ACC 109: Intermediate Accounting 4
Module #2 Teacher’s Guide
PERIOD 1 QUIZ #1
Multiple Choice
1. In 20x0, Newt Corp. acquired 6,000 shares of its own ₱1 par value ordinary share at ₱18 per share. In
20x1, Newt issued 3,000 of these shares at ₱25 per share. Newt uses the cost method to account for
its treasury stock transactions. What accounts and amounts should Newt credit in 20x1 to record the
issuance of the 3,000 shares?
Treasury sh. Sh. premium Retained earnings Ordinary sh.
a. ₱54,000 ₱21,000
b. ₱54,000 ₱21,000
c. ₱72,000 ₱3,000
d. ₱51,000 ₱21,000 ₱3,000
2. On September 20x1, West Corp. made a dividend distribution of one right for each of its 120,000
shares of outstanding common stock. Each right was exercisable for the purchase of 1/100 of a share
of West's ₱50 variable rate preference share at an exercise price of ₱80 per share. On March 20, 20x3,
none of the rights had been exercised, and West redeemed them by paying each stockholder ₱0.10 per
right. As a result of this redemption, West's stockholders' equity was reduced by
a. a. 120 b. 2,400 c. 12,000 d. 36,000
3. Entity A reacquires 10,000 of its own shares for ₱50. The shares have par value of ₱10 and were
originally issued at ₱15 per share. Subsequently, Entity A reissues the 10,000 shares at ₱48 per share.
The journal entry to record the reissuance involves which of the following?
a. Debit to Retained earnings for ₱20,000
b. Credit to Cash for ₱480,000
c. Debit to Share premium for ₱50,000
d. Debit to Treasury shares for ₱500,000
4. Entity A reacquires 10,000 of its own shares for ₱50. The shares have par value of ₱10 and were
originally issued at ₱15 per share. Subsequently, Entity A reissues half of the reacquired shares at ₱58
per share and retires the other half. The journal entry to record the retirement of the shares includes
which of the following? (Hint: Provide the entries for both the reissuance and the retirement.)
a. Debit to Retained earnings for ₱175,000
b. Credit to Share premium - retirement for ₱40,000
c. Debit to Share premium for ₱50,000
d. Debit to Retained earnings for ₱135,000
5. Entity A reacquires 1,000 of its own shares for ₱25 and immediately retires them. The shares have par
value of ₱10 and were originally issued at ₱30 per share. The journal entry to record the retirement of
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ACC 109: Intermediate Accounting 4
Module #2 Teacher’s Guide
the shares includes which of the following?
a. Debit to Retained earnings for ₱5,000
b. Credit to Treasury shares for ₱30,000
c. Credit to Share capital for ₱10,000
d. Credit to Share premium - retirement for ₱5,000
6. Entity A received a subscription for 2,000 shares at ₱18 per share on March 31, 20x1. Entity A’s shares
have a par value ₱5 per share. Entity A collected the subscription receivable on May 15, 20x1. Which
of the following statements is correct?
a. Entity A should credit share premium for ₱13,000 on March 31, 20x1.
b. Entity A should credit share premium for ₱26,000 on March 31, 20x1.
c. Entity A should credit share premium for ₱13,000 on May 15, 20x1.
d. Entity A should credit share premium for ₱26,000 on May 15, 20x1.
7. Entity A has the following share capital transactions during the year:
Issued 10,000 shares with par value of ₱10 per share for a total consideration of ₱160,000.
Received share subscriptions for 20,000 shares at a subscription price of ₱22 per share. Only half of the
subscriptions were collected by the end of the year.
How much is the total share premium arising from the share transactions above?
a. 60,000 c. 300,000
b. 320,000 d. 180,000
8. Entity A’s total shareholders’ equity was ₱900,000 before recording the following share transactions:
• Received cash subscriptions for 10,000 shares with par value of ₱1 at ₱14 per share. Share
issuance costs amounted to ₱2,000.
• Received subscriptions for 20,000 shares at ₱20 per share. Twenty-five percent down payment
was collected on subscription date.
• Collected the remaining unpaid subscription price of 15,000 subscribed shares and issued the
related share certificates. Share issuance costs amounted to ₱3,000.
How much is the balance of Entity A’s total shareholders’ equity after recording the transactions above? (Hint:
Preparing journal entries makes this problem easier to solve.)
a. 1,490,000 c. 1,360,000
b. 1,510,000 d. 1,610,000
9. The residual interest in a corporation belongs to the
a. management.
b. common stockholders.
c. creditors.
d. preferred stockholders.
This document is the property of PHINMA EDUCATION
ACC 109: Intermediate Accounting 4
Module #2 Teacher’s Guide
10. The pre-emptive right of a common stockholder is the right to
a. share proportionately in corporate assets upon liquidation.
b. share proportionately in any new issues of stock of the same class.
c. receive cash dividends before they are distributed to preferred stockholders.
d. exclude preferred stockholders from voting rights.
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. ADDITIONAL NOTES FOR TEACHERS
In this portion, you may include:
● Additional exercises that teachers may give to students during face-to-face classes or during
remote coaching sessions
● Additional reading materials or references that teachers may use
● Instructions for activities during face-to-face classes
● Answer Keys for quizzes and exams
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