PART 2 – PROBLEMS

Use the following information for the next four (4) questions:
On January 1, 2023, Flips Company is authorized to issue 100,000 P100 par value ordinary shares. The

Jan-01 Issued 40,000 ordinary shares at P130 per share.

Feb-01 Issued 30,000 ordinary for the following assets:

Machine 500,000 Fair value

Land - None split
Building 1,100,000 Fair value Share capita
Ordinary shaP120 Fair value

Jul-01 Purchased 10,000 ordinary shares at P150 per share to be held as treasury.
Aug-01 Declared a 2 for 1 split.
Sep-15 Reissued 5,000 treasury shares at P100 per share
Dec-31 Declared a P10 per share cash dividend on the ordinary shares.
Dec-31 Net income for the year is P3,000,000.

1) What is the share premium at year-end?

A. 1,800,000 B. 1,925,000 C. 1,200,000

2) What is the share capital at year-end?

A. 7,000,000 B. 6,000,000 C. 6,250,000

3) What is the balance of retained earnings at year-end?

A. 3,000,000 B. 1,600,000 C. 1,750,000

4) What is the total shareholders’ equity at December 31, 2023?

A. 9,425,000 B. 8,950,000 C. 9,550,000

Use the following information for the next three (3) questions:
At the beginning of current year, Axed Company was authorized to issue share capital of 100,000 sha

January 1 Issued 80,000 shares at P70 per share

May 1 Reacquired 4,000 treasury shares at P65 per share
July 1 Approved a share split of 5 for 1

October 31 Issued a 10% share dividend when the market value of a share is P25
December 31 Reissued all of the treasury shares at P35
December 31 Net income for the year was P4,500,000.

5) What total amount should be reported as share capital at year-end?

A. 3,200,000 B. 3,428,000 C. 2,940,000

6) What total amount should be reported as share premium at year-end?

A. 3,200,000 B. 3,640,000 C. 3,922,000
7) What amount of retained earnings should be reported at year-end?
A. 3,550,000 B. 4,500,000 C. 3,430,000

8) Gel Company was organized on January 1, 2022 with 100,000 authorized shares of P100 par
Jan-15 Sold 30,000 shares at P150 per share.
Feb-14 Issued 2,000 shares for legal services with a fair value of P300,000. The shares on this date a
Mar-27 Purchased 5,000 treasury shares at a cost of P12 per share.
Oct-31 Issued P4,000,000 convertible bonds at 110. The bonds are quoted at 97 without the convers
Nov-05 Declared a 2-for-1 share split when the market value of the share was P160.
Dec-17 Sold 10,000 shares at P75 per share.

What total amount should be recognized as share premium on December 31, 2022?
A. 1,830,000 B. 1,850,000 C. 2,390,000

9) Bacquirin Company provided the following postclosing trail balance at year-end:

Debit
Accounts payable and accrued liabilities
Accounts receivable 6,000,000
Accumulated depreciation
Allowance for doubtful accounts
Bonds payable
Property, plant, and equipment 11,000,000
Cash 2,500,000
Ordinary share capita, P50 par value
Dividends payable
Inventory 8,000,000
Available for sale securities 3,500,000
Investment in equity securities, at cost 2,000,000
Unrealized loss on interest rate swap designated as cash flow he 500,000
Share premium – ordinary in excess of par from
Share premium – from sale of treasury
Preference share capital, P25 par value
Treasury ordinary shares – 20,000 at cost 1,500,000
Total 35,000,000

The dividend on cumulative preference share capital is 10%. The preference share has a liquidation v
A. 22,000,000 B. 21,500,000 C. 21,700,000

Use the following information for the next three (3) questions:
Toyoya Company has two classes of share capital outstanding consisting of 12%, P100 par value prefe
Preference share capital – 5,000 shar 100
Ordinary share capital – 50,000 shar 25
Share premium – PS
Share premium – ordinary
Retained earnings
TSHE
The following data summarize the transactions for the current year:
Shares
1 Issued ordinary share capital 20,000
2 Purchase of treasury – ordinary 10000 5,000
3 Share split – ordinary 2 for 1
4 Reissue treasury share 3,000
5 Shareholders donated 15,000 ordinary shares to the corporation. Subsequently, 10,000 dona
6 Net income for the year was P500,000.
7 Appropriated retained earnings equal to the cost of treasury shares.

10) What amount should be reported as total share premium at year-end?

A. 1,130,000 B. 2,230,000 C. 2,780,000

11) What amount should be reported as unappropriated retained earnings at year-end?

A. 3,000,000 B. 2,290,000 C. 2,740,000

12) What amount should be reported as shareholders’ equity?

A. 7,210,000 B. 7,330,000 C. 7,420,000

13)

Jose Company began operations on January 1, 2018 by issuing at P15 per share one-half of t
had 500,000, P5 par value, 6% preference shares authorized. During 2018, the entity had P1

• Issued an additional 100,000 ordinary shares for P18 per share.

• Issued 150,000 preference shares for P8 per share.
• Authorized the purchase of a custom-made machine to be delivered in January 2020. The en
• Sold an additional 50,000 preference shares for P10 per share.
• Reported P2,500,000 of net income and declared a dividend of P800,000 to shareholders of r

What is the total shareholders’ equity on December 31, 2019?

A. ### B. 11,700,000 C. 11,200,000

14) The following balances are shown in the shareholders’ equity of Rumoosh Company on Dece
Preference share capita, P10 par, 100,000 shares
Ordinary share capital, P10 par, 500,000 shares
Share premium – preference
Share premium – ordinary
Retained earnings
Total

During 2019, the following transactions pertaining to the shareholders’ equity were completed:
• Retirement of 5,000 preference shares at P11 per share.
• Purchase of 5,000 ordinary shares at P12 per share.
• Share split, ordinary, 2 for 1.
• Reissue of 2,000 treasury shares at P8 per share.
• Profit for 2019, P300,000.

The total shareholders’ equity on December 31, 2019 is

A. 6,556,000 B. 6,551,000 C. 6,350,000

Use the following information for the next two (2) questions:

Gargantuan Company was organized on January 1, 2016 with 100,000 authorized shares of P100 par v
Jan-15 Sold 30,000 shares at P150 per share. new par after SS
Feb-14 Issued 2,000 P140 per share.
Mar-27 Purchased 5,000 treasury shares at a cost of P120 per share.
Oct-31 Issued P5,000,000 convertible bonds at 120. The bonds are quoted at 98 without the convers
Nov-05 Declared a 2-for-1 share split when the market value of the share was P160.
Dec-17 Sold 10,000 shares at P75 per share.
Dec-31 The net income for the year was P2,000,000.

15) How much shares are outstanding as of December 31, 2016?

A. 74,000 B. 69,000 C. 64,000

16) What amount should be reported as share capital on December 31, 2016?
A. 4,800,000 B. 3,700,000 C. 3,200,000

17) What amount should be reported as share premium on December 31, 2016?
A. 2,930,000 B. 2,900,000 C. 2,650,000

18) What is the total shareholders’ equity on December 31, 2016?

A. 8,030,000 B. 8,000,000 C. 6,900,000

19) At December 31, 2019, So Sick Company had 30,000 shares of P100 par, 5% cumulative pref
A. Accrued liability of P150,000 C. Accrued liability of P200,000
B. Disclosure of P150,000 D. Disclosure of P200,000

20) On July 1, 2021, Battery Company’s board of directors declared a 10% share dividend. The m

What amount should be charged to the Retained Earnings account as a result of the share dividend?
A. -0- B. 2,000,000 C. 3,200,000

21) Harmony Corporation declared share dividends of 1 share for every 5 shares (20% large RE c
A. 2,000,000 and -0- C. 4,000,000 and -0-
B. 2,500,000 and 2,500,000D. 4,000,000 and 4,000,000

22) The following share dividends were declared and distributed by Party Company:

Percentage of ordinary shares

outstanding Market value Par value
 10% 225,000 150,000
25% 600,000 450,000

How much should be debited to Retained Earnings at the time of declaration?

A. 600,000 B. 675,000 C. 750,000

23)
Dream Company declared 5% share dividend on 100,000 issued and outstanding shares of
share dividend was distributed 60 days after the declaration date. What
A. 250,000 B. 100,000 C. 150,000

24) On May 31, 2022, Internal Company declared a 10% share dividend. The market price of the
distributed on July 31, 2022, when the share market price of P100. Wha

A. 210,000 B. 240,000 C. 270,000

25)
Bad Blood Company issued share capital of 20,000 shares with P5 par at P10 per share. O
reacquired 5,000 shares at P20 per share. In June 2022, the entity sold 1,000 of these share
shares. Net income for 2022 was P60,000. On December 31, 2022, what amount should be r
60k – (4k x 20)
A. 280,000 B. 365,000 C. 375,000

26) Antonette Corporation’s shareholders’ equity is comprised of 10,000, P10 par ordinary share
is declared when the shares are selling for P50 per share, what amount should be transferr
par, shares distrib
A. 0 B. 40,000 C. 160,000

27) Anya Company provided the following information during the current year:
• Dividends on 10% 50,000 cumulative preference shares with P100 par value have not been d
• Treasury ordinary shares were acquired at a cost of P1,000,000 during the year. The treasury
• At year-end, the entity appropriated P2,000,000 of retained earnings for the construction of a
• 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

28) Vhilan Company reported the following outstanding share capital on December 31, 2020:
• 30,000 preference shares, 5% cumulative, par value P10, fully participating as to dividends.
• 200,000 ordinary shares, par value P1

On December 31, 2020, the entity declared dividends of P100,000. What was the amount of dividend
A. 10,000 B. 34,000 C. 40,000

29) Eunice Company provided the following information:

• Dividends on 1,000 cumulative preference shares, 6%, P10 par value, have not been declare
• Treasury shares that cost P15,000 were reissued for P8,000. no more appropriation
What amount of retained earnings should be appropriated as a result of these items?
A. 8,800 B. 1,800 C. 7,000
30) At December 31, 2016, Rama Corp. had 20,000 shares of P1 par value treasury shares that h
A. 5,000 B. 60,000 C. 90,000

Use the following information for the next two (2) questions:
The capital accounts of Forget, Inc. on December 31, 2020 were as follows:
Preference share capital, P20 par, P20,000 shares 400,000
Share premium – preference 160,000
Ordinary share capital, P80 par, 50,000 shares 4,000,000
Share premium – ordinary 600,000
Retained earnings 360,000
5,520,000
During the year ending December 31, 2021, the following summarizes the transaction affecting the sh
Apr-30 1,000 preference shares were retired at P25 per share.
Jun-15 2,000 treasury shares were purchased at P85 per share.
Jun-30 A 2-for-1 share split of the company’s ordinary share was declared.
Jul-31 800 treasury shares were reissued at P50 per share.
Dec-31 Profit for 2021 was P900,000.

31) What was the total shareholders’ equity on December 31, 2021?
A. 6,294,000 B. 6,270,000 C. 6,265,000

32) How much was the remaining cost of the treasury shares on December 31, 2021?
A. 51,000 B. 96,000 C. 102,000

33) Cordilleras Company provided the following shareholders’ equity on December 31, 2022:
Preference share capital, P100 par, 100,000 shares authorized and 80,000 shares issued
Ordinary share capital, P50 par, 500,000shares authorized and 200,000 shares issued
Share premium
Retained earnings

The preference dividends are in arrears for two years and the preference rate is 12%. The preference
the board of directors intent to pay cash dividend of P10 per share to ordinary share shareholders. Wh
dividend objective of the board of directors?

A. 5,280,000 B. 3,600,000 C. 4,560,000

34) The shareholders’ equity of Awat Company on December 31, 2024 shows the following accou

12% preference share capital, 9,000 shares 200 par 1,800,000

Ordinary share capital, 30,000 shares P40 par 1,200,000
Share premium 950,000
Retained earnings 1,350,000
5,300,000

The 12% preference share is cumulative and fully participating. No dividends were declared or paid si
would receive par value plus a premium of P10 per share. what is the book value per share of ordinary
A. 66.59 B. 44.8 C. 99.27

35) Peas Company reported the following shareholders’ equity on December 31, 2022:
Preference share capital, 10% cumulative, P100 par, 40,000 shares
Ordinary share capital, P50 par, 200,000 shares 250000
Subscribed ordinary share capital, net of subscription receivable of P1,500,000
Treasury ordinary share, 20,000 shares at cost
Share premium
Accumulated profit

Preference dividend have not been paid for 3 years and the preference share has a P110 liquidation p
A. 103.89 B. 85 C. 69.26

Assumptions: SP 200000
subscribed shares are issued OS 1000000
TS are retired TS
SR not deducted
SOS 70000
OS
00 par value ordinary shares. The following transactions occurred during 2023:

issued PV out TS P150

40,000 40,000
30,000 30,000
70,000 100 -10000 10000
2 60,000 10,000
140,000 50 7,000,000 120,000 20,000
5000 -5000

eld as treasury.

RE beg
NI 3,000,000
Div - 1,250,000
Reend 1,750,000

D. 1,325,000
SP 1,925,000
SC 7,000,000
D. 5,000,000 RE 1,750,000
TS -1125000
TSHE 9,550,000
D. 1,800,000

D. 8,925,000

sue share capital of 100,000 shares with P30 par value. Axed had the following share capital transactions durin
issued P100 out TS P65
80000 80000
-4000 4000
80000 76000 4000
6 400000 380000 20000 13
value of a share is P25 38000 38000
20000 -20000
438000 438000 0

D. 2,628,000 2628000

year-end?
D. 4,362,000
RE beg
 NI
D. 2,950,000 share div

0 authorized shares of P100 par value. exc over par/cos

50
00,000. The shares on this date are quoted at P160 per share.

quoted at 97 without the conversion feature.

share was P160. 6 25
50

mber 31, 2022?

D. 2,370,000

balance at year-end:
Credit Assets
3,000,000

2,500,000
800,000 RE
5,000,000 Ordinary share capita, P50 par value
Unrealized loss on interest rate swap designated as cash flow hed
Share premium – ordinary in excess of par from
6,000,000 SHE-PIC Share premium – from sale of treasury
200,000 Preference share capital, P25 par value
Treasury ordinary shares – 20,000 at cost

SHE-AOCI
5,000,000 SHE-PIC
1,000,000 SHE-PIC
6,500,000 SHE-PIC
-- TS
30,000,000

ference share has a liquidation value of P50. What amount should be reported as shareholders’ equity?
D. 23,500,000

ting of 12%, P100 par value preference share and P50 par value ordinary share. The entity reported the followin
500,000 Exc over par/cosSP
2,500,000 beg 700000
200,000 10 30,000
500,000 donated cap 400000
 2,000,000 1130000
5,700,000

Per share
50
60 30

40
ation. Subsequently, 10,000 donated shares were reissued at P40 per share.

year-end?
D. 2,880,000

d earnings at year-end?
D. 2,800,000

D. 7,620,000

ng at P15 per share one-half of the 800,000 ordinary shares of P10 par value that had been authorized for sale.
d. During 2018, the entity had P1,000,000 net income and declared P200,000 of dividends. The following transa

elivered in January 2020. The entity restricted P300,000 of retained earnings for the purchase of the m

of P800,000 to shareholders of record on January 15, 2020, to be paid on February 1, 2020.

D. 13,000,000

y of Rumoosh Company on December 31, 2018:

1,000,000 A= TSHE
5,000,000 beg 6,350,000
50,000 - - 55,000
200,000 - - 60,000
100,000 + 16000
6,350,000 + 300000

s’ equity were completed: 6,551,000

 D. 6,251,000

0 authorized shares of P100 par value. During 2016, the following transactions occurred.
par after SS 50 issued P100out
30000 30000
2000 2000
quoted at 98 without the conversion feature. -5000
share was P160. 32000 27000
64000 54000
10000 10000

74000 64000
D. 54,000 3700000

ber 31, 2016? TSHE

D. 3,000,000 4500000
280000
ember 31, 2016? -600000
D. 1,800,000 1100000
750000
2000000
D. 6,000,000 8030000

of P100 par, 5% cumulative preference share outstanding. No dividends were in arrears as of December 31, 20
ued liability of P200,000
closure of P200,000

red a 10% share dividend. The market price of Batter’s 400,000 outstanding ordinary shares, P50 par value, wa

s a result of the share dividend?40k x 80

D. 4,000,000

or every 5 shares (20% large RE charged at par) owned on its 200,000 issued and outstanding shares with a par

by Party Company:
 D. 825,000

ssued and outstanding shares of P20 par value, which had a fair value of P50 per share before the share dividen
after the declaration date. What is the increase in current liabilities as a result of the stock dividend declaration
D. 0 stock dividend is NOT A LIAB

dividend. The market price of the 30,000 outstanding shares of P20 par value was P90 per share on that date. T
share market price of P100. What amount should be credited to share premium for the share dividend? 3k x 7

D. 300,000

s with P5 par at P10 per share. On January 1, 2022, the retained earnings were P300,000. In March 2022, the en
e entity sold 1,000 of these shares to corporate officers for P25 per share. The cost method is used to record tre
, 2022, what amount should be reported as unappropriated retained earnings? 3
60k – (4k x 20) = 280k
D. 360,000

of 10,000, P10 par ordinary shares, P40,000 share premium, and retained earnings of P600,000. If a 40% bonus
what amount should be transferred from the retained earnings account to the share premium account? large
par, shares distributable @par
D. 200,000

e current year:
h P100 par value have not been declared or paid for three years. Arrears does not require appropriation, i
000 during the year. The treasury shares had not been reissued as at year-end. Cost of TS is appropriated
earnings for the construction of a new plant.
t of bonds payable. not appro of RE

D. 6,500,000

apital on December 31, 2020:

lly participating as to dividends. No dividends were in arrears. PS
OS
PS 3/5
What was the amount of dividend payable to ordinary stockholders? OS 2/5
D. 47,000

par value, have not been declared or paid for 3 years.arrears only disclosed not appropriated.
no more appropriation
 of these items?
D. 0
par value treasury shares that had been acquired in 2016 at P12 per share. in May 2017, Rama issued 15,000
D. 240,000

SHE
s the transaction affecting the shareholders’ equity: beg 5,520,000
-25000
4,000 42.5 -170000
40000
- 800 900000
3,200 42.5 136,000 6,265,000

D. 5,520,000

December 31, 2021?

D. 136,000

quity on December 31, 2022: div incl arrears

0,000 shares issued 8,000,000 960000 1920000
00 shares issued 10,000,000 1200000 2000000
2,000,000
5,000,000

ence rate is 12%. The preference share is cumulative and fully participating. On December 31, 2022,
ordinary share shareholders. What is the amount of dividend to be declared in order to meet the

D. 3,360,000

, 2024 shows the following account balances:

TSHE 5,300,000
216,000 PSHE
144,000 LV
Arrears -
OSHE 5,300,000

vidends were declared or paid since 2023. If Awat is to be liquidated, the preference shareholders
e book value per share of ordinary share?
 PS
D. 63.71 1,890,000

on December 31, 2022:

4,000,000 4,000,000 1,200,000.0 Arrears 432,000
10,000,000 12,500,000
2,000,000
1,200,000 18/30
3,000,000 2,800,000 0.4 12/30
5,000,000 5,000,000
22,800,000 24,300,000
ce share has a P110 liquidation price. What is the book value per ordinary share?
D. 74.8
PS
4,000,000
400000
1,200,000 1200000
 Exc SP
30 1,200,000
20 600,000

P75
125,000
1,925,000

share capital transactions during the year:

exc over par/cost

40 3200000

19 722000
22 440000
4362000

0
 4500000
-950000
3550000

Share Prem
1500000 Selling price of compound inst 4400000
100000 less fv of bonds 3880000
520000 SP Conversion Priv 520000

250000 Legal exp 300000

2370000 OS 200000
SP 100000

5,000,000
6,000,000
wap designated as cash flow hedge 500,000
ss of par from 5,000,000
1,000,000
6,500,000
1,500,000 --
2,000,000 23,500,000
21,500,000

as shareholders’ equity?

The entity reported the following balances at the beginning of the current year:
RE beg 2,000,000
NI 500000
Appro for TS -210000
Unappro RE 2,290,000
 A= TSHE
5,700,000
+ 1,000,000
- - 300,000
+ 120000
+ 400000
500000
7,420,000

at had been authorized for sale. In addition, the entity

f dividends. The following transactions relate to 2019:
A= TSHE
+ 6000000
+ 1000000
- -200000
+ 1,800,000
+ 1,200,000
r the purchase of the m- - rest no effecr
+ 500000
uary 1, 2020. + 2500000
-800000
12,000,000
 TS P120 Selling price of compound inst 6000000
less fv of bonds 4900000
SP Conversion Priv 1100000
5000 excess over par
5000 50 30000 1500000
10000 40 2000 80000
25 10000 250000
Share Prem 2930000
10000

n arrears as of December 31, 2017. So Sick did not declare a dividend during 2018. During 2019, So Sick paid a

dinary shares, P50 par value, was P80 per share on the date of declaration. The share dividend was distributed

nd outstanding shares with a par value of P50 per share. at the time of declaration, the market value of ordinary
er share before the share dividend was declared. This
of the stock dividend declaration?

as P90 per share on that date. The share dividend was

m for the share dividend? 3k x 70

P300,000. In March 2022, the entity

ost method is used to record treasury
300k +

ngs of P600,000. If a 40% bonus issue

hare premium account? large RE@

not require appropriation, it is disclosed only.

Cost of TS is appropriated

PS OS total
15000 15000
10000 10000

30000 75000
40000 100000

not appropriated.
May 2017, Rama issued 15,000 of these treasury shares at P10 per share. at December 31, 2017, what amount

December 31, 2022, PS OS Total

order to meet the 1,920,000 1,200,000 3,120,000

PS 8/18 640,000 640000

OS 10/18 800,000 1,440,000 800000
2,000,000 4,560,000

30000 176.66666667

rence shareholders
 OS EXCESS SHE

1,200,000
2,300,000
- 432,000
144000 -144000
1,724,000

689600
2033600
30000
67.78666667 nearest answer

OS EXCESS SHE
12,500,000 7,800,000 24,300,000
-400000
-1200000
6,200,000 6,200,000
18,700,000
250000
74.80
SHE_RE
SHE-PIC
SHE-AOCI
SHE-PIC
SHE-PIC
SHE-PIC
TS
ng 2019, So Sick paid a cash dividend of P100,000 on its preference share. So Sick should report dividends in ar

vidend was distributed on September 1, 2021, when the market price of the share was P100 per share.

market value of ordinary shares was P80 per share and P100 per share at the time the shares were issued. Wha
31, 2017, what amount should Rama show in notes to financial statements as a restriction of retained earnings a
port dividends in arrears in its 2019 financial statements as a/an.

0 per share.

s were issued. What amount should be charged to Retained Earnings account and credit liability accounts, resp
retained earnings as a result of its treasury shares transactions? 5k x P12 cost of TS
bility accounts, respectively?40k x 50