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1.Which of the following statements are true or false about the Statement of Changes in Equity?
i. The Statement of Changes in Equity shows changes in a company’s total liabilities over the
accounting period.
ii. Dividends paid to shareholders are reflected in the retained earnings section of the Statement
of Changes in Equity.
iii. Issuance of new shares increases both share capital and additional paid-in capital.
A) False, True, True
B) True, True, True
C) False, False, True
D) True, False, False

2. Which financial statement reports changes in a company’s equity accounts, such as share capital,
retained earnings, and other reserves, over a specific period?
A) Income Statement
B) Statement of Cash Flows
C) Statement of Changes in Equity
D) Balance Sheet

3. Which of the statements are true or false about Retained Earnings?

i. Retained earnings decrease when dividends are paid to shareholders.
ii. Net losses reduce retained earnings, while net income increases retained earnings.
iii. Retained earnings does not represent cash available for future dividends and expenses.
A) True, True, False
B) True, True, True
C) False, True, True
D) True, False, True

4. C company declares a stock dividend of 1,000 shares, with a market value of P10 per share and a par
value of P1 per share. Which of the following is correct regarding the impact on equity?
i. Retained earnings will decrease by P10,000, and share capital will increase by P1,000.
ii. Retained earnings will decrease by P1,000, and share capital will increase by P10,000.
iii. Retained earnings and share capital will both increase by P10,000.
A) True, False, False
B) False, True, False
C) True, False, True
D) False, False, True

A) True, False, False

1. True: Retained earnings will decrease by P10,000 (1,000 shares × P10 market value).
2. False: Share capital will increase by P1,000 (1,000 shares × P1 par value).
3. False: Retained earnings and share capital will not both increase; instead, retained earnings
decrease and share capital increases by P1,000.

5. The portion of a company’s shares that have been repurchased and are held by the company itself,
reducing shareholders' equity?
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A) Preferred Stock
B) Treasury Stock
C) Share Capital
D) Dividends Payable

6. Which of statements are true or false regarding Other Comprehensive Income.

i. Unrealized gains and losses from foreign currency translation adjustments are part of OCI.
ii. Other Comprehensive Income is included in the income statement along with regular
revenues and expenses.
iii. OCI affects equity through changes in retained earnings rather than retained reserves.
A) False, True, True
B) True, True, False
C) True, False, False
D) False, False, True

7. It represents the original amount of money shareholders have invested in a company in exchange for
ownership?
A) Retained Earnings
B) Share Capital
C) Treasury Stock
D) Accumulated Other Comprehensive Income

8. Which of the statements are true or false regarding shareholders' equity?

i. Treasury stock increases shareholders' equity.
ii. Shareholders' equity includes both retained earnings and common stock.
iii. A company’s equity can increase due to comprehensive income even if no dividends are paid.
A) False, True, True
B) True, True, False
C) False, False, True
D) True, False, True

9. The excess amount paid by investors over the par value of stock issued by a company?
A) Retained Earnings
B) Share Capital
C) Additional Paid-In Capital
D) Treasury Stock

10. Which of the following statements are true or false regarding net income and equity?
i. Net income directly affects the company’s equity through retained earnings.
ii. A net loss will not affect the Statement of Changes in Equity.
iii. Changes in equity due to net income are reported on the statement of cash flows.
A) True, False, True
B) True, True, False
C) False, True, True
D) True, False, False

11. B company repurchases 500 of its own shares for P25 per share. The shares have a par value of P1.
How will this affect shareholders’ equity?
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i. Shareholders’ equity will decrease by P12,500, with a reduction in share capital and additional
paid-in capital.
ii. Shareholders’ equity will decrease by P12,500, with the treasury stock account increasing.
iii. Shareholders' equity will increase by P12,500, as repurchasing stock reduces liabilities.
A) False, True, True
B) True, False, True
C) False, False, True
D) False, True, False

D) False, True, False

1. False: Shareholders’ equity will decrease by P12,500, but this does not involve a reduction in
share capital or additional paid-in capital.
2. True: Shareholders’ equity will decrease by P12,500, with the treasury stock account increasing
by that amount.
3. False: Shareholders' equity will not increase; repurchasing stock reduces equity, not liabilities.

12. X company issues 1,000 new shares of common stock at a price of P15 per share. The par value
of each share is P1. The company's issuance of new common stock results to an increase in share capital
by P1,000, and additional paid-in capital by P14,000.
Y company revalues its land, resulting in a P30,000 increase in the land’s carrying amount. This
P30,000 increase will appear in other comprehensive income and directly increase a revaluation surplus
in equity.
Z Inc. has issued additional shares of stock for P15,000 and repurchased treasury stock costing
P5,000. The transaction results to an increase of P15,000 in the shareholder’s equity.
A) False, True, True
B) True, True, False
C) True, False, False
D) False, False, True

A) False, True, True

1. False: The issuance of new common stock results in an increase in share capital by P1,000 (1,000
shares × P1 par value) and an increase in additional paid-in capital by P14,000 (the amount over
par value). The total increase in equity is P15,000.
2. True: The P30,000 increase in the land’s carrying amount will appear in other comprehensive
income and directly increase a revaluation surplus in equity.
3. True: The net increase in shareholders’ equity from issuing stock (P15,000) is after considering
the repurchase of treasury stock (P5,000).

13. D Enterprises issues 1,500 new shares of common stock at a price of P30 per share. The par
value of each share is P10. This issuance results in an increase in share capital by P15,000 and an
increase in additional paid-in capital by P30,000.
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E Corporation issues 2,000 shares of common stock at P40 per share. The par value of each share
is P10. Additionally, during the same year, the company revalues its investment property, which results in
a P100,000 increase in its carrying amount. This increase will appear in other comprehensive income and
will directly increase the revaluation surplus in equity by P100,000. The overall effect on total equity
from both transactions is an increase of P180,000.
F Inc. has engaged in several transactions during the year, including the issuance of 1,000 new
shares of common stock with a par value of P15, sold at P25 each; the declaration of dividends totaling
P20,000 while reporting a net income of P50,000; and the revaluation of its land, resulting in a P15,000
increase in its carrying amount, which will be reflected in other comprehensive income. The total
increase in shareholders' equity resulting from these transactions is stated to be P45,000.
A) True, True, True C) True, False, True
B) False, True, True D) True, True, False

The correct answer is B) False, True, True.

1. False: For D Enterprises, the issuance of 1,500 shares at P30 per share results in a total increase
in share capital of P15,000 (1,500 shares × P10 par value) and an increase in additional paid-in
capital of P30,000 (1,500 shares × (P30 - P10)). However, the total increase in equity from this
transaction is P45,000, not P30,000 as stated.
2. True: For E Corporation, the revaluation of its investment property by P100,000 will indeed
increase the revaluation surplus in equity, and the total effect on equity from both the share
issuance and the revaluation is correctly stated as P180,000.
3. True: For F Inc., the total increase in shareholders' equity resulting from the issuance of shares,
net income, and revaluation of land is correctly calculated as P45,000. The dividends do not
affect this increase as they reduce retained earnings.

14. The Statement of Changes in Equity provides information about:

A) The company's profitability over a specific period.
B) Changes in the company's equity accounts during a reporting period.
C) The cash flows generated and used by the company.
D) The company's total liabilities and assets at a given point in time.

15. Which of the following transactions would not affect shareholders' equity?
A) Issuance of common stock.
B) Declaration of dividends.
C) Repurchase of treasury stock.
D) Increase in accounts payable.

16. In the Statement of Changes in Equity, the revaluation surplus appears under:
A) Retained Earnings.
B) Share Capital.
C) Other Comprehensive Income.
D) Non-Current Liabilities.
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17. If a company issues new shares at a price higher than the par value, the excess amount is credited to
which account?
A) Share Capital.
B) Retained Earnings.
C) Additional Paid-In Capital.
D) Revaluation Surplus.

18. The purpose of the Statement of Changes in Equity is primarily to:

A) Show how cash flows have changed over a period.
B) Report the profitability of the company.
C) Provide information on how the equity components have changed over time.
D) Assess the company's liquidity position.

19. When a company declares dividends, the effect on the Statement of Changes in Equity is to:
A) Increase retained earnings.
B) Decrease retained earnings.
C) Increase total equity.
D) Have no effect on total equity.

20. Which of the following components is typically included in the Statement of Changes in Equity?
A) Revenue from sales.
B) Cash flow from operating activities.
C) Other comprehensive income items.
D) Current liabilities.

21. Which of the following best describes the nature of share premium?
A) Represents accumulated profits that can be distributed to shareholders.
B) Reflects the excess amount received from shareholders over the par value of shares issued.
C) Represents amounts paid by shareholders for services rendered to the company.
D) Is an account that only applies to preferred stock issuances.

22. In the context of the Statement of Changes in Equity, which of the following items would not be
included in the other comprehensive income section?
A) Gains or losses from foreign currency translations.
B) Unrealized gains or losses on available-for-sale financial assets.
C) Gains from the revaluation of fixed assets.
D) Net income for the year.

23. What is the effect of a stock split on the Statement of Changes in Equity?
A) Increases total equity but does not affect retained earnings.
B) Decreases share capital and increases retained earnings.
C) Does not affect total equity or retained earnings but increases the number of shares outstanding.
D) Decreases total equity and retained earnings.

24. Which of the following statements is true regarding the effect of treasury stock transactions on
equity?
A) Treasury stock transactions increase total shareholders' equity.
B) Treasury stock reduces total shareholders' equity.
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C) Treasury stock is reported as a liability on the balance sheet.

D) Treasury stock increases retained earnings.

25. When preparing the Statement of Changes in Equity, which of the following is not typically disclosed?
A) The beginning and ending balances of each component of equity.
B) The reasons for any significant changes in equity components.
C) The details of cash flows from financing activities.
D) The impact of corrections of prior period errors on retained earnings.

26. Which of the following transactions would result in an increase in retained earnings?
A) Payment of dividends to shareholders.
B) Sale of an asset at a gain.
C) Repurchase of treasury stock.
D) Issuance of new common stock.

27. In the Statement of Changes in Equity, a company’s net income is typically transferred to:
A) Share Capital. C) Additional Paid-In Capital.
B) Retained Earnings. D) Other Comprehensive Income.

28. When a company experiences a loss in its foreign subsidiary that is translated into the reporting
currency, the effect on equity would typically be recorded in:
A) Retained Earnings. C) Other Comprehensive Income.
B) Additional Paid-In Capital. D) Share Capital.

29. G Holdings issues 2,500 new shares of common stock at a price of P50 per share. The par value of
each share is P20. Additionally, during the same year, the company declares dividends of P25,000 after
reporting a net income of P80,000. The issuance results in an increase in share capital of P50,000 and
additional paid-in capital of P75,000. The overall effect on total equity from the stock issuance and the
net income, after accounting for dividends, is stated to be an increase of P105,000.

H Corporation issues 4,000 shares of common stock at P25 per share. The par value of each share is P5.
During the same fiscal year, the company revalues its machinery, resulting in a P200,000 increase in its
carrying amount. This increase will be recorded in other comprehensive income and directly increase the
revaluation surplus in equity. The total increase in equity from both transactions is claimed to be
P300,000.
A) True, True C) True, False
B) False, True D) False, False

The correct answer is B) False, True. For G Holdings, the increase in total equity should be calculated as
follows:

● Increase from stock issuance: P50,000 (share capital) + P75,000 (additional paid-in capital) =
P125,000.
● Net income after dividends: P80,000 - P25,000 = P55,000.
● Total increase: P125,000 + P55,000 = P180,000 (not P105,000).

For H Corporation, the equity increase calculation is correct:

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● Increase from stock issuance: P100,000 (4,000 shares at P25, par value P5).
● Plus P200,000 from the revaluation = P300,000.

Thus, the first statement is false and the second statement is true.

30. I Technologies issues 1,200 new shares of common stock with a par value of P10, sold at P20 each.
The company also repurchases treasury stock at a cost of P15,000 and reports a net income of P60,000.
The total increase in shareholders' equity resulting from these transactions is stated to be P45,000. F

J Enterprises issues 3,000 new shares of common stock with a par value of P12, sold at P30 each. During
the same year, the company declares dividends of P15,000 after reporting a net income of P90,000.
Additionally, J Enterprises revalues its investment property, resulting in a P50,000 increase in its carrying
amount, which will be recorded in other comprehensive income. The total decrease in shareholders'
equity resulting from these transactions is stated to be P145,000.
A) True, True C) True, False
B) False, True D) False, False

The correct answer is D) False, False.

For I Technologies:

● Issuance of shares: 1,200 shares at P20 = P24,000 increase in equity (P12,000 in share capital
and P12,000 in additional paid-in capital).
● Treasury stock decreases equity by P15,000.
● Net income increases equity by P60,000.
● Total change in equity: P24,000 + P60,000 - P15,000 = P69,000 (not P45,000).

For J Enterprises:

● Issuance of shares: 3,000 shares at P30 = P90,000 increase in equity (P36,000 in share capital
and P54,000 in additional paid-in capital).
● Net income of P90,000 adds to equity.
● Dividends decrease equity by P15,000.
● Revaluation surplus increases equity by P50,000.
● Total change in equity: P90,000 + P90,000 - P15,000 + P50,000 = P215,000 (not a decrease).

Thus, both statements regarding total increases or decreases in shareholders' equity are false.