1.A 6.B 11.D 16.

A
2.C 7.C 12.C 17.C
3.D 8.D 13.C 18.B
4.B 9.B 14.C 19.D
5.A 10.D 15.A 20.C

PART I. THEORIES (2 points each)

Put the letter of your choice on the answer sheet provided.
1. The retained earnings balance is zero after a company undergoes
a. Corporate reorganization
b. Modification of term
c. Equity swap
d. Asset swap

2. Only a memorandum entry is made when an entity

a. Gives warrants to executives as compensation
b. Includes warrants to make a security more attractive
c. Entities issue rights to existing shareholders
d. All of the choices are correct

3. Any increase in the fair value of the equipment using the revaluation method will be
a. Credited to Share Premium
b. Credited to Retained Earnings
c. Credited to Share Capital
d. Credited to Revaluation Surplus

4. Which is issued to shareholders to acquire unissued shares within a specified time at a specified price?
a. Share option
b. Share warrant
c. Share subscription
d. Share appreciation right

5. The retained earnings balance is zero after a company undergoes

a. Corporate reorganization
b. Modification of term
c. Equity swap
d. Asset swap

6. An entity issued rights to the existing shareholders to purchase unissued ordinary shares at more than par value. Share prem
would be recorded when the rights
a. Expire
b. Are exercised
c. Become exercisable
d. Are issued

7. The primary purpose of quasi-reorganization is to give an entity the opportunity to

a. Obtain relief from creditors
b. Revalue understated assets to fair value
c. Eliminate a deficit in retained earnings
d. Form a new corporation
7. The primary purpose of quasi-reorganization is to give an entity the opportunity to
a. Obtain relief from creditors
b. Revalue understated assets to fair value
c. Eliminate a deficit in retained earnings
d. Form a new corporation

8. Share warrants outstanding account shall be reported as

a. Liability
b. Reduction of share premium
c. Share capital
d. Share premium

9. Any increase in the fair value of the inventories using the revaluation method will be
a. Credited to Share Premium
b. Credited to Retained Earnings
c. Credited to Share Capital
d. Credited to Revaluation Surplus

10. Share split is issued primarily to

a. Increase the number of outstanding shares
b. Increase the number of authorized shares
c. Increase legal capital
d. Induce a decline in market value per share

11. Reduction in the value of liabilities during the process of quasi-reorganization would include an entry to
a. Credit to Liability
b. Debit to Asset
c. Credit to Gain
d. Credit to Retained Earnings

12. An entity undertakes a quasi-reorganization. Certain assets will be written down to fair value. Liabilities will remain the sam
How would the quasi-reorganization affect share capital and retained earnings, respectively?
a. Increase and decrease
b. Decrease and no effect
c. Decrease and increase
d. No effect and increase

13. If the carrying amount of the property, plant and equipment is higher than its fair market value during the process of quas
a. Debit to Property, Plant and Equipment
b. Credit to Retained Earnings
c. Debit to Retained Earnings
d. Credit to Accumulated Depreciation

14. Loss from sale of treasury shares shall be charged to

a. Loss on sale of treasury shares
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance and then retained earnings
15. Immediately after a quasi-reorganization, the retained earnings account
a. Has a zero balance
b. Remains the same
c. Frozen and dated
d. Has a debit balance

16. Gain on the retirement of treasury shares shall be credited to

a. Share premium
b. Retained earnings
c. Share capital
d. Income

17. The accounting for a quasi-reorganization usually includes

a. Writeup of assets and write down of retained earnings
b. Write down of both assets and retained earnings
c. Write down of assets and elimination of a deficit
d. Writeup of assets and elimination of a deficit

18. Any decrease in the fair value of the notes payable using the revaluation method will be
a. Credited to Share Premium
b. Credited to Retained Earnings
c. Credited to Share Capital
d. Credited to Revaluation Surplus

19. Loss on retirement of treasury shares is debited to

a. Retained earnings
b. Share premium from treasury shares and then retained earnings
c. Share premium from treasury shares, share premium from original issuance and then retained earnings
d. Share premium from original issuance of shares, share premium from treasury shares and then retained earnings

20. When an entity goes through a quasi-reorganization, the carrying amounts are stated at
a. Original cost c. Fair value
b. Replacement cost d. Original carrying amount
ce?

han par value. Share premium

 try to

ilities will remain the same.

uring the process of quasi_x0002_reorganization, the entry includes

 ings
ained earnings
Hoyt Company

Retained Earnings (P12,000,000 - P8,000,000) 4,000,000

Property, plant, and equipment 4,000,000

Retained Earnings (P6,500,000 - P6,000,000) 500,000

Inventory 500,000

Share capital (700,000xP5) 3,500,000

Share premium 3,500,000

Share premium 5,400,000

Retained Earnings (900,000+500,000+4,000,000) 5,400,000

1. Decrease by 500,000

2. Decrease by 4,000,000

3. Decrease by 3,500,000

4. Decrease by 1,900,000

Beginning bal. P 2,300,000

Less: Ending bal. 400,000
P 1,900,000

5. 0

6. TOTAL SHE 3,900,000

Share capital (7,000,000 - 3,500,000) P 3,500,000

Share premium (2,300,000+3,500,000) - 5,400,000 400,000
Retained Earnings 0
P 3,900,000
Cyan Company

Cash (200,000xP10) 2,000,000

Share capital (200,000xP5) 1,000,000
Share premium 1,000,000

March RE - Unappropriated (50,000xP20) 1,000,000

RE - Appropriated (50,000xP20) 1,000,000

Treasury shares (50,000xP20) 1,000,000

Cash (50,000xP20) 1,000,000

June Cash (10,000xP25) 250,000

Treasury shares (10,000xP20) 200,000
Share premium 50,000

Profit or loss summary 600,000

RE 600,000

7. 2,600,000 or 2,800,000

Retained Earnings P 3,000,000

Less: Treasury (1,000,000)
Add: Net income 600,000
P 2,600,000

OR

Retained Earnings - Beg. P 3,000,000

Income for the Current year 600,000
Total Retained Earnings 3,600,000
Less: Appropriated for Treasury Shares (40,000 x P20) -800,000
Unappropriated Retained earnings P 2,800,000

8. 0
Laban Lang Co.

Share capital (100,000xP25) 2,500,000

Share premium 2,500,000

Share premium 2,100,000

Retained Earnings 2,100,000

9. Share capital 500,000

Share Capital
Beg. Bal P 3,000,000
Reduction of par value (2,500,000)
P 500,000
10. Share premium 1,900,000
Share premium
Beg. Bal P 1,500,000
Reduction of par value 2,500,000
Wipe out of deficit (2,100,000)
P 1,900,000

11. 0
Newton company

Cash (675,000xP10) 6,750,000

Share capital (675,000xP6) 4,050,000
Share premium 2,700,000

Retained Earnings - Unappropriated (90,000xP11) 990,000

Retained Earnings - Appropriated 990,000

Treasury shares (90,000xP11) 990,000

Cash (90,000xP11) 990,000

Cash (90,000xP18) 1,620,000

Tresury shares (90,000xP11) 990,000
Share Premium 630,000

RE -Appropriated 990,000
RE- Unappropriated 990,000

12. Share premium 3,330,000

Share premium
Ordinary P 2,700,000
Treasury 630,000
P 3,330,000

13. 0

14. None
Let's Party Inc.

Retained Earnings 4,000,000

Property, plant, and equipment 4,000,000

Retained Earnings 2,000,000

Inventory 2,000,000

Retained Earnings 1,000,000

Goodwill 1,000,000

Share premium 5,000,000

Share capital 10,000,000
Retained Earnings (8,000,000+2,000,000+4,000,000+1,000,000) 15,000,000

15. Deficit to be wiped out 15,000,000

Acumulated Deficit
Beg bal. P (8,000,000)
Write down of PPE (2,000,000)
Write down of Inventory (4,000,000)
Write down of Goodwill (1,000,000)
P (15,000,000)

16. Total Shareholders' Equity 40,000,000

Share capital (50,000,000 - 10,000,000) P 40,000,000
Share premium 0
RE 0
Total Shareholders' Equity P 40,000,000

17. Reduction in share capital P10,000,000

Albay Company

Retroactive adjustments P 500,000 Increase and RE since overstated ang dep.expense

2,000,000
2,500,000
Multiply 75% Net of tax kasi dapat
1,875,000
Beg. RE 4,500,000
Income 5,000,000
Dividends paid (3,000,000)
P 8,375,000
Vela Company

Increase in Assets P 8,900,000

Increase in Assets (2,700,000)
Net Increase 6,200,000
Add: dividend payment 1,300,000
Total 7,500,000
Less: Share Capital 6,000,000
Share Premium 600,000 6,600,000
Net Income P 900,000

19. Net income 900,000

Luck Corporation

Retained Earnings 1,750,000

Property, plant, and Equipment 1,750,000

Retained Earnings 750,000

Asset 750,000

Share capital (800,000xP5) 4,000,000

Share premium 4,000,000

Share premium 4,500,000

Retained Earnings (2,000,000+1,750,000+750,000) 4,500,000

20. TOTAL SHE 5,000,000

Share capital (8,000,000-4,000,000) P 4,000,000

Share premium (1,500,000+4,000,000-4,500,000) 1,000,000
RE 0
P 5,000,000