QUIZ1 - Lecture notes 1 PDF

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TRUE OR FALSE. SHADE "A"FOR TRUE, SHADE "B" FORFALSE.1. All incorporators are shareholders but not all  shareholders are incorporators. 2. A Corporation, like a partnership may be...

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TRUE OR FALSE. SHADE "A" FOR TRUE, SHADE "B" FOR FALSE.

1. All incorporators are shareholders but not all shareholders are incorporators. 2. A Corporation, like a partnership may be formed by mere agreement. 3. The authorized shares represent the maximum number of shares that a Corporation may issue. 4. When share capital is issued for consideration in the form of property other than cash, the net book value of the property is used to record the transaction. 5. The owners of a stock corporation are called shareholders; the owners of non-stock corporation are called members. 6. When the journal entry method is used the account Share capital is credited upon issuance of stocks. 7. Under the memorandum entry method, the amount of share capital issued is determined by deducting the balance of unissued share capital account from the balance of authorized share capital account. 8. A stock certificate is issued to the subscriber upon the full payment of the subscription. 9. Additional paid-in capital for the excess of the stock subscription price over par or stated value is recorded at the time of subscription. 10. A corporation issued share capital on a subscription basis that is payable in three installments. Each time the corporation receives a payment, Share capital account is credited. 11. The liability of the shareholders for corporate debts is limited to the amount of their investment. 12. A corporation is a business owned by its shareholders. 13. Generally, there are only two classes of authorized share capital, the preference share capital and the ordinary share capital. 14. Total issued shares less treasury shares is equal to outstanding shares. 15. When subscribed shares are declared delinquent, receivable is reclassed to the account "receivable from the highest bidder" MULTIPLE CHOICE. SHADE THE LETTER OF THE CORRECT ANSWER 16. Which of the following be considered characteristic/s of a corporation? a. Separate legal c. Rights of entity succession b. Limited liability of d. All of the shareholders choices 17. A Cash asset received in exchange for share capital is recorded at c. Higher between fair a. Face value market value or book value b. Fair market value d. Book value

18. The issuance of ordinary share capital to shareholders a. increases ordinary share capital authorized b. decreases ordinary share capital authorized

c.increases ordinary share capital outstanding d. decreases ordinary share capital outstanding

19. Advantages of a Corporation incudes a. Continuous existence b. Subject to rigid government control

c. Weak credit capacity d. All of the above

20. Process of organizing a Corporation includes c. Commencement of the business d. All of the above

a. Promotion b. Incorporation

21. Cream Corporation was organized on January 1, 2010 with authorized capital of P2,000,000 consisting of 100,000 ordinary shares, P20 par value. Subsequently, incorporators subscribed for 25,000 shares at P24. How much must be paid up upon subscription to comply with the requirement of Securities and Exchange Commission (SEC)?

a. P600,000 b. P125,000

c. P500,000 d. P150,000

22. Beige Co. was authorized to issue 10,000 preference shares, P100 par value and 200,000 no-par ordinary shares. Subscriptions for 4,000 preference shares was received at P110 with a downpayment of 25%. What entry should be made in the books of Beige Co. to record the receipt of subscription? a. Preference Share Capital Subscription Receivable Preference Share Capital Subscribed Prefere nce Share Premiu m

440,00 0

b. Preference Share Capital Subscription Receivable Preference Share Capital Subscribed

440,00 0

c. Cash

110,00

400,0 00

40,00 0

440,0 00

0 Preference Share Capital Subscription Receivable d. Preference Share Capital Subscribed Prefere nce Share Capital

110,0 00 400,00 0

400,0 00

23. Last September 6, 2010, Brown Co. issued 2,000 shares of its P10 par value ordinary share capital in exchange for a piece of land to be held for a future plant site. Brown Co.'s ordinary share capital was listed and traded at P28 per share on the same date. The land has no known market value. How much is the increases in Shareholder's equity resulting from this exchange?

a. P0 b. P20,000

c. P56,000 d. P34,000

For items 24-25 Violet Corp., was organized on January 1, 2010 with authorized capital of 100,000 ordinary shares, P20 par value. During 2010, Violet Co. had the following transactions affecting the shareholder's equity. Jan. 10 Issued 25,000 shares at P22 per share Mar.25 Issued 1,000 shares for legal service when the fair value was P24 per share Sept.30 Issued 5,000 shares for a piece of equipment when the value was P26 per share. 24. How much is the balance of the ordinary share capital account as of September 30?

a. P620,000 b. P674,000

c. P700,000 d. P704,000

25. Using the information above, what amount should be reported as additional paid-in capital?

a. P50,000 b. 54,000

c. P64,000 d. P84,000

For items 26-27 Aqua Corp. was incorporated on June 1, 2010 with an authorized 250,000 share of no-par ordinary share capital, stated value of P15 and 10,000 shares of 10% preference share capital, par value P50. Transactions affecting company's share capital as of June 30,2010 were as follows: June 1 Issued 50,000 ordinary shares for cash at P15 per share. June 5 Issued 50,000 ordinary shares in exchange for assets with total market value of P900,000. June 15 Received subscriptions for 100,000 ordinary share at P30 and for 5,000 preference shares at P55. June 25 Received full payment for subscriptions received on June 15 and the corresponding stock were issued. 26. What is the total paid in capital in excess of par and stated value for both ordinary and preference shares?

a. P25,000 b. P300,000

c.P1,650, 000 d.P1,675, 000

27. Using the information above, how much is the total Shareholder's equity?

a. P3,250,000 b. P4,500,000

c.P4,675, 000 d.P4,925, 000

For items 28-30 The Shareholder's equity of Cecille Corp. revealed the following on June 30,2010: Issued Preference share, P100 par value Unissued preference shares, P100 par value Preference share premium Authorized Ordinary share, P15 par value

P230,0 00 50,000 80,500 1,000,0 00

Unissued Ordinary share, P15 par value Ordinary share premium Ordinary share subscribed Retained earnings Notes payable Subscription receivable ordinary (Current) Revaluation surplus Treasury shares

525,00 0 275,00 0 50,000 190,00 0 400,00 0 40,000 50,000 10,000

28. How much is the contributed capital of the Corporation? a. P715,000

c. P755,000

b. P980,000

d. P705,000

29. How much is the additional paid-in capital of the Corporation? a. P275,000

c. P355,500

b. P80,500

d. P345,500

30. How much is the total Shareholder's equity of the Corporation? a. P1,340,500 c. P1,110,500 b. P1,350,500 d. P1,740,500

For items 31-34 ABC Corp. was authorized to issue 200,000 ordinary shares, par value P25. The transactions that took place during the months of November and December are shown below: Nov. 2 Received subscription from incorporators for 50,000 shares at P30. A downpayment of 40% was received. Nov.5 Issued 10,000 shares in exchange for equipment with a fair value of P400,000. Nov. 16 Received subscription for 30,000 shares at P28 with a downpayment of 20%. The balance due within 30 days. Nov.28 Received the balance due from incorporators who subscribed for 35,000 shares on Nov.2. The shares of stock were issued. Dec. 16 Received the balance due from incorporators who subscribed for 25,000 shares on Nov.16. The corresponding shares of stock were issued. Dec.16 Declared as delinquent shares the subscription for 5,000 shares from subscription on Nov.2 Dec.20 Paid advertising expenses of P5,000 relative to delinquency sale. Dec. 26 Received payment from highest bidder and shares were issued.

31. How much is the total additional paid-in capital after the foregoing transactions? a. P490,000

c. P250,000

b. P340,000

d. P90,000

32. How much is the total Ordinary share capital after the foregoing transactions? a. P1,750,000 b. P1,875,000

c. P1,625,000 d. None

33. How much is the total Ordinary share capital subscribed after the foregoing transactions? a. P1,250,000

c. P2,000,000

b. P375,000

d. P2,340,000

34. How much should be presented as part of subscription receivable? a. P2,340,000

c. P95,000

b. P1,500,000

d. P382,000

KEY ANSWER: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

T F T F T F F T T F T T T T T D A C A D D A C

33. B 34. 292,000

24. 25. 26. 27. 28. 29. 30. 31.

32.

A D D D 1,110,500 C A A B...