price in excess of carrying amount b. Liabilities are overstated c. Assets are overstated d. It is issued for assets other than cash ________13. Which of the following statements about property dividend is not true? a. A property dividend is usually in the form of securities of other entities. b. A property dividend is also called dividend in kind.

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

c. The accounting for property dividend should be carrying amount of nonmonetary asset transferred. d. All of these statements are true.

based

on

________14. When an entity settles the dividend payable, it recognize the difference between the carrying amount of the distributed and the carrying amount of the dividend payable in a. Profit or loss b. Other comprehensive income c. Equity d. Retained earnings

the

shall asset

________15. An entity shall measure a noncurrent asset classified as held for distribution to owners at a. Carrying amount b. Fair value less cost to distribute c. Lower of carrying amount and fair value less cost to distribute d. Higher of carrying amount and fair value less cost to distribute ________16. Share options are what type of share-based transaction? a. Asset-settled share-based payment transaction b. Equity-settled share-based payment transaction c. Cash-settled share-based payment transaction d. Liability-settled share-based payment transaction

payment

________17. The date on which total compensation expense is computed in a share option plan is the date a. Of grant b. Of exercise c. That the market price coincides with the option price d. That the market price exceeds the option price ' ________18. Which of the following option valuation techniques should not be used as a measure of fair value of share options in the first instance? a. Black-Sholes model b. Binomial model c. Monte-Carlo model d. Intrinsic value ________19. In accounting for share appreciation rights, compensation expense is generally a. Not recognized b. Recognized in the period of the grant. c. Allocated over the service period of the employees d. Recognized in the period of exercise. ________20. For appreciation rights, the measurement date for computing compensation is the date

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ACC 109: INTERMEDIATE ACCOUNTING a. b. c. d.

1ST GRADING PERIOD EXAMINATION

The rights mature The share price reaches a predetermined amount Of grant Of exercise.

________21. If share-based payment transaction provides that the employees have the right to choose the settlement whether in cash or shares, the entity is deemed to have issue a. A compound financial instrument b. An equity instrument c. A liability instrument d. Either an equity instrument or liability instrument but not both ________22. EPS disclosures are required for a. Entities whose ordinary shares and potential ordinary shares are publicly traded. b. Entities that are in the process of issuing ordinary shares in the public market c. All entities d. Entities whose ordinary shares and potential ordinary shares are publicly traded or entities that are in the process of issuing ordinary shares in public market. ________23. When an entity issues both consolidated financial statements, the EPS information is required a. For both sets of financial statements b. In neither set of financial statements c. Only for consolidated financial statements d. Only for separate financial statements

and

separate

________24. In the computation of weighted average shares outstanding, when a share dividend or share split occurs, the additional shares are a. Weighted by the number of days outstanding. b. Weighted by the number of months outstanding. c. Considered outstanding at the beginning of the year. d. Considered outstanding at the beginning of the earliest year reported. ________25. Dilution of EPS is defined as a. Decrease in EPS when any financial instrument is converted to any form of share capital. b. Decrease in share capital. c. Decrease in EPS when convertible instruments are converted to ordinary shares d. Decrease in earnings per share when share capital is converted to debt capital. ________26. Options and warrants are dilutive if a. The option shares represent 50% of the ordinary shares actually outstanding. b. The option price is equal to the average market price. c. The option price is higher than the average market price. d. The option price is lower than the average market Juice.

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

________27. When applying the treasury share method for dilute earnings per share, the market price of the, ordinary shares used for the repurchase is the a. Price at the end of the year b. Average market price c. Price at the beginning of the year d. Predetermined market price ________28. Earnings per share should always be shown separately for a. Income from continuing operations b. Discontinued operations c. Net income d. All of these require separate EPS presentation ________29. For an entity having several different issues of convertible securities and share options, the standard requires selection of the combination of securities producing a. The lowest possible earnings per share. b. The highest possible earnings per share. c. The EPS figure midway between the lowest possible and the highest possible EPS. d. Any EPS figure between the lowest possible and the highest possible EPS ________30. Antidilutive securities a. Should be included in the computation of diluted earnings per share. b. Are those whose inclusion would decrease basic earnings per share. c. Include share options whose exercise price is less than the average market price | d. Should be ignored in all earnings per share calculations

PART II. PROBLEMS ________1. An entity reported the following equity at the beginning of the current year: Share capital, P10 par 5,000,000 Share Premium 2,000,000 Retained Earnings 1,500,000 During the current year, the entity had the following share transactions:  Acquired 20,000 treasury shares for P1,000,000  Sold 15,000 treasury shares at P60 per share.  Sold the remaining treasury shares at P45 per share. What amount should be reported as share premium at year-end? A. 2,125,000 B. 2,150,000 C. 2,000,000 D. 1,975,000

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

________2. An entity issued 100,000 ordinary shares. Of these, 5,000 shares were held as treasury at the beginning of current year. During the current year, transactions involving ordinary shares were as follows: May 1 1,000 shares of treasury were sold. Aug 1 10,000 previously unissued share were sold. Nov 1 A 2-for-1 share split took effect. At year end, how many shares are outstanding? a. 212,000 b. 216,000 c. 214,000 d. 218,000 ________3. An entity was organized at the beginning of the current year with 100,000 authorized shares of P100 par value. During the current year, the following transactions occurred: January 1 Sold 30,000 share at P150 per share February 1 Issued 2,000 shares for legal services with a fair value of P250,000. The shares on this date are quoted at P140 per share. March 1 Purchased 5,000 treasury shares at a cost of P120 per share. October 31 Issued P5,000,000 convertible bonds at 120. The bonds are quoted at 98 without the conversion feature. November 15 Declared a 2-for-1 share split when the market value of the share was P160. December 15 Sold 10,000 shares at P75 per share. December 30 The net income for the year was P2,000,000 At what amount should be recognized as share premium at year-end? a. 1,800,000 b. 2,900,000 c. 2,930,000 d. 2,650,000 ________4. Refer to no. 3, what is the total shareholder’s equity at year-end? a. 8,000,000 b. 6,900,000 c. 6,000,000 d. 8,030,000 ________5. An entity reported the following shareholder’s equity on January 2017 Share capital, P50 par, 300,000 shares authorized, 5,500,000 110,000 shares outstanding Share premium 2,000,000 Retained earnings 5,000,000 On January 31, 2017, the entity reacquired 10,000 shares at P60 per share to be held as treasury. On June 20, 2017, the entity declared an issued a 20% stock dividend when the market value per share was P80. On December 31, 2017, the entity paid a cash dividend of P10 per share. The net income for 2017 was P3,000,000. What is the unappropriated balance of retained earnings on December 31, 2017? a. 5,200,000

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

b. 5,800,000 c. 4,600,000 d. 5,100,000 ________6. On January 1, 2017, an entity showed the following shareholder’s equity: Share capital, P5 par, 300,000 shares outstanding 1,500,000 Share premium 3,000,000 Retained earnings 5,000,000 On July 1, 2017, the entity declared a property dividend of inventory payable on March 1, 2018. The inventory had a P1,200,000 carrying amount and a fair value less cost to distribute of P1,500,000 on July 1, 2017, P1,800,000 on December 31, 2017 and P2,000,000 on March 1, 2018. The net income for 2017 was P3,000,000. What amount should be reported as retained earnings on December 31, 2017? a. 8,000,000 b. 6,200,000 c. 6,000,000 d. 6,500,000 ________7. At December 31, 20x0 and 20x1, Carr Corp. had outstanding 4,000 shares of ₱100 par value 6% cumulative preferred stock and 20,000 shares of ₱10 par value common stock (i.e., ordinary shares). At December 31, 20x0, dividends in arrears on the preferred stock were ₱12,000. Cash dividends declared in 20x1 totaled ₱44,000. Of the ₱44,000, what amounts were payable on each class of stock? Preference shares Ordinary shares a. ₱44,000 ₱ 0 b. ₱36,000 ₱ 8,000 c. ₱32,000 ₱12,000 d. ₱24,000 ₱20,000 ________8. On January 1, 2017, an entity had ordinary and preference shares outstanding. The incorporators own ten ordinary shares but no preference shares. On December 31, 2017, the entity declared dividends on the ordinary shares payable on December 31, 2018. The entity decided to give the ordinary shareholders a choice between receiving a cash dividend of P500,000 per share or in the form of a noncash asset. The noncash asset is a standard model from the entity’s car fleet. Each car has a fair value of the car is P700,000 on December 31, 2018. The entity estimated that 80% of the ordinary shareholders will take the option of the cash dividend and 20% will elect for the noncash asset. What amount should be recognized as dividend payable on December 31, 2017? a. 5,500,000 b. 5,200,000 c. 4,000,000 d. 6,000,000 ________9. Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of ₱2 par value common stock, which had a fair value of ₱5 per share before the stock dividend was declared. This stock dividend was distributed 60 days after the declaration date. By what amount did Ray’s current liabilities increase as a result of the stock dividend declaration? a. 0 b. 500

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

c. 1,000 d. 2,500 ________10. On December 1, 20x1, Line Corp. received a donation of 2,000 shares of its ₱5 par value ordinary shares from a shareholder. On that date, the stock’s market value was ₱35 per share. The stock was originally issued for ₱25 per share. By what amount would this donation cause total stockholders’ equity to decrease? a. 70,000 b. 50,000 c. 20,000 d. 0 ________11. An entity provided the following information during the current year:  Dividends on 10% 50,000 cumulative preference shares with P100 par value have not been declared or paid for 3 years.  Treasury ordinary shares were acquired at a cost of P1,000,000 during the year. The treasury shares had not been reissued as at year-end.  The entity appropriated P2,000,000 of retained earnings for the construction of a new plant.  Also, P3,500,000 of cash was restricted for the retirement of bonds payable. What amount should be reported as appropriated retained earnings? a. 3,000,000 b. 4,500,000 c. 7,500,000 d. 6,500,000 ________12. On January 1, 2017, an entity granted 100 share options each to 500 employees, conditional upon the employee’s remaining in the entity’s employ during the vesting period. The share options vest at the end of a three-year period. On grant date, each share option has a fair value of P30. The par value per share is P100 and the option price is P120. On December 31, 2018, 30 employees have left and it is expected that on the basis of a weighted average probability, a further 30 employees will leave before the end of the three-year period. On December 31, 2019, only 20 employees actually left and all of the share options are exercised on such date. What is the a. b. c. d.

compensations expense for 2019? 600,000 880,000 380,000 470,000

________13. An entity has granted share options to employees. The total compensation expense to the vesting date on December 31, 2020 has been calculated at P6,000,000. The entity has decided to settle the award early on December 31, 2019. The compensation expense charged since the date of grant on January 1, 2017 was P1,500,000 for 2017 and P1,300,000 for 2018. The compensation expense that would have been charged for 2019

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ACC 109: INTERMEDIATE ACCOUNTING

1ST GRADING PERIOD EXAMINATION

is P1,200,000. What is the compensation expense for 2019, assuming the share options are not exercised but instead, the entity paid the employees P5,000,000 on December 31, 2019? a. 5,000,000 b. 2,200,000 c. 3,200,000 d. 0 Use the following information for the next two questions: On January 1, 20x1, Entity A grants 1,000 share appreciation rights (SARs) to employees with the condition that the employees remain in service within the next 3 years. Information on the SARs is shown below: Date Jan. 1. 20x1 Dec. 31, 20x1 Dec. 31, 20x2 Dec. 31, 20x3

No. of SARs expected to vest 1,000 900 800 750

Fair value of each S...