0% found this document useful (0 votes)
118 views10 pages

109 SHE Reviewer

Download as pdf or txt
Download as pdf or txt
Download as pdf or txt
You are on page 1/ 10

Illustrative 1 (Outstanding Shares Computation)

Deloitte Company was incorporated on January 1, 2026.

Jan 2 Number of shares authorized 80,000


Feb 1 Numbers of shares issued 60,000
July 1 Number of shares reacquired but not cancelled 5,000

On December 31, 2026, what is the number of shares outstanding?


a. 150,000 c. 115,000
b. 120,000 d. 110,000

Rudd Company had 700K ordinary shares authorized and 300K shares outstanding on January 1, 2016

 Jan 31–Declared 10% stock dividend


 June 30–Purchased 100K shares
 Aug 1–Reissued 50K shares
 Nov 30–Declared 2-for-1 share split

On December 31, 2016, how many shares are outstanding?


a. 560,000 c. 630,000
b. 600,000 d. 660,000

Illustrative 3 (Distribution of Property Dividend)


Ant Man Company, a real estate developer, is owned by five founding shareholders.

On December 31, 2016, the entity declared a property dividend of a "one-bedroom flat" for each shareholder. The
property dividend is payable on January 31, 2017.

On December 1, 2016, the carrying amount of a one-bedroom flat is P1,000,000 and the fair value is P1,500,000.

However, the fair value is P1,800,000 on December 31, 2016 and P1,900,000 on January 31, 2017.

1. What is the dividend payable on December 1, 2016?


a. 5,000,000
b. 7,500,000
c. 1,500,000
d. 1,000,000

2. What is the measurement of the property on December 31, 2016?


a. 5,000,000
b. 7,500,000
c. 1,000,000
d. 1,500,000

3. What is the dividend payable on December 31, 2016?


a. 5,000,000
b. 7,500,000
c. 9,000,000
d. 2,500,000

4. What amount of gain is reported as a result of the settlement of the property dividend on January 31, 2017?
a. 2,500,000
b. 4,000,000
c. 2,000,000
d. 4,500,000

Illustrative 4 (Contribution of Property Dividend)

On November 1, 2020, the Wasp Company declared a property dividend of equipment payable on March 1, 2017.

The carrying amount of the equipment is P3,000,000 and the fair value is P2,500,000 on November 1, 2016.

However, the fair value less cost to distribute the equipment is P2,200,000 on December 31, 2016 and P2,000,000 on
March 1, 2017.

1.What is the dividend payable on Dec 31, 2016?


a. 2,500,000 c. 3,000,000
b. 2,200,000 d. 0

2. What is the measurement of the equipment on Dec 31, 2016?


a. 2,500,000 c. 3,000,000
b. 2,200,000 d. 2,000,000

3.What amount of loss on distributionof property dividend is recognized on March 1, 2017?


a. 300,000 c. 500,000
b. 200,000 d. 0

Illustrative 5 (Distribution of Share Dividend)


At the beginning of the current year, Edith Company declared a 10% stock dividend. The market price of the entity’s
30,000 outstanding shares of 20 par value was 90 per share on that date. The stock dividend was distributed on July 1
when the market price was 100.

What amount should be credited to share premium?


a. 210,000 c. 270,000
b. 240,000 d. 300,000

Illustrative 6 (Distribution of Share Dividend)


At the current year-end, Karen Company issued 4,000 ordinary shares of P100 par value in connection with a share
dividend. The market value per share on the date of declaration was P 150.
The shareholders’ equity accounts immediately before issuance of the share dividend were:

Ordinary share capital P100 par, 50,000 shares authorized, 20,000 shares outstanding 2,000,000
Share premium 3,000,000
Retained earnings 1,500,000

What amount should be reported as retained earnings immediately after the share dividend?
A. 400,000 C. 900,000
B. 600,000 D. 0

SHAREHOLDER’S EQUITY

1. On April 1, 2021, the board of directors of Cyclops Company declared P200 dividends per share to shareholders of
record as of April 15, 2021 for distribution on May 1, 2021. The shareholders’ equity of Cyclops as of April 1, 2021 is
as follows:
Share capital, authorized capital 12,000 shares, P400 par P3,200,000
Subscribed share capital 880,000
Share premium capital 400,000
Retained earnings 1,816,000
Treasury shares (at cost of P480 per share) 576,000
Other components of equity 280,000
Total shareholders’ equity 6,000,000

How much is the cash dividends payable?


A.1,800,000 C.2,200,000
B.1,360,000 D.1,760,000

Illustrative 2 (Distribution of Cash Dividend)


Numbers 2, 3, 4, 5 and 6:
Captain Marvel Company declared P7,200,000 cash dividends to its preference and ordinary shareholders out of its
profit in 2023. No dividends have been, declared since 2021. The shareholders’ equity immediately before dividend
declaration are:

10% Preference share capital, P800 par P8,000,000


Ordinary share capital, P400 par 32,000,000
Retained earnings 20,000,000
Total shareholders’ equity 60,000,000

2.How much is the dividend to ordinary shareholders if the preference shares are noncumulative?
A.7,200,000 C.6,400,000
B.5,080,000 D.6,000,000

3.How much is the dividend to ordinary shareholders if the preference shares are cumulative?
A.2,400,000 C.5,600,000
B.4,800,000 D.6,400,000

4.How much is the dividend to ordinary shareholders if the preference shares are noncumulative and fully
participating?
A.7,560,000 C.5,120,000
B.6,400,000 D.5,760,000

5.How much is the dividend to ordinary shareholders if the preference shares are cumulative and fully participating?
A.4,480,000 C.5,125,000
B.5,760,000 D.6,400,000

6.The dividend to ordinary shareholders if the preference shares are cumulative and participating up to 16% is
A.5,120,000 C.5,480,000
B.4,480,000 D.4,320,000

7. Bit by Bit Company had the following classes of shares outstanding at December 31, 2020:
Ordinary share capital, P20 par P8,000,000
12% Preference share capital, P100 par, cumulative and fully participating 4,000,000
10% Preference share capital, P100 par, cumulative and non-participating 2,000,000

Dividends on preference shares have been in arrears for 2018 and 2019. On December 31, 2020, total cash dividends
of P6,000,000 was declared. What is the amount of dividends payable to ordinary shares?
A.2,640,000 C.2,960,000
B.2,906,667 D.3,960,000

(Distribution of Cash Dividend)


8.The board of directors of Aurora Company wishes to declare a dividend whereby ordinary shareholders are to
receive a total per share dividend of P4. The equity on December 31, 2017 appears as follows:
Preference share capital, P100 par, 7% fully-participating, non cumulative,
25,000 shares issued 2,500,000
Ordinary share capital, P25 par, 250,000 shares authorized and issued 6,250,000
Share premium 1,250,000
Retained earnings 5,000,000

The total dividend that must be declared to meet the per share goal of the board of directors is
A.2,012,500 C.1,400,000
B.1,575,000 D.1,175,000

(Dividend In-Arrears)
9.At December 31, 2019, So Sick Company had 30,000 shares of P100 par, 5% cumulative preference share
outstanding. No dividends were in arrears as of December 31, 2017.So Sick did not declare a dividend during 2018.
During 2019, So Sick paid a cash dividend of P100,000 on its preference share. So Sick should report dividends in
arrears in its 2019 financial statements as a/an.
A. Accrued liability of P150,000
B. Disclosure of P150,000
C. Accrued liability of P200,000
D. Disclosure of P200,000

10. Aha Company declared and distributed 10% share dividend with fair value of P1,500,000 and par value of
P1,000,000, and 25% share dividend with fair value of P4,000,000 and par value of P3,500,000. What aggregate
amount should be debited to retained earnings for the share dividends?
A.4,500,000 C.5,000,000
B.3,500,000 D.5,500,000

Numbers 11-12:
Over Company showed the following balances:
Share capital authorized P100 par, 50,000 shares 5,000,000
Share capital unissued, 20,000 shares 2,000,000
Subscribed share capital, 10,000 shares 1,000,000
Treasury shares (5,000 at cost) 600,000
Share premium 500,000
Retained earnings 1,500,000
Market value of shares:
On declaration 140
On issuance date 150

11.What amount is deducted/debited to retained earnings account assuming the Board of Directors declared a share
dividend from unissued share capital of one share for each ten shares outstanding?
A.350,000 C.560,000
B.525,000 D.490,000

12.What amount is deducted/debited to retained earnings account assuming the Board of Directors declared a share
dividend from treasury shares for each ten shares outstanding?
A.420,000 C.300,000
B.480,000 D.360,000

Numbers 13 – 15:
On October 31, Persecution Inc. Declared a building as property dividend distributable to shareholders on January 31
of the following year. The building had a carrying amount of P1,500,000 on October 31. The building had a fair value
of P1,400,000 on the same date. On December 31 the value of the building deteriorated and latest estimates placed the
fair value of the building at P1,200,000. The building was transferred to shareholders on January 31 when the
prevailing fair value of the building was at P1,300,000.
13.The entry to record the declaration of the property dividends would include a debit to retained earnings of
A.1,500,000 C.1,400,000
B.1,200,000 D. 0

14.The property dividends payable should be reported in the statement of financial position as of December 31 is
A.1,500,000 C.1,200,000
B.1,400,000 D. 0

15.How much loss should be recognized in the income statement on the reclassification of the building to asset held
for disposal on the declaration date?
A.300,000 C.100,000
B.200,000 D. 0

16.What is the gain or loss to be recognized in the profit or losses as a result of the distribution of the property
dividends on January 31?
A.300,000 C.100,000
B.200,000 D.0

17.On January 1, 2021, the board of directs of Blacked Company declared a cash dividend of P800,000 to
shareholders of record on January 15, 2021, and payable on February 15, 2021.Blacked Company reported the
following data on December 31, 2020:

Accumulated depletion 500,000


Share capital 9,000,000
Share premium 300,000
Retained earnings – December 31, 2020 600,000
Net income for 2021 150,000

What amount should be reported as liquidating dividend?


A.600,000 C.200,000
B.300,000 D.50,000

18. Shop Company had sufficient retained earnings in 2021 as abasis for dividends but was temporarily short of cash.
The company declared a dividend of P100,000 on April 1, 2021 and issued promissory notes to its shareholders in lieu
of cash. The notes, which were dated April 1, 2021, had a maturity date of March 31, 2022 and a 10% interest rate.
How should the scrip dividend and related interest be accounted for?

A. Debit retained earnings for P110,000 on April 1, 2021.


B. Debit retained earnings for P110,000 on March 31, 2022.
C. Debit retained earnings for P100,000 on April 1, 2021 & debit interest expense for P10,000 on March 31, 2022.
D. Debit retained earnings for P100,000 on April 1, 2021 & debit interest expense for P7,500 on December 31, 2022.

19.At December 31, 2021, Azores Corp. Had 20,000 shares of P1 par value treasury shares that had been acquired in
2021 at P12 per share. In May 2022, Azores issued 15,000 of these treasury shares at P10 per share. At December 31,
2022, what amount should Azores show in notes to financial statements as a restriction of retained earnings as a result
of its treasury shares transactions?
A.5,000 C.90,000
B.60,000 D.240,000

(Appropriation of RE)
20. The following information pertains to Ox Company:

 Dividends on its 50,00 shares of 10% par value cumulative preference share capital have not been declared or
paid for 3 years.
 Treasury ordinary shares were acquired at a cost of P1,000,000 during the year. The treasury shares had not
been reissued as of year end.
 At the year, Ox appropriated P3,000,000 of retained earnings for the construction of a new plant.
 Also,P2,000,000 of cash was restricted for the retirement of bonds payable due in the next year.

What amount of retained earnings should be appropriated as a result of these items?


A. 4,000,000 C. 6,000,000
B. 5,500,000 D.7,500,000

AUDIT OF SHAREHOLDERS’ EQUITY


Illustrative 1 (Legal Capital)
Kirigaya Company provided the following information at year-end:
Preference share capital, P 100 par P 2,300,000
Share premium–preference shares 805,000
Ordinary share capital, 10 par 5,250,000
Share premium–ordinary share 2,750,000
Subscribed ordinary share capital 50,000
Retained earnings 1,900,000
Loans payable 4,000,000
Subscription receivable–ordinary shares 400,000

What is the amount of legal capital?


a.7,550,000 c.13,055,000
b.7,600,000 d.11,150,000

You might also like