UNION CHRISTIAN COLLEGE

City of San Fernando, La Union

School of Business and Sciences

Accountancy Program

MOCK BOARD EXAMINATION

SY 2019-2020

Audit of Equity

I. A partial list of the accounts and ending account balances taken from the post-closing trial balance of
Alpha Corporation on December 31,2008 is shown below:
Accumulated profits P410,000
Bonds payable 220,000
Ordinary shares subscribed 50,000
Long-term investment in shares 210,000
Share premium on ordinary shares 460,000
Premium on bonds payable 30,000
Ordinary shares (no par) 400,000
Preference shares subscribed 45,000
Share premium on preference shares 112,000
Preference shares (P50 par) 300,000
Share premium from treasury stock transactions 4,000
Unrealized increase in the value of securities available for sale 3,000
Ordinary share options outstanding 15,000
Ordinary shares warrant outstanding 5,000
Subscriptions receivable from ordinary shares- current 10,000
Subscriptions receivable from preference shares- current 5,000

1.What is the total additional paid-in-capital?

a. 572,000
b. 576,000
c. 596,000
d. 599,000

2. What is the total contributed capital?

a. 1,371,000
b. 1,391,000
c. 1,394,000
d. 1,424,000

3. What is the total legal capital from ordinary shares?

a. 400,000
b. 450,000
c. 910,000
d. 914,000

4. What is the total legal capital from preference shares?

a. 300,000
b. 345,000
c. 457,000
d. 461,000

5. What is the total stockholder’s equity?

a. 1,789,000
b. 1,800,000
c. 1,804,000
d. 1,834,000

II. The shareholders equity section of Light Co. showed the following data as at December 31,2007:
Ordinary shares, P3 par, 150,000 shares authorized,
125,000 shares issued and outstanding 375,000
Share premium 3,525,000
Ordinary share options outstanding (15,000 options) 75,000
Accumulated profit 240,000

The following transactions occurred during 2008:

03/30 Key executives exercised 2,250 options outstanding at December 31,2007. The share options
were granted to key executives and provided them the right to acquire 15,000 shares of Ordinary share
at P35 per share.
04/01 The company issued 1 million bonds, with 1,000 detachable warrants at 105. A warrant enables
the holder to purchase 2 ordinary shares at P40 per share. Market values immediately following
issuance of the bonds were: P4 per warrant and P998 per P1,000 bond without the warrant.
06/30 The company issued rights to shareholders (1 right on each share, exercisable within a 30-day
period) permitting shareholders to acquire 1 ordinary share for every 10 rights exercised at P40 per
share.
07/31 All rights, except 3,000 were exercised
9/30 All warrants issued with the bonds on April 1 were exercised.
11/30 The options are due on this date, but since the market price of the issuance of ordinary share was
below the option price, no remaining options were exercised.

1. What is the amount to be credited to Share premium relative to the issuance of ordinary shares
through the exercise of options on 3/30?
a. 83,250
b. 72,000
c. 4,500
d. no adjustment is necessary
2. What is the amount to be credited to Share warrants Outstanding as a result of the issuance of the
bonds with detachable warrants?
a. 52,000
b. 4,192
c. 4,000
d. 0

3. What amount should be credited to Share premium account as a result of the issuance of shares
through the exercise of share rights by the stockholders on 6/30?
a. 534,275
b. 497,000
c. 462,500
d. 459,725

4. What is the amount to be credited to share premium from the exercise of the warrants attached to
the bonds?
a. 126,000
b. 52,000
c. 22,000
d. 12,000

5. What is the balance of the Ordinary share options outstanding at the end of the year?
a. 75,000
b. 63,750
c. 11,250
d. 0

6. What is the balance of the Ordinary share warrants outstanding at the end of the year?
a. 52,000
b. 22,000
c. 10,000
d. 0

III. Cyprus Co. began operations on January 1. Authorized were 20,000 shares of P10 par, ordinary share
and 40,000 shares of 10%, P100 par, convertible preference share. The following transactions occurred
during the first year of operations:

1.1 Issued 500 ordinary shares to the corporation promoters in exchange for property valued at
P240,000.
2.01 Issued for P1,500,000, 10,000, P100 par convertible preference shares. The company paid P75,000
to an agent for selling the shares. Each preference share can be converted into 5 ordinary shares.

3.01 Sold for P1,170,000 a total of 3,000 ordinary shares. Issue costs were P25,000

4.01 4,000 ordinary shares were sold under share subscriptions at a total price of P1.8 million
7.01 Exchanged 700 ordinary shares and 1,400 preference shares for a building with a fair value of
P510,000. In addition, 600 ordinary shares were sold for P240,000 cash.

8.01 Received full payments for half of the shares subscribed.

12.01 Declared a cash dividend of P10 per share on preference share payable on December 31, to
shareholders of record on December 15 and a P20 per share cash dividend on ordinary share, payable
on January 5 of the following year to shareholders of record on December 15.

12.31 Paid the dividend to preference share

12.31 Net income for the year was P600,000

Compute the balances of each of the following accounts:

1. Preference share
a. 1,140,000
b. 1,000,000
c. 1,655,000
d. 1,795,000

2. Share premium- Preference share

a. 425,000
b. 90,000
c. 515,000
d. 545,000

3. Ordinary share
a. 88,000
b. 68,000
c. 61,000
d. 62,000

4. Share premium- Ordinary share

a. 3,707,000
b. 3,110,000
c. 1,920,000
d. 3,617,000

5. Accumulated profit
a. 310,000
b. 600,000
c. 350,000
d. 290,000
IV. The Unappropriated Accumulated profits account of Billy Jean Corp. shows the following debts and
credits for the year 2008:

UNAPPROPRIATED ACCUMULATED PROFIT

Debit Credit Balance

Beginning Balance 565,000
A Gain on life insurance policy settlement 50,000 615,000
B Write off of intangibles 30,000 585,000
C Effect of a change in accounting principle (from
FIFO to weighted average) 100,000 685,000
D Loss on sale of treasury stock (Share premium
from treasury stock has enough
balance to absorb the loss) 20,000 665,500
E 10% stock dividends on 100,000, P10 par value
shares issued and
outstanding (FMV at the same date is P12.50) 100,000 565,000
F 2007 accrued employee compensation omitted 160,000 405,500
G Premium on ordinary shares issued 80,000 485,500
H Stock issuance expenses related to ordinary
share issued (see letter g above) 5,000 480,500
I Loss on sale of an equipment 25,000 455,500
J Gain on retirement of preference shares at less
than issue price 35,000 490,500
K Gain on early retirement of bonds 12,000 503,000
L Correction of a prior period error 45,000 548,000
M Cash dividends payable 75,000 473,000
N Inventory loss from flood 10,500 462,500
O Proceeds from sale of donated stocks 37,500 500,000
P Revaluation increase in land 150,000 650,000
Q Appropriations for plant expansion 100,000 550,000
R Net income for the period 175,000 725,000

1. How much is the adjusted net income for the year?

a. 207,000
b. 187,000
c. 172,000
d. 159,500

2. How much is the unappropriated accumulated profits beginning balance as restated?

a. 710,500
b. 680,500
c. 550,500
d. 520,500

3. How much is the adjusted unappropriated accumulated profits at th end of the year?
a. 447,500
b. 460,000
c. 422,500
d. 377,500