1 The following will cause total retained earnings to decrease , except

A purchase of treasury stock C declaration of bonus issue

B appropriation of retained earnings for plant acquisition D A and B only

2 Which of the following would not be considered a characteristic of a corporation?

A right of succession C unlimited liability

B separate legal entity D created by operation of law

3 Which of the following will not decrease retained earnings?

A declaration of scrip dividends

B declaration of property dividends

C declaration of liquidating dividends

D retirement of share capital at more than the original issue price

4 Earnings per share is

net income minus annual dividends on undeclared non-cumulative preference shares divided by the weighted
A average number of outstanding ordinary shares

B net income divided by weighted average number of outstanding ordinary shares

net income minus annual dividends on cumulative preference shares divided by the weighted average
C number of outstanding ordinary shares

D B and C but not A

5 A capital deficiency is eliminated in any of the following ways except

A by contributing cash to the partnership

B by distributing it as additional loss to the other partners

C by declaring bankruptcy

D by contributing non-cash assets

6 When there is no bidder for delinquent subscription, the subscribed shares

A will be issued in the name of the board of directors

B will be reverted back to unsubscribed shares

C will be issued in the name of the corporation

D will be issued to the delinquent subscriber

7 On June 1, authorized ordinary share capital was sold on a subscription basis at a price in excess of par value, and 40%
of the subscription price was collected. On October 1, the remaining 60% of the subscription price was collected.
Ordinary Share Premium account will be credited on
June 1 October 1
A Yes No

B No No

C Yes Yes

D No Yes

8 The issuance of shares of ordinary share capital to shareholders

A decreases ordinary share capital authorized

B decreases ordinary share capital outstanding

C increases ordinary share capital outstanding

D increases ordinary share capital authorized

1 Hunger Games Corporation was organized on January 1, 2009 with authorized capital of 100,000 ordinary shares, P 20
par value. During 2009, Hunger Games Corporation had the following transactions affecting the shareholders’ equity:
January 10, issued 25,000 shares at P 22 per share; March 25, issued 1,000 shares for legal services when the fair value
was P 24 per share; September 30, issued 5,000 shares for an equipment when the value was P 26 per share. How much
is the balance of the Ordinary Share Capital account as of September 30?
A P 700,000 C P 634,000

B P 620,000 multiply the shares to par value. D P 704,000

2 Using the information in item 49, what amount should be reported as Premium on Ordinary Shares?
A P 84,000 multiply shares to the excess of par value. C P 50,000

B P 54,000 D P 34,000

3 Dream High Corporation has the following classes of share capital outstanding as of December 31, 2009: Ordinary Share
Capital, P 20 par value, 20,000 shares outstanding; 6% Preference Share Capital, P 100 par value, cumulative, 2,000
shares outstanding. No dividends were paid on preference shares for 2007 and 2008. On December 31, 2009, a total
cash dividend of P 200,000 was declared. How much dividends would be received by ordinary shareholders?
A P 0 C P 176,000

B P 188,000 D P 164,000 subtract 200 to arrears and current div.

4 Using the information in item 51, how much dividends will be received by preference shareholders?
A P 200,000 C P 12,000
 B P 24,000 D P 36,000 add div/arrears and current dividends.

5 On April 8, 2009, Simsimi Corporation declared and issued 25% ordinary share capital dividend. Prior to this date,
Simsimi Corporation had 20,000 shares of P 2 par value ordinary share that were both issued and outstanding. The
carrying value of each share of stock is P 20 at the time of declaration of the dividend. As a result of the stock dividend,
how much will be debited to Retained Earnings?
A P 40,000 C P 100,000

B P 10,000 large bonus issue, at par only. D P 75,000

6 Red Corporation and Yellow Corporation have Preference Share Capital outstanding. Red Corporation has issued 3,000
shares of 5% Preference Share Capital, par value P 100. Yellow Corporation has issued 5,000 shares of 10% Preference
Share Capital, par value P 120. What is the dividend per share for the Preference Share Capital for the two corporations?
A P 5 for Red, P12 for Yellow current div / shares. C P 5 for Red, P 10 for Yellow

B P 100 for Red, P 120 for Yellow D P 5 for Red, P 120 for Yellow

7 White Rock Resort Corporation has 400 shares of 6% preference share capital outstanding, par value is P 50 per share
and market value is P 80 per share. The amount of cash dividends for the year on this share capital would be
A P 1,200 6% multiplied by 400 multiplied by 50. C P 2,400

B P 12 D P 1,920

8 Club Manila East Corporation has 6,000 shares of P 8 non-cumulative preference shares outstanding and 12,000
ordinary shares outstanding. At the end of the year, cash dividends of P 180,000 were declared. How much dividends
were paid on both classes of share capital?
A P 48,000 and P 132,000 PS current, balance to OS. C P 90,000 and P 90,000

B P 60,000 and P 120,000 D none of the given

9 Using the information in item 56, what is the dividend per share on both classes of share capital?
A P 10 and P 10 C P 15 and P 2.50

B P 8 and P 11 divide to outstanding shares. D none of the given

10 Park Min-Young Corporation was organized on January 1, 2009 with authorized capital of 100,000 shares of P 10 par
value ordinary share capital. During 2009, Park Min-Young Corporation had the following transactions affecting
shareholders’ equity: January 7, issued 40,000 shares at 12 per share; December 2, purchased 6,000 treasury shares at
P 13 per share. Profit for the year amounted to P 300,000. What is the amount of shareholders’ equity as of December
31, 2009?
A P 702,000 add issued, less treasury, add profit. C P 640,000

B P 720,000 D P 708,000

1 Entitles the holder to an equal or pro-rata division of profits without any preference or advantage over any class of
shares
A Preference share C Treasury shares
B Donated share D Ordinary share
2 Holders of this type of preference share capital are entitled to receive dividend in arrears
A Convertible C participating
B Cumulative D accumulative

3 The cost of organizing a corporation that is expensed in the year of organization

A Post-operating expense C Neither a nor b
B Organization Cost (hindi ba pre-operating exp yun?) D Either a or b

4 These represent increase or decrease in equity other than contributions by and distributions to owners and which are
not included in the calculations of net income
A Retained earnings C Subscribed share capital
B Additional paid-in capital D Capital maintenance adjustment
5
The statement of changes in stockholders equity shows the following except
A Gains and losses that are reported directly in equity
B Cumulative effect of change in accounting policy
C Comparative analysis of assets and liabilities
D The net income or loss for the period

6 If the treasury share is sold at a price greater that its cost, the excess is recorded as
A Gain on sale of treasury stock C Gain on realization
B Retained earnings D Paid in capital from sale of treasury stock
1 A. A dividend in arrears are only referred to preference share capital
B. Ordinary share capital is considered the residual equity of a corporation
A Only A statement is true C Both statement are true
B Only B statement is true D Both statement are false

2 When a 15% stock dividend is declared, retained earnings would be debited for an amount equal to
A The FMV of the stock on the date of record C The FMV of the stock on the date of distribution
B The par value of the stock D The FMV of the stock on the date of declaration

3 The acceptable method in accounting for treasury stock

C Memorandum entry method
A Cost method Journal entry method
D

PROBLEM SOLVING

1 On December 10,2004 Mel B. Corp. declared a 5 for 1 stock split when the market value of stock was P200 per share.
Prior to the split they had 100,000 shares of P20 per value ordinary share issued and outstanding. After the split. The
par value of the stock will be
A 20 C 40
B 100 D 4
2 Blahblah purchased 7,000 shares of ordinary shares par value P50 @ P75 each. She gave a down payment of 30%, then
an additional partial payment of 50% of the blance. If Blahblah was unable to pay for the remaining balance, how much
would be debited to receivable from highest bidder if she were to be declared as delinquent?
A P183,750 C P105,000
B P122,500 D P70,000

3 Rasziel Corp was organized with an authorized capital stock of P1,200,000 consisting of 8,000 shares at P150 par value
ordinary share. Subsequently, the incorporators subscribed 2,000 share at P160 per share. How much should be paid
upon subscription to comply with the requirement of SEC?
A 300,000 C 75,000
B 60,000 D 80,000 E. none of the above

4 The bank statement of Nightingale Co reveal that among the cancelled checks shows payment of payable amounting
to P9,857 but was erroneously recorded by the bookkeeper as P8,957, while collection made by the bank in the name
of the company amounted to P13,000. These transactions will be shown in the bank reconciliation statement as :

Bal. per books-add Bal. per books-less Bal. per Bank state.- add Bal. per Bank state.- less

A P900 P0 P0 P0

B P0 P900 P0 P13,000

C P13,000 P900 P0 P0

D P13,900 P0 P0 P0

5 Maimai, Inc.has the following data as of Dec 31,2004

Ordinary share, 30,600 shares authorized, P40 par value P 1,200,000
Net income for the year P 165,000
How much will be the earnings per share?
A P5.39 C P13.75
B P5.50 D P40

6 Elayne, Inc. has outstanding ordinary share of 30,000 shares at P25 par value. The corporation declared a 30% stock
dividend. On the date of the declaration, the stocks sell at P35/share abd P37 on the date of the payment. Retained
earnings will be debited
A 210,000 C 222,000
B 150,000 D 60,000

7 The following data regarding the capita; of Astasha were taken from the AMC, LTD books. Jan.1 beg Capital P55,000;
May 1, investment P3,000, July 31, withdrawal, P5,000. What would be the average capital on Dec. 31?
A 53,000 C 54,917
B 21,167 D 59,000 E. none of the above
8 The SaMax Corp. has 232,000 shares of common stock outstanding, 270,000 shares authorized and 244,000 shares
issued. How many shares of treasury stock did it have?
A 38,000 C 24,867
B 26,000 D 12,000

1. The shareholders or members indicated in the articles of incorporation. Originally forming and composing the
corporation, and who are signatories thereof, are called
a. Corporators
b. Subscribers
c. Promoters
d. Incorporators
2. When share is sold on subscription basis and the entire subscription price has been subsequently collected, the
issuance of the share certificate is recorded by
a. A debit to cash and credit to share capital
b. A debit to subscription receivable and credit to subscribed share capital
c. A credit to share capital and credit to subscription receivable
d. A debit to subscribed share capital and credit to share capital

3. On April 2, 2012, authorized ordinary shares was sold on a subscription basis at a price in excess of par value,
25% of the subscription price was collected. On June 2, 2012, the remaining 75% of the subscription price was
collected Share premium (APIC), would increase on

April 2 , 2012 June 2, 2012

A Yes No

B No Yes

C Yes Yes

D No No

4. Which of the following will decrease the retained earnings?

a. Payment of cash dividend
b. Declaration of bonus issue
c. Net income for the period
d. Issuance of a share dividend

5. Jeaneth Company has not declared or paid dividends on its cumulative preference shares in the last two years.
How would this information be presented in the financial statement?
a. In a note to the financial statements
b. The dividends would be presented as current liability
c. The dividends would be presented as non-current liability
d. The dividends would be presented as a restriction on retained earnings

6. Treasury shares were acquired for cash at a price in excess of its par value. Treasury shares were subsequently
reissued for cash at a price in excess of their acquisition cost. Assume that the cost method of accounting is
used, what is the effect of retained earnings of (a) the acquisition, (b) the resale of treasury sales, respectively?
a. Increase, No effect
b. No effect ,increase
c. No effect, no effect
d. Increase, decrease
7. Global sign company exchanges a piece of equipment for P5,000 shares of Golden Corporation’s ordinary share
capital that has P100 par value. The equipment cost Global sign 750,000 when purchased 5 years ago, and
 currently has a fair value of P550,000. The equipment has recorded accumulated depreciation of P150,000 in
the books of global sign. What is the amount to share premium- Ordinary as a result of the exchange?
a. 50,000
b. 75,000
c. 100,000
d. 250,000

8. On June 30, 2012, Balbarino Corporation declared a 10% bonus issue on its 300,000 p10 par ordinary share
capital outstanding. The shares are distributable on Aug.15,2012 to shareholders of record as of the close of
business on July 15,2012.

The shareholders were selling at P18 per share on June 30,2012, at P19 on July 15,2012 and P21 on Aug. 15,
2012. What amount should be charged to retained earnings as a result of the above dividends?
a. 300,000
b. 570,000
c. 540,000
d. 630,000

9. Orfiano, Inc prepared this journal entry on May 31,2012:

Cash 140,000
Ordinary share capital 130,000
Share Premium –Ordinary 10,000
Issued shares at P14 per share

What is the par value of shares and how many share were issued?
a. P14 par value; 10,000 shares
b. P14 par value; 14,000 shares
c. P13 par value; 10,000 shares
d. P13 par value; 13,000 shares

10. Doquenia Corporation was incorporated on January 2,2012. The following information pertaining to her
ordinary share transaction:
01/02/2012 Number of share authorized 80,000
02/01/2012 Number of shares issued 60,000
08/01/2012 Number of shares reacquired (treasury) 5,000
12/01/2012 Two-for-one share split

What is the number of Doquenia Corporation’s ordinary share outstanding at Dec. 31, 2012?
a. 150,000 shares
b. 120,000 shares
c. 115,000 shares
d. 110,000 shares
11. On June 1, 2012, Espimo Corporation declared a bonus issue entitling its shareholders to one additional share
for each shares held. At the time the dividend was declared, the market value of each share was P10 and the
par value was P5 per share. On this date, Espino Corporation had 500,000 of ordinary shares outstanding.
What entry should the company make to record this transaction?
a. Retained Earnings 5,000,000
Share dividends Distributable 2,500,000
Share Premium 2,500,000

b. Retained Earnings 5,000,000

Share dividend distributable 5,000,000

c. Retained Earnings 2,500,000

Share dividend distributable 2,500,000
 d. Share Dividends payable 5,000,000
Share dividends Distributable 2,500,000
Share Premium 2,500,000

12. The Fonte Corporation had the following classes of share outstanding as of December 31,2012:

6% Cumulative Preference Share Capital, P100 par

2,000 shares outstanding P 200,000
Ordinary Share Capital, P20 par, 20,000 shares outstanding 400,000

No dividends were paid during 2010 and 2011. On Dec 31, 2012, P200,000 cash dividends were declared. What
is the total amount of the dividends payable to ordinary shareholders?
a. 164,000
b. 188,000
c. 109,333
d. 117,333

13. The following information pertains to ABC corporation at Dec. 31, 2012:
12% Preference share, P100 par, 10,000 shares issued and outstanding P1,000,000
Ordinary share , P50 par, 40,000 shares issued and outstanding 2,000,000

The ABC corporation declared and paid cash dividends for the years 2010 through 2012 as follows:
2010-100,000; 2011-400,000; 2012-600,000

Assuming that the preference share is cumulative and fully participating and there are no umpaid dividends at
the beginning of 2010, calculate the dividend per share for both share capital at the end of 2012.
a. Preference –10.00; Ordinary –none
b. Preference –14.47; Ordinary –6.63
c. Preference –14.47; Ordinary –8.57
d. Preference –17.14; Ordinary –8.57

14. Honey Corporation’s Statement of financial position shows total Shareholder’s equity of P1,705,000 as of dec.
31, 2012. What is the book value per ordinary share assuming that the company has two classes of share capital
outstanding, consisting of 5,000 shares, P100 par value preference share with liquidation value of P120 per
share and 50,000 of P10 par value ordinary share capital?
a. P24.10
b. P22.10
c. P9.50
d. P11.50

15. The account of Review Company made the following adjusting entry on Dec. 31, 2012:
Prepaid Rent 1,800
Rent expense 1,800

If annual rent is paid in advance every October 1, the original transaction entry made was
a. Debit prepaid rent and Credit cash. P1,800
b. Debit rent expense and Credit cash. P1,800
c. Debit rent expense and Credit cash. P2,400
d. Debit rent expense and Credit cash. P7,200

16. The accountant of battleship company made the following adjusting entry on Dec 31, 2012
Rent Income 900
Unearned rent income 900
 If annual rent is received in advanced every March 1, the original transaction entry made was
a. Debit cash and Credit unearned rent income. P900
b. Debit cash and Credit rent income. P1,080
c. Debit cash and Credit rent income. P5,400
d. Debit rent income and Credit cash. P5,400

Walang answer key :’(

1. Pope Francis Corporation was organized in January 2013 with authorized capital of P10 par value of common stock.
On February 1, 2013, shares were issued at par for cash. On March 1, 2013, the corporation’s attorney accepted 5,000
shared of the common stock in settlement for legal services with a fair value of P60,000. Additional paid in capital
would increase on
February 1, 2013 March 1, 2013
a. Yes No
b. Yes Yes
c. No No
d. No Yes

2. When collectability is reasonably assured, the excess of the subscription price over the stated value of the no-par
common stock subscribed should be recorded as
a. No par common stock
b. Additional paid-in capital when the subscription is recorded
c. Additional paid-in capital when the subscription is collected
d. Additional paid-in capital when the common stock is issued

3. On December 1, 2013, shares of authorized common stock were issued on a subscription basis at a price in excess of
par value. A total of 25% of the subscription price of each share was collected as a down payment on December 1,
2013, with the remaining 75% of the subscription price of each share due in 2014. Collectability was reasonably
assured. At December 31,2013, the stockholder’s equity section would report additional paid capital for the excess of
the subscription price over the par value of the shares of common stock subscribed and
a. Common stock issued for 25% of the par value of the shares of common stock subscribed
b. Common stock issued for the par value of the shares of common stock subscribed
c. Common stock subscribed for 75% of the par value of the shares of common stock subscribed
d. Common stock subscribed for the par value of the shares of common stock subscribed

4. A company declared a cash dividend on its common stock on December 15, 2013, payable on January 12,2014. How
would this dividend affect stockholder’s equity on the following dates?
December 15,2013 December 31,2013 January 12,2014
a. Decrease No effect Decrease
b. Decrease No effect No effect
c. No effect Decrease No effect
d. No effect No effect Decrease

5. Which of the following would not be reported in the stockholder’s equity section of the balance sheet?
a. Retained earnings appropriated for future plant expansion
b. Dividends declared on preferred stock
c. Paid in capital in excess of par value
d. Deficit in retained earnings

6. Unlike a stock split, a stock dividend requires a formal journal entry in the financial accounting records because
a. Stock dividends increase the relative book value of an individual’s stock holdings
b. Stock dividends increase the stockholder’s equity in the issuing firm
c. Stock dividends are payable on the date they are declared
d. Stock dividends represent a transfer from Retained earnings to Capital stock

7. The following are the attributes of a private corporation. What is the exception?
 a. It is an artificial being
b. It is created by law
c. It has the right of succession
d. Its power, attributes or properties are expressly authorized by law or incident
e. None of the above

8. It is the amount fixed in the articles of incorporation. To be subscribed and paid in by the shareholders of a corporation,
either in money or property, labor or services, at the organization of the corporation or afterwards and upon which it
is to conduct its operations. It limits the maximum amount or number of shares that may be issued by the corporation
without formal amendment of the articles of incorporation
a. Legal capital
b. Subscribed capita
c. Outstanding capital stock
d. Authorized capitals stock

9. Incorporators should have the following qualifications. Which is the exception?

a. They must be of legal ages and must be natural persons
b. They must not be less than five (5) but not more than fifteen (15), whom are citizens of the Philippines
c. They must number not less than five (5) but not more than fifteen (15), majority of whom must be residents of
the Philippines
d. Each of the incorporators of the stock corporation must be a subscriber to at least one (1) share of the capital
stock of the corporation
1. The adjusted trial balance of the Lee, Min and Ho partnership at December 31,2012 was as follows:
Cash P50,000 Accounts Payable P80,000

Accounts Receivable-net 100,000 Loan from Ho 20,000

Non-monetary assets 800,000 Lee, Capital 300,000

Loan to Lee 50,000 Min, Capital 450,000

Expenses 400,000 Ho, Capital 350,000

Revenue 200,000

P1,400,000 P1,400,000

Additional information:
1. Partnership profits are divided 20%, 40% and 40% to Lee, Min and Ho respectively, after salary allowances
of P25,000 each to Lee and Min for the time devoted to the business
2. Due to disastrous results of 2012, the partnership agreed to liquidate the business as soon as possible after
January 1,2013 and to distribute available cash on a weekly basis
3. During the first week in January, P85,500 was collected on the accounts receivable and cash was distributed
on January 8,2013

Who among the partners will receive the first available cash to partners?

a. Lee b. Min c. Ho d. cannot be determined

2. How much is the capital balance of Lee after January 8,2013 cash distribution, net of loan?
a. P264,833 b. 214,833 c. 181,500 d. 206,500 e. No answer given

3. How much cash Min received?

a. P37,500 b. P6,000 c. P12,000 d. P18,000 e. No answer given
4. On January 1, 2013, the partners Harry, Hermione and Ron, who share profits and losses in the ratio of 5:3:2
respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as
follows:
Assets Liabilities and Capital

Cash P50,000 Liabilities P60,000

Other Assets 250,000 Harry, Capital 80,000

P300,000 Hermione, Capital 90,000

Ron, Capital 70,000

P300,000

On January 15,2013 the first cash sale of other assets with a carrying amount of P150,000 realized P120,000. Safe
installment payments to the partners were made on the same date.

How much cash should be distributed to each partner?

Harry Hermione Ron
a. P15,000 P51,000 P44,000
b. P40,000 P45,000 P35,000
c. P55,000 P33,000 P22,000
d. P60,000 P36,000 P24,000
e. No anwer given

5. JPIA’s Finests Co. issued 1,000 shares of its P5 par common stock to Finex as compensation for 1,000 hours of
legal services performed. Finex usually bills P160 per hour for legal services. On the date of issuance, the stock
was trading on a public exchange at P140 per share. By what amount should the additional paid-in capital account
increase as a result of this transaction?
a. P135,000 b.P140,000 c.P155,000 d. P160,000

6. The partnership of Aaron and Luke provides for equal sharing of profits and losses. Prior to the admission of a
third person Elizabeth, the capital accounts are Aaron, P75,000 and Luke, P105,000. Elizabeth invests P90,000 for
a P75,000 interest and partners agreed that the net assets of the new partnership would be P270,000.

How much is Luke’s capital in the new partnership?

a. P112,500 c. P110,000
b. P105,000 d. P120,000
7. Xian, Hewie and Otaro are partners and share profits and losses equally. Each has a capital balance of P1,800,000.
Hewie retires from the partnership and receives P1,500,000. The partnership assets are fairly stated.

What is the entry to record Hewie’s retirement?

a. Hewie, Capital P1,800,000 (dr)
Goodwill P 300,000 (cr)
Cash P1,500,000 (cr)

b. Hewie, Capital P1,800,000 (dr)

Partnership Assets P 300,000 (cr)
Cash P1,500,000 (cr)

c. Hewie, Capital P1,500,000 (dr)

Cash P1,500,000 (cr)

d. Hewie, Capital P1,800,000 (dr)

Otaro, Capital P 150,000 (cr)
Xian, Capital P 150,000 (cr)
 Cash P1,500,000 (cr)

8. The balance sheet as of June 30,2013 for the partnership of Isaac, Dmitri and Maxwell shows the following
information:
Total Assets P360,000

Isaac, Loan P 20,000

Isaac, Capital 83,000

Dmitri, Capital 77,000

Maxwell, Capital 180,000

P 360,000

It was agreed among the partners that Isaac retires from the partnership and it was further agreed that the assets be
adjusted to their value of P408,000 as of June 30,2013. The partnership would pay Isaac, P121,000 cash for his
partnership interest and includes the payment of loan to him. No goodwill is recorded. Isaac, Dmitri and Maxwell
share profits and losses, 25%, 25% and 50% respectively.

What is Maxwell’s capital balance after the retirement of Isaac?

a. P120,000 c. P200,000
b. P180,000 d. P560,000

9. Anne and Dominique are partners with capital balances and profit and loss ratio as follows:
Capital Profit and Loss Ratio

Anne P24,500 60%

Dominique 15,500 40%

P40,000 100%

The partners decided to liquidate the partnership. The firm’s liabilities amount to P36,000 including P4,000 owing
to Anne and P3,500 owing to Dominique on loans. After realization of assets, the cash on hand amount to P37,500

The loss on realization amounts to

a. P2,500 c. P38,500
b. P4,000 d. P37,500
10. Partners Exodus and Leviticus who shared equally on the profits and losses had the following balance sheet as of
December 31, 2003
Assets Liabilities and Capital

Cash P120,000 Accounts Payable P172,000

Accounts Receivable 100,000 Exodus, Capital 140,000

Merchandise Inventory 140,000 Leviticus, Capital 120,000

Equipment 80,000
 Accumulated Depreciation ( 8,000)

Total Assets P432,000 Total Liabilities and Capital P 432,000

Partners agreed to incorporate and have the new corporation absorb all the assets and assume the liabilities of the
partnership after effecting the following adjustment:
 Provision for allowance for bad debt of P10,000
 Recording the merchandise inventory at fair market value of P160,000
 Further depreciation of the equipment by P3,000

The corporation’s capital stock has a par value of P100 and partner where issued the corresponding shares of stock
equivalent to their adjusted capital accounts in the amount of
a. P273,000 c. P267,000
b. P280,000 d. P277,000

11. FutureCPAko Corp. issued 20,000 shares of P5 par common stock at P10 per share. On December 31,2013,
FutureCPAko’s retained earnings were P300,000. In March 2014, FutureCPAko reacquired 5,000 shares of its
common stock P20 per share. In June 2014, FutureCPAko sold 1,000 of these shares to its corporate officers for
P25 per share. FutureCPAko uses the cost method to record treasury stock. Net income for the year ended
December 31,2014 was P60,000

At December 31,2014, what amount shoukd FutureCPAko report as retained earnings?

a. P360,000 b. P365,000 c.P375,000 d. P380,000

12. The following stock dividends were declared and distributed by Moses Corp.:
Percentage of common share

Outstanding at declaration date Fair Value Par Value

10 P15,000 P10,000

28 P40,000 P30,800

What aggregate amount should be debited to retained earnings for these stock dividends?
a. P40,800 b. P45,800 c.P50,000 d. P55,000

13. At December 31,2012, Noah Corporation reported P1,750,000 of appropriated retained earnings for the
construction of a new office building, which was completed in 2013 at a total cost of P1500,000. In 2013, Noah
appropriated P1,200,000 of retained earnings for the construction of a new plant. Also, P2,000,000 of cash was
restricted for the retirement of bonds due in 2014

In its 2013 balance sheet, Noah should report what amount of appropriated retained earnings?
a. P1,200,000 c. P1,450,000
b. P3,200,000 d. P2,950,000

14. Genesis Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31,
2012. The following events occurred during 2013:
January 31 Declared 10% stock dividend

June 30 Purchased 100,000 shares

August 1 Reissued 50,000 shares

 November 30 Declared 2-for-1 stock split

At December 31, 2013 how many shares of common stock outstanding did Genesis have?
a. P560,000 b. P600,000 c.P630,000 d. P660,000

15. Thaddeus Corp., a calendar-year company, had sufficient retained earnings in 2013 as a basis for dividends, but
was temporarily short of cash. Thaddeus declared a dividend of P100,000 on April 1,2013, and issued promissory
notes to its stockholders in lieu of cash. The notes which were dated April 1,2013, had a maturity date of March
31,2014, and a 10% interest rate

How should Thaddeus account for the scrip dividend and related interest?
a. Debit retained earnings for P110,000 on April 1,2013
b. Debit retained earnings for P110,000 on March 31,2014
c. Debit retained earnings for P100,000 on April 1,2013 and Debit interest expense for P10,000 on March
31,2014
d. Debit retained earnings for P100,000 on April 1,2013 and Debit interest expense for P7,500 on December
31,2013

16. Mario Maurer Corp.’s current balance sheet reports the following stockholder’s equity:

5% cumulative preferred stock, par value P100 per share;

2,500 shares issued and outstanding P250,000

Common stock, par value P3.50 per share;

100,000 shares issued and outstanding 350,000

Additional paid in capital in excess of par value of common stock 125,000

Retained Earnings 300,000

Dividend in arrears on the preferred stock amounts to P25,000 including the current year. If Mario Maurer were to
be liquidated, the preferred stockholders would receive par value plus a premium of P50,000. The book value per
share of common stock is
a. P7.75 b. P7.50 c.P7.25 d. P7.00

17. Neseyeneenglehet Corp.’s outstanding capital stock at December 15,2013 consisted of the following:
 30,000 shares of 5% cumulative preferred stock, par value P10 per share, fully participating as dividends
were in arrears
 200,000 shares of commons stock, par value P1 per share

On December 15,2013, Neseyeneenglehet declared dividends of P100,000. What was the amount of dividends
payable to Neseyeenglehet’s common stock holders?
a. P10,000 b. P34,000 c.P40,000 d. P47,000

TRUE OR FALSE. Shade A when the statement is TRUE and B when the statement is FALSE – 1 PT EACH.

1. A partner who desires to withdraw from the partnership may do so as long as he gets the consent of all of the
other partners.
2. Preference Share Capital is usually recorded at Par Value while Ordinary share Capital is at stated value.
3. Subscribers are persons who purchase stocks and agree to pay at a later date, while undertakers are those who
agree to dispose of the shares to the general public
4. Share Capital amount shown in the Statement of Financial Position is the difference between Authorized Share
Capital and Unissued Share Capital
 5. Another term used for Share Capital is Additional Paid-in Capital.
6. Quasi-public corporations are actually government corporations.
7. When share capital are reacquired and then retired by the issuing corporation, the related additional paid in
capital from the original issuance of stock is also cancelled.
8. Share Capital includes issued shares at its par or stated value, subscribed shares (net of short-term subscription
receivables), and stock dividend distributable.
9. Retained Earnings with debit balance is called Deficit.
10. If the FMV of stocks is greater than the PV at the time of stock declaration of 18%, the gain from the issuance of
stock dividends at more than par has no effect on Total Stockholder’s Equity.
11. Share Capital issued at Stated value and Additional Paid-in Capital is known as the legal capital
12. To compute for Earnings per Share, subtract from the Net Income the earnings attributable to ordinary shares
divided by the outstanding ordinary shares.
13. Equity identified with Preference share Capital (cumulative) generally includes the liquidation value of the
outstanding shares and any claim on current and dividend in arrears.
14. The account Retained Earnings Appropriated for Dividends is debited at the date of declaration.
15. All the partners in a Limited Partnership are only liable up to their contributions to the partnership only.
16. When the value of the asset received in exchange for stocks is overstated, the share capital is said to hold secret
reserves.
17. Partnership liquidation is always preceded by partnership dissolution.
18. A corporator whose name is mentioned in the Articles of Incorporation is an incorporator.
19. The chronological and numerical records of stock certificates issued are listed in the stockholder’s ledger.
20. The Articles of incorporation enumerates the powers and limitations conferred upon the corporation by the
government which includes the name of corporation, the authority and duties of the directors and the principal
office of the corporation.
21. When preference share capital is participating, ordinary shares are always given regular dividends with the same
rate as that of preference shares, whether they are cumulative or not, as long as there are available dividends.
22. The Retained Earnings Account of the corporation has a credit balance of P500,000. 80% of this was appropriated
for the expansion of the company, while the Cash account has a balance of P150,000. The corporation can only
declare dividends up to P150,000 Cash dividends.
23. The highest bidder is the one who is willing to pay the unsettled subscription plus any expense incurred in
relation with the delinquency sale and is agreeable to receive the least number of stocks.
24. Dividend in arrears on preference shares are reported in the financial statement as a liability.
25. A corporation may never earn a profit or incur a loss by selling or buying its own stock.
26. When two classes of shares capital are issued for a lump-sum amount, the total amount received should be
allocated to the two classes of share capital based on the par or stated value of the shares issued.
27. An eleemosynary corporation is a non-stock corporation
28. The following are transaction costs: stock exchange listing fees, road show presentation and PR consultant’s fee.
29. Bonus issue are one and the same as share premium.
30. Appropriation of Retained earnings does not require the setting up of a separate cash fund
31. Deferred Cash dividends are also called script dividends
32. Treasury stocks result from defaulted shares, donated shares and redeemed shares.
33. To compute for EPS, the dividend requirement for Cumulative Preference share is deducted from the Net profit
to get the profit identified with ordinary shares then divided by the outstanding shares. This method is done when
only when the dividends are declared.
34. The 3 for 2 stock split means that the Issued Ordinary Share capital of 20,000 shares with par value of P60 will be
replaced by 60,000 shares with P20 par value.
35. Pre-emptive right is the right of the stockholder to maintain his percentage share (advantage) in the
corporation

MULTIPLE CHOICE. 2.167 PTS EACH

36. The Kardo Corporation shows the following information its shareholder’s equity:
Ordinary Share Capital, 25,400 authorized shares, 20,000 shares issued
18,000 shares outstanding, P 60 par. - - - - - - - - - - - - - - - - - - - - - - - -- P _____________
 What will be the amount written on the space above?
a. P1,200,000 b. P1,524,000 c. P1,080,000 d. P120,000

37. Based on Alice in Kardo Corporation, if P33,372 were declared as dividends, what would be the dividends
per share?
a. P1.31 b. P1.67 c. P16.69 d. P1.85

38. The Shareholder’s Equity of Allyana Corp shows the following information as of December 31, 2018.
10% Preference Share Capital, P100 par P500,000
Preference Share Premium 7,500
Ordinary Share Capital, 10,000 shares 400,000
Ordinary Share Premium 50,000
Retained Earnings 200,000
The corporation has P35,150 dividend in arrears at the end of 2017. Preference shares were noncumulative
but participating up to an additional 6%. Dividends declared was P180,000. Dividends per share for
Preference & Ordinary share capital (respectively) would be -
a. P16.00; P10.00 b. P20.00; P8.00 c. P16.00; P2.50 d. P23.12; P6.44

39. What would be the Dividends per share for Preference & Ordinary share capital (respectively) of Allyana
Corp. assuming the preference share capital was cumulative and fully participating?
a. P23.12; P6.44 b. P22.52; P6.74 c. P20.00; P8.00 d. P100.00; P40.00

40. The following information were taken from the books of Enzo Incorp. Compute for the total shareholder’s
equity.
Cash, P300,000
Dividends payable, P25,000
Treasury shares, P52/sh
Retained Earnings - Appropriated, P450,000
Input tax, P8,500
Ordinary share capital, 50,000 shares issued, P20 par
Ordinary share premium, P91,500
Ordinary Shares subscribed, 20,000 shares
Ordinary Shares Subscription Receivable - due in 3 years, P100,000
Preference Share Capital, 10,000 share outstanding, P50 par, 1,000 shares in treasury
Retained Earnings - Unappropriated, P150,000
Preference Share dividend distributable, 5,000 shares

a. P2,689,500 b. P2,839,500 c. P2,739,500 d. P2,791,500

41 How much would be the Retained Earnings appropriated for Treasury shares in the Enzo Incorp?
a. P450,000 b. P52,000 c. P50,000 d. Not given

42. The Godson Corporation owns 40,000 shares in the Antoni Group of Companies. The Godson Corp is to
distribute 3 shares of Antoni for every 2 shares of The Godson owned. At the date of declaration the
financial statements show that Investment in Antoni Group of Companies has a debit balance of
P1,060,000, while The Godson Corp. has reported 15,000 P160-par outstanding Ordinary shares. On the
date of declaration, the Retained Earnings account will be recorded at -
a. P532,650 debit b. P265,000 debit c. P397,500 debit d. P596,250 debit

43. Hazel Corporation has authorized ordinary shares of 150,000 with par value of P250/share. As of the date
of incorporation 37,500 shares were subscribed at P275/share. How much should be reported to the
Securities and Exchange Commission as paid up?
 a. P2,343,750 b. P2,578,125 c. 937,500 d. P37,500,000

44. Using the information from Hazel Corporation. The company undertakes a 5 for 2 share split. The new
number of authorized shares and par value would be:
a. 375,000 shares at P100.00/share c. 60,000 shares at P625.00share
b. 375,000 shares at P110.00/share d. 60,000 shares at P687.50/share

45. Upon partnership liquidation, the total non-cash assets of GenBorja, Ltd were sold with a gain on
realization amounting P150,000. Liabilities of P110,000 were all paid. The partners, Onyok, Makmak and
Delfin share income and loss in the ratio 3:2:5. GenBorja, Ltd had a beginning balance of P120,000 invested
equally by the partners. Upon liquidation, Makmak would receive -
a. P30,000 b. P70,000 c. P14,000 d. P32,000

46. The Retained Earnings account of Gael Corp. has a credit balance of P85,000 as of December 31, 2017.
During that year 20% stock dividends were declared to 5,000 outstanding Ordinary shares with par value
of P50/sh (fair market value of P55/sh). It has been noted that the retained earnings had a deficit of P5,000
at the beginning of the year (2017). No other stock transactions were made. Compute for the Earnings Per
Share.
a. P29/sh b. P28/sh c. P26/sh d. Incomplete data

47. Homer, Inc. issued 4,000 to Ordinary shareholders for cash (at par) and another 2,000 stocks to lawyers
during incorporation as payment for legal fees amounting to P150,000. It also issued 2,500 shares in
exchange for an equipment with book value of P215,000 but has FMV of P219,000. The corporation also
received subscription for 2,000 shares issued at P76/sh. If, after these transactions, Subscribed Ordinary
Shares has a balance of P130,000, what would be shown as Ordinary Share Capital in the Shareholder’s
Equity?
a. P684,000 b. P780,000 c. P552,500 d. P836,000

48. The Shareholder’s Equity of Homer, Inc. would show its Additional Paid-in Capital at -
a. P94,500 b. P72,500 c. P98,500 d. zero

49. On April 1, 2017, Mona Corp received subscription for 20,000 Ordinary Shares at P5 above the par value
of P95/sh. The subscribers gave a down payment of 30% . After a month, Mary 1, 2017, the subscribers
paid an additional 60% of the balance. How much would be reported as Subscription Receivable in the
Statement of Financial Position after these transactions?
a. P560,000 b. P200,000 c. P532,000 d. P190,000

50. Assuming only half of the subscribers of Mona Corp made a full payment on June 1, 2017, how many shares
will be issued stock certificates?
a. 10,000 shares b. 12,000 shares c. 3,211 shares d. 6,442 shares

51 Ordinary Share Capital will be reported on May 1, 2017 as

a. P1,000,000 b. P950,000 c. P342,000 d. P900,000

52. The Shareholder’s Equity of Bagani Incorporated as of December 31, 2016 consists of 10% Preference
Shares (cumulative and participating) with outstanding shares of 6,000, P100 par value; Ordinary Shares
of 10,000 with P40 par value and Retained Earnings of P300,000. Dividends were in arrears for 2 years at
the start of 2016. Dividends declared for 2016 amounted to P200,000. How much will be in arrears at the
end of 2016?
a. P20,000 b. none c. P180,000 d. P60,000

53 Using the information from Bagani Incorporated, assuming the dividends declared for 2016 were P250,000
instead, the dividends per share for Preference share and Ordinary share respectively would be:
 a. P31.88 and P5.88 b. P25.00 and P10 c. P37.00 and P2.80 d. P33.00; P5.20

54. Partners Lakas, Ganda and Lakam divide their profits and loss equally. Mayari is to join the partnership
and will invest sufficient amount to have 30% interest in the partnership. The new profit and loss ratio for
partners Lakas, Ganda, Lakam and Mayari (respectively) will be:
a. 23%; 23%; 24%; 30% c. 33%; 33%; 33%; 30%
b. 1/3; 1/3; 1/3; 1/3 d. Equally

55. Four thousand ordinary shares were reacquired by Dumakulem Inc. at P55/sh. A month later, 1,250
treasury shares were reissued at P59/sh. Additional information shows that all the shares were originally
issued at P10 above the par value of P40. What would be credited (debited) as Paid-in Capital (Retained
Earnings) upon the reissuance of the treasury shares?
a. P23,750 b. (P12,500) c. P5,000 d. P18,750

56. After the reacquisition and reissuance of the treasury shares of Dumakulem Inc., the total Retained
Earnings will -
a. Decrease b. increase c. Remain the same

57. Sarimaw Corporation received 2,160 Ordinary shares as donation. It later sold 1,500 shares P30/share.
Ordinary shares has par value of P25/sh. Memorandum entry method was used by the company. The
entry to record the sale will show a credit to_____ amounting to ______.
a. Donated Capital, P22,500 c. Paid in Capital from Donated Stock, P82,500
b. Donated Capital, P45,000 d. Paid in Capital from Donated Stock, P37,500

58. Josef Corporation has a Total shareholder’s Equity of P11,225,000 as of December 31, 2010, which includes
23,000 Ordinary shares issued at P200 par and 5,000 12% Preference shares issued at P300 par. Dividends
in arrears amounted to P410,000 (including the current year). Compute for the book value per share
assuming the cumulative preference shares has a liquidation value of P333/share.
a. PSC – P415.00; OSC – P397.83 c. PSC – P423; OSC – P396.09
b. PSC – P451.00; OSC – P390.00 d. PSC – P333; OSC – P200.00

59. The Shareholder’s Equity of Fiona Corp shows the following information as of December 31, 2010.
₱8 Preference Share Capital, P40 par P325,000
Ordinary Share Capital, P30 par. 600,000
Retained Earnings 200,000
Dividends declared for the year amounted to P96,000. Preference Shares are noncumulative and non-
participating. Dividends per share (PSC and OSC respectively) for the year would be:
a. P3.20 and P2.50 b. P8 and P1.55 c. P8 and P2.40 d. P3.20 and P2.40

60. Dalisay Corporation received from Mayora partial payment of P261,000 for 5,000 subscribed P80 par
Ordinary shares. Paid in capital was recorded at P7 per share. A year later, 800 from the said shares were
declared to be delinquent after several months of no collections. A total of P2,500 was disbursed in
connection with the said 800 shares. A month after, a bidder agreed to assume the balance and would
take 550 shares. The highest bidder would pay a total amount of
a. P21,640 b. P30,340 c. P69,600 d. P24,740

61. The following accounts are found in the trial balance of Ericka Trading Corporation as of December 31,
2016
Authorized Ordinary Share, P50 par P 2,000,000.00
Subscription Receivable- collectible on Jan 31, 2017 200,000.00
 Unissued Ordinary Share 800,000.00
Subscribed Ordinary Share 400,000.00
Share Premium – Ordinary 300,000.00

What is the total number of shares issued and available, respectively, for subscription
a. 24,000; 16,000 c. 16,000; 8,000
b. 24,000; 8,000 d. 16,000; 16,000

62. The Erich Corporation was organized early in Year 1. Authorization was obtained to issue 100,000 shares
of P10 par value ordinary share capital and 20,000 shares of P100-par 10% Cumulative Preference Share
Capital.

All the Preference shares were issued at par and 80,000 Ordinary shares were sold for P15/share. During
the first five years of operations, the corporation earned a total of P3,600,000 and paid annual dividends
of P2 Per Ordinary share.

How much total dividend was being paid each year?

a. P200,000 b. P160,000 c. P360,000 d. P1,800,000

63. The Enrico Corporation received subscription from Mr. Ilocos Zur for 2,500 P80-par Ordinary shares. He
was able to pay up to 65% from the original subscription price of P90/share before he defaulted from his
payments. The corporation declared the shares as delinquent and advertised them in a public auction.
Fees totalling P8,150 was disbursed in connection with the delinquent shares. The auction-goers, Mr. Juan,
bidded for 950 shares; Mr. Tsu with 858 shares and Mr. Tres with 885 shares.

The highest bidder would be -

a. Mr. Juan b. Mr. Tsu c. Mr. Tres d. Mr. Zur

64. The highest bidder would pay a total of

a. P86,900 b. P78,750 c. P70,000 d. P78,150

65. Mr. Ilocos Zur will then receive how many shares?
a. 1,550 shares b. 1,642 shares c. 1,615 shares d. 1,625 shares

“Ituloy ang laban……may tatlong taon pa… plus summer ”

^^^^^
 ANSWER KEY

NOS 1-35 1 PT EACH NOS 36-65 2.1667 each

1 A 21 A 36 A 51 BONUS
2 B 22 B 37 D 52 B
2 B 23 A 38 A 53 BONUS
3 A 24 B 39 A 54 A
4 A 25 A 40 C 55 C
5 B 26 B 41 B 56 C
6 B 27 A 42 D 57 B
7 A 28 B 43 B 58 A
8 B 29 B 44 A 59 B
9 A 30 A 45 B 60 B
10 A 31 B 46 B 61 A
11 A 32 A 47 C 62 C
12 B 33 B 48 C 63 B
13 A 34 B 49 A 64 A
14 B 35 A 50 A 65 B
15 B
16 B
17 A
18 A
19 B
20 B