12/10/22, 9:29 PM Part 2 Computational: Attempt review

Dashboard / Courses / SY 2021-2022 Sem 1 / ACT113-MN512 21-22-1 / MIDTERM EXAMINATION / Part 2 Computational

Started on Friday, 31 December 2021, 2:34 PM

State Finished
Completed on Friday, 31 December 2021, 4:17 PM
Time taken 1 hour 42 mins
Grade 22.00 out of 26.00 (85%)

Question 1
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Computational. On January 1, 2020, ABC Corporation issued a P 3 million 6% convertible bonds at par. The bonds are redeemable at a
premium of 10% on December 31, 2023 or it may be converted into ordinary shares on the basis of 50 shares for each P 1,000 bond at the
option of the holder. The interest rate of the equivalent bond without the conversion rights would have been 10%. The issuance of
convertible bonds on January 1, 2020 increased the entity’s equity by (Round-off present value factors to four decimal places)

Answer: 300,000

Question 2
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Computational. On January 1, 2021, ABC Company had ordinary and preference shares outstanding. The incorporators own 10 ordinary
shares but no preference shares. At the end of the year, ABC declared dividends on the ordinary shares payable on December 31, 2021. ABC
decided to give the ordinary shareholders a choice between receiving a cash dividend of P500,000 per share or a property dividend in the
form of noncash asset. Each noncash asset has a fair value of P600,000 and carrying amount of P400,000. Based on a reasonable estimate,
80% of the ordinary shareholders will take the cash dividend option, and 20% will elect for the noncash asset. On the date of declaration, how
much will be charged against accumulated profits/ losses?

Answer: 5,200,000

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Question 3

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Computational. Presented below is the stockholders' equity section of ABC Corporation at December 31, 2020:
Ordinary share, par value P20; authorized 150,000 shares; issued and outstanding 90,000 shares - P1,800,000
Paid-in capital in excess of par value - 500,000
Retained earnings - 1,000,000
During 2021, the following transactions occurred relating to stockholders' equity:
• 4,000 shares were reacquired at P28 per share.
• 4,000 shares were reacquired at P35 per share.
• 2,400 shares of treasury stock were sold at P30 per share.
For the year ended December 31, 2021, ABC reported net income of P900,000. Assuming ABC accounts for treasury stock under the cost
method, what should it report as total stockholders' equity on its December 31, 2021, balance sheet?

Answer: 4,020,000

Question 4
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Computational. On January 2, 2021, Lake Mining Co.’s board of directors declared a cash dividend of P400,000 to stockholders of record on
January 18, 2021, payable on February 10, 2021. The dividend is permissible under law in Lake’s state of incorporation. Selected data from
Lake’s December 31, 2020 balance sheet are as follows:
Accumulated depletion - P100,000
Capital stock - 500,000
Share premium - 150,000
Retained earnings - 300,000
The P400,000 dividend includes a liquidating dividend of

Answer: 100,000

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Question 5

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Computational. The following data were compiled prior to preparing the balance sheet of the ABC Corporation as of December 31, 2020:
Authorized ordinary share, P100 par value - P4,000,000
Cash dividends payable - 160,000
Donated capital - 800,000
Gain on sale of treasury stock - 80,000
Net unrealized loss on available for sale securities - 96,000
Premium on capital stock - 320,000
Premium on bonds payable - 240,000
Reserve for bond sinking fund - 400,000
Reserve for depreciation - 600,000
Revaluation increment on property - 800,000
Retained earnings, unappropriated - 720,000
Subscribe capital stock - 480,000
Stock subscriptions receivables - 120,000
Stock warrants outstanding - 200,000
Treasury stock, at cost - 144,000
Unissued ordinary share - 800,000
Compute the total stockholders’ equity

Answer: 6,640,000

Question 6

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Computational. On January 1, 2017, ABC Company granted 100 share appreciation rights to each of its 500 employees on condition that the
employees remain in its employ for the next 3 years. No employees left the entity during the 3-year vesting period. The employees exercised
their share appreciation rights as follows:
December 31, 2019, 100 employees
December 31, 2020, 250 employees
December 31, 2021, 150 employees
The fair value and intrinsic value of the share appreciation right are as follows, respectively:
December 31, 2017, 15 FV
December 31, 2018, 18 FV
December 31, 2019, 20 FV and 15 IV
December 31, 2020, 21 FV and 20 IV
December 31, 2021, 25 IV
The intrinsic value of the share appreciation right on that date of exercise is the amount paid out to the employees. Determine the accrued
liability on year 2020

Answer: 315,000

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Question 7

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Computational. On January 1, 2018, ABC Company granted 60,000 share options to employees. The share options will vest at the end of three
years provided the employees remain in service until then. The option price is P60 and the par value per share is P50. At the date of grant, the
entity concluded that the fair value of the share options cannot be measured reliably. The share options have a life of 4 years which means
that the share options can be exercised within one year after vesting. The share prices are P62 on December 31, 2018, P66 on December 31,
2019, P75 on December 31,20192 and P85 on December 31, 2021. All share options were exercised on December 31, 2021. What is the
compensation expense for 2021?

Answer: 600,000

Question 8
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Computational. Following is the stockholders’ equity section of ABC Corporation’s balance sheet at December 31, 2019:
Ordinary share, P10 par value; authorized 1,500,000, shares; issued and outstanding 900,000 shares - P9,000,000
Share premium - 750,000
Retained earnings - 2,700,000
Transactions during 2020 and other information relating to the stockholders’ equity accounts were as follows:
• On April 4, ABC sold 45,000 shares of its treasury stock for P14 per share.
• On June 1, ABC declared a cash dividend of P1 per share, payable on July 15, 2020 to stockholders of record on July 1, 2020.
• On August 15, each stockholder was issued one stock right for each share held to purchase two additional shares of stock for P12 per share.
The rights expire on October 31, 2020.
• On September 30, 150,000 stock rights were exercised when the market value of the stock was P12.50 per share.
• On November 2, ABC declared a two for one stock split-up and charged the par value of the stock from P10 to P5 per share. On November
20, shares were issued for the stock split.
• On December 5, 60,000 shares were issued in exchange for a second hand equipment. It originally cost P600,000, was carried by the
previous owner at a book value of P300,000, and was recently appraised at P390,000.
• Net income for 2020 was P720,000.
The balance of ordinary share capital account on December 31, 2020 is

Answer: 12,300,000

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Question 9

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Computational. On December 31, 2020, the stockholders' equity section of ABC Co. was as follows:
Common stock, par value P10; authorized, 60,000 shares; issued and outstanding, 18,000 shares - P180,000
Additional paid-in capital - 232,000
Retained earnings - 192,000
Total stockholders' equity - P604,000
On March 31, 2021, ABC declared a 10 percent stock dividend, and accordingly 1,800 additional shares were issued, when the fair market
value of the stock was P16 per share. For the three months ended March 31, 2021, ABC sustained a net loss of P64,000. The balance of ABC's
Retained Earnings as of March 31, 2021, should be

Answer: 99,200

Question 10
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Computational. At the beginning of 2019, the entity grants 200 shares each to 500 employees, conditional upon the employees’ remaining in
the entity’s employ during the vesting period. The shares will vest at the end of 2019 if the entity’s earnings increase by more than 18
percent; at the end of 2020 if the entity’s earnings increase by more than an average of 13 percent per year over the two-year period; and at
the end of 2021 if the entity’s earnings increase by more than an average of 10 percent per year over the three-year period. The fair value of
the share option is P20 on the date of grant. No dividends are expected to be paid over the three-year period. By the end of 2019, the
entity’s earnings have increased by 14 percent, and 30 employees have left. The entity expects that earnings will continue to increase at a
similar rate in 2020. The entity expects, on the basis of a weighted average probability that a further 30 employees will leave during 2020. By
the end of 2020, the entity’s earnings have increased by only 10 percent, 28 employees have left during the year. The entity expects that a
further 25 employees will leave during 2021, and that the entity’s earnings will increase by at least 6 percent. By the end of 2021, 23
employees have left and the entity’s earnings had increased by 8 percent. The remuneration expense for year 2021

Answer: 564,000

Question 11
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Computational. The following are selected transactions of ABC Company for 2021. On August 1, ABC declared 20% stock dividend on 100,000
outstanding ordinary shares, with P10 par value. All these shares were sold at P20. A month after the declaration, ABC distributed the stock
dividends declared which include fractional warrants of 2,000 shares. The recipients of the fractional warrants have until November 31, of the
current year to exercise the option. All but 200 were issued for fractional warrants by ABC. Considering all the aforementioned transaction,
the amount which represents an increase in share premium account is

Answer: 400,000

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Question 12

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Computational. During 2019, ABC Co. issued 5,000 shares of P100 par convertible preference share for P110 per share. One share of
preference share can be converted into three shares of ABC’s P25 par ordinary share at the option of the preferred shareholder. On
December 31, 2021, when the market value of the ordinary share was P40 per share, all of the preference share was converted. What amount
should ABC credit to Share premium— Ordinary share as a result of the conversion?

Answer: 175,000

Question 13
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Computational. On July 1, 2020, ABC Co. issued 1,500 shares of its P10 par ordinary share and 3,000 shares of its P10 par convertible
preference share stock for a lump sum of P75,000. At this date ABC's ordinary share was selling for P24 per share and the convertible
preference share stock for P18 per share. The amount of the proceeds allocated to ABC's preference share stock should be

Answer: 45,000

Question 14
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Computational. The following data were compiled prior to preparing the balance sheet of the ABC Corporation as of December 31, 2020:
Authorized ordinary share, P100 par value - P4,000,000
Cash dividends payable - 160,000
Donated capital - 800,000
Gain on sale of treasury stock - 80,000
Net unrealized loss on available for sale securities - 96,000
Premium on capital stock - 320,000
Premium on bonds payable - 240,000
Reserve for bond sinking fund - 400,000
Reserve for depreciation - 600,000
Revaluation increment on property - 800,000
Retained earnings, unappropriated - 720,000
Subscribe capital stock - 480,000
Stock subscriptions receivables - 120,000
Stock warrants outstanding - 200,000
Treasury stock, at cost - 144,000
Unissued ordinary share - 800,000
Compute the legal capital

Answer: 3,680,000

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Question 15

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Computational. The following are ABC COMPANY’s equity accounts at December 31, 2020:
Ordinary share Capital, par value P10; authorized 200, 000 shares; issued and outstanding, 120, 000 shares P 1, 200, 000
Share premium - 180, 000
Retained earnings - 720, 000
ABC Company uses the cost method of accounting for treasury shares.
a) Acquired 8, 000 ordinary shares for P144, 000
b) Sold 6, 500 treasury shares at p20 per share
c) Retired the remaining treasury shares
What is the share premium balance on December 31, 2021?

Answer: 181,000

Question 16
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Computational. ABC Corporation was organized on January 1, 2019, at which date it issued 100,000 shares of P10 par ordinary stock at P15
per share. During the period January 1, 2019, through December 31, 2021, ABC reported net income of P450,000 and paid cash dividends of
P230,000. On January 10, 2021, ABC purchased 6,000 shares of its ordinary stock at P12 per share. On December 31, 2021, ABC sold 4,000
treasury shares at P8 per share. ABC uses the cost method of accounting for treasury shares. What is ABC's total stockholders' equity on
December 31, 2021?

Answer: 1,680,000

Question 17

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Computational. At the beginning of year 1, an entity grants 100 share options to each of its 200 employees. Each grant is conditional upon
the employee remaining in service over the next three years. The entity estimates that the fair value of each option is P21. On the basis of a
weighted average probability, the entity estimates that 60 employees will leave during the three-year period and therefore forfeit their rights
to the share options. Suppose that 15 employees leave during year 1. Also suppose that by the end of year 1, the entity’s share price has
dropped, and the entity reprices its share options, and that the repriced share options vest at the end of year 3. The entity estimates that a
further 35 employees will leave during years 2 and 3. During year 2, a further 10 employees leave, and the entity estimates that a further 10
employees will leave during year 3. During year 3, a total of 8 employees leave. The entity estimates that, at the date of repricing, the fair
value of each of the original share options granted (ie before taking into account the repricing) is P10 and that the fair value of each repriced
share option is P13. The amount to be recognized as expense in year 2 is

Answer: 0

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Question 18

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Computational. The equity section of ABC Company's December 31, 2020 balance sheet consisted of the following:
Common stock, P100 par, 500,000 shares authorized and outstanding - 50,000,000
Additional paid in capital - 5,000,000
Retained earnings (deficit) - (18,000,000)
On January 2, 2021, ABC put into effect a stockholder approved quasi reorganization by reducing the par value of the stock to P50 and
eliminating the deficit against additional paid in capital. Immediately after quasi-reorganization, what amount should ABC report as
additional paid in capital?

Answer: 12,000,000

Question 19

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Computational. ABCD Co. issued 100,000 shares of ordinary share. Of these, 5,000 were held as treasury stock at December 31, 2020. During
2021, transactions involving ABCD’s ordinary share were as follows:
• May 3 1,000 shares of treasury stock were sold.
• August 6 10,000 shares of previously unissued stock were sold.
• November 18 A 2-for-1 stock split took effect.
Laws in ABCD’s state of incorporation protect treasury stock from dilution. At December 31, 2021, how many shares of ABCD’s ordinary share
were outstanding?

Answer: 212,000

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Question 20

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Computational. Following is the stockholders’ equity section of ABC Corporation’s balance sheet at December 31, 2019:
Ordinary share, P10 par value; authorized 1,500,000, shares; issued and outstanding 900,000 shares - P9,000,000
Share premium - 750,000
Retained earnings - 2,700,000
Transactions during 2020 and other information relating to the stockholders’ equity accounts were as follows:
• On April 4, ABC sold 45,000 shares of its treasury stock for P14 per share.
• On June 1, ABC declared a cash dividend of P1 per share, payable on July 15, 2020 to stockholders of record on July 1, 2020.
• On August 15, each stockholder was issued one stock right for each share held to purchase two additional shares of stock for P12 per share.
The rights expire on October 31, 2020.
• On September 30, 150,000 stock rights were exercised when the market value of the stock was P12.50 per share.
• On November 2, ABC declared a two for one stock split-up and charged the par value of the stock from P10 to P5 per share. On November
20, shares were issued for the stock split.
• On December 5, 60,000 shares were issued in exchange for a second hand equipment. It originally cost P600,000, was carried by the
previous owner at a book value of P300,000, and was recently appraised at P390,000.
• Net income for 2020 was P720,000.
The balance of share premium account on December 31, 2020 is

Answer: 1,575,000

Question 21
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Computational. The following data are extracted from the stockholders' equity section of the balance sheet of ABC Corporation as of
12/31/2020 and 12/31/2021, respectively
Ordinary stock (P1 par value) - P50,000; P51,000
Share premium - 25,000; 29,000
Retained earnings - 50,000; 52,300
During 2021, the corporation declared and paid cash dividends of P7,500 and also declared and issued a share dividend. There were no other
changes in stock issued and outstanding during 2021. Net income for 2021 was

Answer: 14,800

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Question 22

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Computational. At the beginning of 2019, the entity grants 200 shares each to 500 employees, conditional upon the employees’ remaining in
the entity’s employ during the vesting period. The shares will vest at the end of 2019 if the entity’s earnings increase by more than 18
percent; at the end of 2020 if the entity’s earnings increase by more than an average of 13 percent per year over the two-year period; and at
the end of 2021 if the entity’s earnings increase by more than an average of 10 percent per year over the three-year period. The fair value of
the share option is P20 on the date of grant. No dividends are expected to be paid over the three-year period. By the end of 2019, the
entity’s earnings have increased by 14 percent, and 30 employees have left. The entity expects that earnings will continue to increase at a
similar rate in 2020. The entity expects, on the basis of a weighted average probability that a further 30 employees will leave during 2020. By
the end of 2020, the entity’s earnings have increased by only 10 percent, 28 employees have left during the year. The entity expects that a
further 25 employees will leave during 2021, and that the entity’s earnings will increase by at least 6 percent. By the end of 2021, 23
employees have left and the entity’s earnings had increased by 8 percent. The balance of share option outstanding account at the end of
2020 is

Answer: 1,112,000

Question 23
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Computational. At December 31, 2020, ABC Corp. had 20,000 shares of P1 par value treasury stock that had been acquired in 2020 at P12 per
share. In May 2021, ABC issued 15,000 of these treasury shares at P10 per share. The cost method is used to record treasury stock
transactions. ABC is located in a state where laws relating to acquisition of treasury stock restrict the availability of retained earnings for
declaration of dividends. At December 31, 2021, what amount should ABC show in notes to financial statements as a restriction of retained
earnings as a result of its treasury stock transactions?

Answer: 60,000

Question 24
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Computational. On January 1,2019, ABC Company granted to an employee the right to choose either shares or cash payment. The choices are
as follows:
Share alternative – equal to 25,000 shares with par value of P30.
Cash alternative – cash payment equal to the market value of 20,000 shares.
The grant is conditional upon the completion of three years of service. On grant date, on January 1, 2019, the share price is P51. The share
prices for the three-year vesting period are P54 on December 31, 2019, P66 on December 31, 2020 and P65 on December 31, 2021. After
taking into account the effect of vesting restrictions, ABC Company has estimated that the fair value of the share alternative is P48. What is
the share premium if the employee has chosen the cash alternative on December 31, 2021?

Answer: 180,000

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Question 25

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Computational. On January 1, 2017, ABC Company granted 100 share appreciation rights to each of its 500 employees on condition that the
employees remain in its employ for the next 3 years. No employees left the entity during the 3-year vesting period. The employees exercised
their share appreciation rights as follows: December 31, 2019, 100 employees December 31, 2020, 250 employees December 31, 2021, 150
employees The fair value and intrinsic value of the share appreciation right are as follows, respectively: December 31, 2017, 15 FV December
31, 2018, 18 FV December 31, 2019, 20 FV and 15 IV December 31, 2020, 21 FV and 20 IV December 31, 2021, 25 IV The intrinsic value of the
share appreciation right on that date of exercise is the amount paid out to the employees. Determine the salaries expense on year 2019

Answer: 200,000

Question 26
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Computational. ABC Co. issued 1,000 shares of its P5 par ordinary share to XYZ as compensation for 1,000 hours of legal services performed.
XYZ 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 Share premium account increase as a result of this transaction?

Answer: 135,000

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