prelims on shareholder\'s equity PDF

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A company declared a cash dividend on its ordinary share in December 2019 payable in January 2020. Retained earnings woulda. Decrease on the date of paymentb. Not be affected on the date of declarationc. Increase on the date of declarationd. Not be affected on the date of paymentFeedback The correct...

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A company declared a cash dividend on its ordinary share in December 2019 payable in January 2020. Retained earnings would a. Decrease on the date of payment b. Not be affected on the date of declaration c. Increase on the date of declaration d. Not be affected on the date of payment

Feedback The correct answer is: Not be affected on the date of payment Question 2 Correct Mark 1.00 out of 1.00

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Question text 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 issued b. P15 per share when the rights are exercised c. P10 per share when the rights are exercised d. P15 per share when the rights are issued

Feedback The correct answer is: P10 per share when the rights are exercised Question 3 Incorrect Mark 0.00 out of 1.00

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Question text 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. Additional Paid-in capital credited at P2 per share b. No credit made to Additional Paid-In Capital or Retained Earnings c. Paid-in Capital from share rights credited at P2 per share d. Retained earnings credited at P2 per share

Feedback The correct answer is: Additional Paid-in capital credited at P2 per share Question 4 Correct Mark 1.00 out of 1.00

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Question text 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 debited b. No entry will be made c. Additional paid-in-capital will be credited d. Share rights outstanding will be debited

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The correct answer is: No entry will be made Question 5 Correct Mark 1.00 out of 1.00

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Question text A restriction of retained earnings is most likely to be required by a. Incurring a net loss in the current year b. Reissuing treasury share c. Incurring a net loss in the prior year d. Purchasing treasury share

Feedback The correct answer is: Purchasing treasury share Question 6 Incorrect Mark 0.00 out of 1.00

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

d. The new common stock will have a par value of P5 per share after the split

Feedback The correct answer is: The new common stock will have a par value of P5 per share after the split Question 7 Correct Mark 1.00 out of 1.00

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Question text 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. Purchase of treasury share d. Declaration of a share split

Feedback The correct answer is: Purchase of treasury share Question 8 Correct Mark 1.00 out of 1.00

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Question text 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. 7,440,000 c. 5,000,000 d. 6,200,000

Feedback The correct answer is: 6,200,000 Question 9 Correct Mark 1.00 out of 1.00

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Question text 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

Feedback The correct answer is: 840,000 Question 10 Correct Mark 1.00 out of 1.00

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Question text 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. 1,200,000 b. 1,100,000 c. 1,150,000 d. 1,500,000

Feedback The correct answer is: 1,100,000 Question 11 Correct Mark 1.00 out of 1.00

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Question text 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. 100,000 b. 280,000 c. 20,000

d. 180,000

Feedback The correct answer is: 180,000 Question 12 Correct Mark 1.00 out of 1.00

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Question text 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. 100,000 b. 180,000 c. 20,000 d. 280,000

Feedback The correct answer is: 100,000 Question 13 Correct Mark 1.00 out of 1.00

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Question text 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. 3,306,000 b. 3,370,000 c. 3,338,000 d. 3,290,000

Feedback The correct answer is: 3,290,000 Question 14 Correct Mark 1.00 out of 1.00

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Question text 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. 16,500,000 c. 18,000,000 d. 11,250,000

Feedback The correct answer is: 11,250,000 Question 15 Incorrect Mark 0.00 out of 1.00

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Question text 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. 5,250,000 b. 0 c. 1,500,000 d. 3,750,000

Feedback The correct answer is: 3,750,000 Question 16 Correct Mark 1.00 out of 1.00

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Question text Easybreezy Co. held 100,000 shares of P1 par value as treasury reacquired for P120,000. At yearend, 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. Retained earnings P70,000 b. Share premium P70,000 c. Share capital P100,000

d. Gain on sale of investment P70,000

Feedback The correct answer is: Share premium P70,000 Question 17 Correct Mark 1.00 out of 1.00

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

Feedback The correct answer is: In a note to the financial statements Question 18 Correct Mark 1.00 out of 1.00

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Question text 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. Decrease, increase d. No effect, no effect

Feedback The correct answer is: No effect, no effect Question 19 Incorrect Mark 0.00 out of 1.00

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Question text 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 ordinary shareholders receive a dividend rate per share equal to the preference and all excess dividends are share proportionately between the two classes. c. The preference shareholders receive their full dividend and any excess dividends on the ordinary shareholders. d. The ordinary shareholders receive a dividend rate per share equal to the preference and all excess dividends go to the preference.

Feedback The correct answer is: The ordinary shareholders receive a dividend rate per share equal to the preference and all excess dividends are share proportionately between the two classes. Question 20 Correct Mark 1.00 out of 1.00

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Question text 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 and retained earnings accounts c. Paid in capital accounts d. Income and paid-in capital accounts

Feedback The correct answer is: Paid in capital and retained earnings accounts Question 21 Correct Mark 1.00 out of 1.00

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Question text How would a share split affect the company’s assets, total shareholders’ equity and share premium, respectively? a. No effect, no effect, increase b. Decrease, decrease, decrease c. Increase, increase, no effect d. No effect, no effect, no effect

Feedback The correct answer is: No effect, no effect, no effect

Question 22 Correct Mark 1.00 out of 1.00

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

Feedback The correct answer is: Decrease, no effect Question 23 Correct Mark 1.00 out of 1.00

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Question text 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. Decrease, decrease d.

No effect, decrease

Feedback The correct answer is: Decrease, no effect Question 24 Correct Mark 1.00 out of 1.00

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Question text 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

Feedback The correct answer is: Stock exchange listing fees Question 25 Correct Mark 1.00 out of 1.00

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Question text 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. 21,000,000

b. 25,000,000 c. 20,000,000 d. 22,000,000

Feedback The correct answer is: 22,000,000 Question 26 Correct Mark 1.00 out of 1.00

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Question text 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. 5,500,000 b. 3,500,000 c. 4,500,000 d. 5,000,000

Feedback The correct answer is: 5,000,000 Question 27 Incorrect Mark 0.00 out of 1.00

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Question text

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. 22,310,000 b. 22,235,000 c. 16,810,000 d. 15,200,000

Feedback The correct answer is: 16,810,000 Question 28 Correct Mark 1.00 out of 1.00

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Question text 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, YES b. NO, YES c. YES, NO d. NO, NO

Feedback The correct answer is: YES, NO

Question 29 Correct Mark 1.00 out of 1.00

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Question text 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. 270,000 b. 240,000 c. 210,000 d. 300,000

Feedback The correct answer is: 210,000 Question 30 Correct Mark 1.00 out of 1.00

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Question text 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. 450,000 b.

375,000 c. 300,000 d. 125,000

Feedback The correct answer is: 375,000 Question 31 Correct Mark 1.00 out of 1.00

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Question text 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. 300,000 b. 324,000 c. 334,000 d. 285,000

Feedback The correct answer is: 334,000 Question 32 Correct Mark 1.00 out of 1.00

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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. 500,000 b. 1,800,000 c. 600,000 d. 2,400,000

Feedback The correct answer is: 600,000 Question 33 Correct Mark 1.00 out of 1.00

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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. 2,950,000 b. 1,450,000 c. 3,200,000 d. 1,200,000

Feedback The correct answer is: 1,200,000

Question 34 Incorrect Mark 0.00 out of 1.00

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Question text 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. Stock dividend c. Property dividend d. Investment dividend

Feedback The correct answer is: Property dividend Question 35 Correct Mark 1.00 out of 1.00

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Question text 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. 8,000,000 b. 6,000,000 c.

2,000,000 d. 3,000,000

Feedback The correct answer is: 2,000,000 Question 36 Incorrect Mark 0.00 out of 1.00

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Question text 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. 0 c. 3,000,000 d. 2,500,000

Feedback The correct answer is: 2,200,000 Question 37 Correct Mark 1.00 out of 1.00

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Question text On October 31, 2019,...