Questions

Question 1
The stockholders’ equity section of the Determination Inc. showed the following data on December 31,
2021: Common stock, P3 par, 450,000 shares authorized, 375,000 shares issued and outstanding,
P1,125,000; Paid-in capital in excess of par, P10,575,000; Additional paid-in capital from stock options,
P225,000; Retained earnings, P720,000. The stock options were granted to key executives and provided
them the right to acquire 45,000 shares of common stock at P35 per share. Each option has a fair value
of P5 at the time the options were granted.
The following transactions occurred during 2022:
Feb. 1 Key executives exercised 6,750 options outstanding at December 31, 2021. The market
price per share was P44 at this time.
Apr. 1 The company issued bonds of P3,000,000 at par, giving each P1,000 bond a detachable
warrant enabling the holder to purchase two shares of stock at P40 each for a 1-year
period. The bonds would sell at P996 per P1,000 bond without the warrant.
July 1 The company issued rights to stockholders (one right on each share, exercisable within a
30-day period) permitting holders to acquire one share at P40 with every 10 rights
submitted. All but 9,000 rights were exercised on July 31, and the additional stock was
issued.
Oct. 1 All warrants issued in connection with the bonds on April 1 were exercised.
Dec. 1 The market price per share dropped to P33 and options came due. Because the market
price was below the option price, no remaining options were exercised.
Dec. 31 Net income for 2022 was P375,750.
QUESTIONS:
Based on the above and the result of your audit, determine the following as of December 31, 2021:
1. Common stock
a. P1,165,950 b. P1,250,775 c. P1,275,075 d. P1,273,050
2. Total additional paid-in capital
a. P12,629,175 b. P11,283,300 c. P12,329,475 d. P12,604,200
3. Retained earnings
a. P870,750 b. P1,095,750 c. P1,287,000 d. P981,225
4. Total stockholders’ equity
a. P13,545,000 b. P15,000,000 c. P14,676,000 d. P14,973,000

Question 2
Resolve Corporation began operations on January 1, 2021. The company was authorized to issue 60,000
shares of P10 par value common stock and 120,000 shares of 10%, P100 par value convertible preferred
stock. In connection with your audit of the company’s financial statements, you noted the following
transactions involving stockholders’ equity during 2021:
Jan. 1 Issued 1,500 shares of common stock to the corporation promoters in exchange for property
valued at P510,000 and services valued at P210,000. The property costs P270,000 3 years ago and was
carried on the promoters’ books at P150,000.
Jan. 31 Issued 30,000 shares of convertible preferred stock at P150 per share. Each share can be
converted to five shares of common stock. The corporation paid P225,000 to an agent for selling the
shares.
Feb. 15 Sold 9,000 shares of common stock at P390 per share. The corporation paid issue costs of
P75,000.
May 30 Received subscriptions for 12,000 shares of common stock at P450 per share.
Aug. 30 Issued 2,100 shares of common stock and 4,200 shares of preferred stock in exchanged for a
building with a fair market value of P1,530,000. The building was originally purchased for P1,140,000 by
the investors and has a book value of P660,000. In addition, 1,800 shares of common stock were sold for
P720,000 cash.
Nov. 15 Payments in full for half of the subscriptions and partial payments for the rest of the subscriptions
were received. Total cash received was P4,200,000. Shares of stock were issued for the fully paid
subscriptions.
Dec. 1 Declared a cash dividend of P10 per share on preferred stock, payable on December 31 to
stockholders of record on December 15, and P20 per share cash dividend on common stock, payable on
January 15, 2022 to stockholders of record on December 15.
Dec. 31 Paid the preferred stock dividend.
1. Common stock
a. P264,000 b. P144,000 c. P204,000 d. P186,000
2. Paid-in capital in excess of par value of preferred stock
a. P1,500,000 b. P1,275,000 c. P1,545,000 d. P1,860,000
3. Paid-in capital in excess of par value of common stock
a. P8,211,000 b. P11,121,000 c. P10,851,000 d. P10,032,000

4. Retained earnings
a. P1,050,000 b. P1,170,000 c. P1,458,000 d. P930,000
a. P17,295,000 b. P15,810,000 c. P16,950,000 d. P17,010,000
Question 3
The stockholder’s equity of Willpower Corporation showed the following data on December 31, 2020:
12% preferred stock, P30 par, 135,000 shares issued and outstanding P4,050,000
Common stock, P50 par, 180,000 shares issued and outstanding 9,000,000
Premium on preferred stock 1,080,000
Premium on common stock 3,240,000
Retained earnings 1,395,000
The 2021 transactions of the company affecting its stockholders’ equity are summarized
chronologically as follows:
1. Issued 27,000 shares of preferred stock at P40.

2. Issued 94,500 shares of common stock at P70.
3. Retired 5,400 shares of preferred stock at P45.
4. Purchased 13,500 shares of its common stock at P80.
5. Split common stock two for one (par value reduce to P25).
6. Reissued 13,500 shares of treasury stock – common at P50.
7. Stockholders donated to the company 9,000 shares of common stock when shares had
a market price of P52. One half of these shares were subsequently issued for P54.
8. Dividends were paid at the end of the calendar year on the common stock at P2 per
share and on the preferred stock at the preferred rate.
9. Net income for the year was P2,520,000.
1. Preferred stock
a. P4,617,000 b. P4,968,000 c. P4,698,000 d. P4,860,000
2. Common stock
a. P15,615,000 b. P13,968,000 c. P13,500,000 d. P13,725,000
3. Additional paid-in capital
a. P6,777,000 b. P6,679,800 c. P6,858,000 d. P6,814,800
4. Unappropriated retained earnings
a. P1,749,240 b. P1,711,440 c. P2,251,440 d. P1,684,440
a. P26,949,240 b. P26,958,960 c. P26,922,240 d. P26,940,240

Questions

Uploaded by

Copyright:

Available Formats

Questions

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Questions

Uploaded by

Copyright:

Available Formats

Question 1

The following transactions occurred during 2022:

Dec. 31 Net income for 2022 was P375,750.

a. P1,165,950 b. P1,250,775 c. P1,275,075 d. P1,273,050

2. Total additional paid-in capital

a. P12,629,175 b. P11,283,300 c. P12,329,475 d. P12,604,200

a. P870,750 b. P1,095,750 c. P1,287,000 d. P981,225

4. Total stockholders’ equity

a. P13,545,000 b. P15,000,000 c. P14,676,000 d. P14,973,000

Dec. 31 Paid the preferred stock dividend.

a. P264,000 b. P144,000 c. P204,000 d. P186,000

2. Paid-in capital in excess of par value of preferred stock

a. P1,500,000 b. P1,275,000 c. P1,545,000 d. P1,860,000

3. Paid-in capital in excess of par value of common stock

a. P8,211,000 b. P11,121,000 c. P10,851,000 d. P10,032,000

a. P1,050,000 b. P1,170,000 c. P1,458,000 d. P930,000

5. Total stockholders’ equity

a. P17,295,000 b. P15,810,000 c. P16,950,000 d. P17,010,000

1. Issued 27,000 shares of preferred stock at P40.

a. P4,617,000 b. P4,968,000 c. P4,698,000 d. P4,860,000

a. P15,615,000 b. P13,968,000 c. P13,500,000 d. P13,725,000

3. Additional paid-in capital

a. P6,777,000 b. P6,679,800 c. P6,858,000 d. P6,814,800

4. Unappropriated retained earnings

a. P1,749,240 b. P1,711,440 c. P2,251,440 d. P1,684,440

5. Total stockholders’ equity

a. P26,949,240 b. P26,958,960 c. P26,922,240 d. P26,940,240

You might also like