1.

When shares with par value are sold, the proceeds shall be credited to the
a. Share capital account
b. Share premium
c. Retained earnings
d. Share capital account to the extent of the par of the shares issued with any excess being reflected
in share premium
2. When shares without par value are sold, the excess proceeds over stated value shall be credited to
a. Income
b. Retained earnings
c. Share premium
d. Share capital
3. If shares are issued for noncash consideration, the shares issued shall be measured by
a. Fair value of the shares issued
b. Par value of the shares issued
c. Fair value of the consideration received
d. Carrying amount of the consideration received
4. If shares are issued to extinguish a financial liability, what is the initial measurement of the shares issued?
a. Par value of the shares issued
b. Fair value of the shares issued
c. Fair value of liability extinguished
d. Book value of the shares issued
5. When shares are issued for services received, the measure is equal to
a. Fair value of the services
b. Par value of the shares issued
c. Book value of the shares issued
d. Fair value of the shares issued
6. Treasury shares shall be recorded at cost irrespective of whether these are acquired below or above par value.
The cost of treasury shares acquired for noncash consideration is usually measured by
a. Fair value of the noncash consideration given
b. Carrying amount of the noncash asset surrendered
c. Par value of the shares
d. Book value of the shares
7. The total cost of treasury shares shall be reported as
a. Deduction from shareholders’ equity
b. Asset
c. Deduction from retained earnings
d. Deduction from share premium
8. If treasury shares are reissued for noncash considearation, the proceeds shall be measured by
a. Fair value of the treasury shares
b. Fair value of the noncash consideration received
c. Carrying amount of the noncash consideration received
d. Book value of the treasury shares
9. Which of the following statements is incorrect concerning treasury shares?
a. Treasury shares shall be recorded at cost irrespective of whether acquired below or above par value.
b. The total cost of treasury shares shall be deducted from equity.
c. Treasury shares may be recognized as financial asset
d. Gain or loss on sale of treasury shares shall not be included in profit or loss.
10. “Loss” from sale of treasury shares shall be charged to
a. Loss on sale of treasury shares to be reported as other expense
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance, share premium from treasury shares and then retained earnings
11. Gains and losses on retirement of treasury shares shall not be included in profit or loss. If the retirement
results in a gain, such gain shall be credited to
a. Share premium
b. Retained earnings
c. Share capital
d. Income
12. Loss on retirement of treasury shares shall be debited to
a. Retained earnings
b. Share premium from treasury shares and then retained earnings
c. Share premium from treasury share, share premium from original issuance and then retained earnings
 d. Share premium from original issuance, share premium from treasury shares and then retained
earnings
13. it is issuance by an entity of its own shares to its shareholders without consideration and under conditions
indicating that such action is prompted mainly by a desire to increase the number of shares outstanding for the
purpose of effecting a reduction in unit market price.
a. Share split
b. Reverse share split
c. Stock dividend
d. Recapitalization
14. Subscriptions receivable and other receivables from sale of shares which are not collectible currently shall
be presented as
a. Deduction from the related subscribed share capital under shareholder’s equity
b. Current asset
c. Long-term investment
d. Other asset
15. Deposits on subscriptions to a proposed increase in share capital shall be reported as
a. Part of liabilities
b. Part of shareholders’ equity
c. Memorandum only
d. Part of retained earnings
16. A redeemable preference share is a preference share
I. That provides for mandatory redemption by the issuer for a fixed or determinable amount at a future
date.
II. That gives the holder the right to require the issuer to redeem the instrument for a fixed or determinable
amount at a future date.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
17. A redeemable preference share must be redeemed at the option of
a. Issuer
b. Holder
c. Either issuer or holder
d. Neither the issuer nor holder
18. A redeemable preference share is
a. An equity instrument
b. A financial liability
c. Either an equity instrument or a financial liability
d. Neither an equity instrument nor a financial liability
19. A redeemable preference share shall be classified in the statement of financial position as
a. Current liability
b. Noncurrent liability
c. Either current liability or noncurrent liability depending on redemption date
d. Component of shareholders’ equity
20. Dividend paid on redeemable preference share shall be accounted for as
a. Direct deduction from retained earnings
b. Interest expense as component of finance cost
c. Component of other comprehensive income
d. Deduction from share premium
21. When collectibity is reasonably assuredm the excess of the subscription price over the stated value of the
no-par subscribed share capital shall be recorded as
a. No par share capital
b. Share premium when the subscription is recorded
c. Share premium when the subscription is collected
d. Share premium when the share capital is issued.
22. During the current year, shares were subscribed for a price in excess of par value. A total of 20% of the
subscription price was collected as down payment with the remaining 80% due next year. Collectibility is
assured. At the current year-end, the shareholders’ equity would report share premium for the excess of the
subscription price over the par value of the shares subscribed and
a. Share capital issued for 20% of the par value of shares subscribed.
b. Share capital issued for the par value of the shares subscribed.
c. Subscribed share capital for 80% of the par value of the shares subscribed.
 d. Subscribed share capital for the par value of the shares subscribed.
23. When treasury shares are purchased for more than par value, what account or accounts shall be debited?
a. Treasury shares for the par value and share premium for the excess of purchase price over the par value.
b. Share premium for the purchase price
c. Treasury shares for the pruchase price.
d. Treasury shares for the par value and retained earnings for excess of the purchase price over the par
value.
24. The purchase of treasury shares
a. Decreases shares authorized
b. Decreases shares issued
c. Decreases shares outstanding
d. Has no effect on shares outstanding
25. Treasury shares were acquired for cash at more than par value, and then subsequently sold for cash at more
than acquisition price. What is the effect on share premium from treasury shares?
Purchase of treasury shares Sale of treasury shares
a. Increase Increase
b. Decrease No effect
c. No effect Increase
d. No effect No effect
26. Which of the following statements best describes the net effect on retained earnings of the purchase aned
subsequent sale of treasury shares?
a. Retained earnings may never be increased but sometimes decreased
b. Retained earnings may never be increased or decreased
c. Retained earnings sometimes may be increased but never be decreased.
d. Retained earnings account is always affected unless the sale price is exactly equal to cost.
27. At the date of the financial statements, shares issued would exceed shares outstanding as a result of
a. Declaration of share split
b. Declaration of a stock dividend
c. Purchase of treasury shares
d. Payment in full of subscribed shares
28. Which of the following statements in relation to treasury shares is true?
a. No reference need be made to donated treasury shares since the acquisition of such shares does not
restrict retained earnings.
b. Treasury shares and unissued shares can be reported as total shares not outstanding with no
distinguishing comments.
c. Treasury shares shall be reported as a deduction, at cost, from the total paid in capita.
d. Treasury shares shall be reported as a deduction, at cost, from the total shareholders’ equiry, and
the restriction on retained earnings occasioned by their acquisition must also be stated.
29. How would a share split affect each of the following?
Asset Shareholders’ equity
a. Increase Increase
b. No effect No effect
c. No effect Increase
d. Increase No effect
30. How would a share split in which the par value per share decreases in proportion to the number of additional
shares issued affect each of the following?
Share premium Retained earnings
a. Increase No effect
b. No effect No effect
c. No effect Decrease
d. Increase Decrease
31. Nonstock dividends shall be recognized as liabilities on the
a. Date of declaration
b. Date of record
c. Date of payment
d. Date of issuing check
32. When shareholders may elect to receive cash in lieu of stock dividend, the amount to be charged to retained
earnings is equal to
a. Optional cash dividend
b. Fair value of the shares
c. Par value of the shares
d. Book value of the shares
33. Treasury shares may be reissued as dividends, in which case what amount should be charged to retained
earnings?
a. Cost of the treasury shares
b. Par value of the treasury shares
c. Fair value of the treasury shares on the date of declaration
d. Fair value of the treasury shares on the date of issuance
34. If the stock dividend is less than 20%, how much of the retained earnings should be capitalized?
a. Par value of the shares
b. Fair value of the shares on the date of declaration
c. Fair value of the shares on the date of record
d. Fair value of the shares on the date of issuance
35. An entity issued what is called a “20% stock dividend” on its share capital. At what amount per share should
retained earnings be reduced for this transaction?
a. Zero because no entry is made
b. Par value
c. Fair value at the declaration
d. Fair value at the date of issuance
36. Which of the following statements is true concerning stock dividends?
I. A stock dividend does not give rise to any change in either the entity’s assets or the shareholders’
proportionate interest therein.
II. Stock dividends should be recorded on the date declared
a. I only
b. II only
c. Both I and II
d. Neither I nor II
37. In closely held entities, if stock dividends are declared, retained earnings shall be capitalized at
a. Par or stated value
b. Book value
c. Fair value on date of declaration
d. Fair value on date of issue
38. In certain cases, stokc dividends are declared on the basis of a proposed increase in authorized share capital,
the application for which has been filed but not yet approved by SEC at the end of reporting period. Under these
circumstances, which may not be done?
a. The proposed increase and such dividend declaration generally shall not be reflected in the statement of
financial position prior to SEC approval.
b. These matters shall be disclosed in the notes to financial statements.
c. If the proposed increase is approved by SEC after the end of reporting period but before the issuance of
the statements, the new authorized share capital may be presented and the stock dividend may be shown
as part of issued share capital.
d. A note to the financial statements is unnecessary to disclose the fact that the proposed increase
and dividend declaration have been reflected in the financial statements.
39. Which of the following statements is incorrect concerning retained earnings?
a. Appropriated retained earnings shall be clearly distinguished from unappropriated retained earnings.
b. A deficit is a debit balance in retained earnings.
c. A deficit in retained earnings shall be presented as an asset
d. When the deficit exceeds the total of the other capital account balances, the excess is a capital
deficiency.
40. Appropriations of retained earnings, if reflected in separate account, shall be reported as
a. Component of equity as part of share premium
b. Component of equity as part as total retained earnings
c. Component of total liabilities as current liability
d. Component of total liabilities as noncurrent liability
41. The liability to pay a dividend shall be recognized when the dividend is appropriately authorized and is no
longer at the discretion at the entity, which is the date
I. When declaration of dividend by management or the board of directors is approved by relevant
authority, for example, the shareholders, if the jurisdiction requires such approval.
II. When the dividend is declared by management or the board of directors if the jurisdiction does not
require further approval.
a. I only
b. II only
c. Either I or II
d. Neither I nor II
42. An entity shall measure a liability to distribute noncash asset as dividend to its owners at
a. Carrying amount of the asset distributed
b. Fair value of the asset distributed
c. Either the carrying amount or fair value of the asset distributed
d. Neither the carrying amount nor fair value of the asset distributed
43. An entity shall review and adjust the carrying amount of the dividend payable at the end of each reporting
period and at the date of settlement with any changes in the carrying amount of the dividend payable
recognized.
a. In equity as adjustment to the amount of distribution
b. In profit or loss
c. As adjustment of general reserve
d. As component of other comprehensive income
44. When an entity settles the property dividend payable, it shall recognize the difference between the carrying
amount of the asset distributed and the carrying amount of the dividend payable in
a. Profit or loss
b. Other comprehensive income
c. Equity
d. Retained earnings
45. An entity shall measure a noncurrent asset classified as held for distribution to owners at
a. Carrying amount
b. Fair value less cost to distribute
c. Lower of carrying amount and fair value less cost to distribute
d. Higher of carrying amount and fair value less cost to distribute
46. An entity declared a cash dividend on its share capital in December of the current year, payable in January
of the next year. Retained earnings would
a. Increase on the date of declaration
b. Not be affected on the date of declaration
c. Not be affected on the date of payment
d. Decrease on the date of payment
47. The actual total amount of a cash dividend to be paid is determined on the date of
a. Record
b. Declaration
c. Declaration or date of record, whichever is earlier
d. Payment
48. A dividend which is a return to shareholders of a portion of their original investment is
a. Liquidating dividend
b. Patronage dividend
c. Liability dividend
d. Participating dividend
49. An entity declared and paid a liquidating dividend. This distribution resulted in a decrease in
a. Neither paid in capital nor retained earnings
b. Both paid in capital and retained earnings
c. Retained earnings and no effect on paid in capital
d. Paid in capital and no effect on retained earnings
50. An entity declared a dividend, a portion of which was liquidating. How would this declaration affect
contributed capital and retained earnings, respectively?
a. Decrease and No effect
b. Decrease and Decrease
c. No effect and Decrease
d. No effect and No effect
51. The issuer shall directl charge retained earnings for the par value of the shares issued in
a. Two for one share split
b. Share options
c. Twenty percent stock dividend
d. Share appreciation right
52. The issuer should charge retained earnings for the fair value of shares issued in a
a. 1 for 5 stock dividend
b. 1 for 8 stock dividend
c. 4 for 1 share split
d. 2 for 1 share split
53. If the issuing entity has only one class of share capital, a transfer from retained earnings to share capital
equal to the fair value of the shares issued is ordinarily a characteristic of
 a. Either a stock dividend or a share split
b. Neither a stock dividend nor a share split
c. A share split but not a stock dividend
d. A stock dividend but not a share split
54. The peso amount of total shareholders’ equity remains the same when there is
a. Issuance of preference shares in exchange for convertible debentures
b. Issuance of nonconvertible bonds with share warrants
c. Declaration of a stock dividend
d. Declaration of a cash dividend
55. How would the declaration and subsequent issuance of a 10% stock dividend affect each of the following
when the fair value of the shares exceeds the par value of the shares?
Share capital Share premium
a. No effect No effect
b. No effect Increase
c. Increase No effect
d. Increase Increase
56. Unlike a share split, a stock dividend requires a formal journal entryin the accounting records because
a. Stock dividends increase the relative book value of an individual’s shareholdings
b. Stock dividends increase the shareholders’ equity in the issuing entity.
c. Stock dividends are payable on the date they are declared.
d. Stock dividends represent a transfer form retained earnings to share capital.
57. Which of the following would not affect retained earnings?
a. Conversion of preference shares into ordinary shares.
b. Share split
c. Reissue of treasury shares
d. Stock dividend
58. How would retained earnings be affected by the declaration of stock dividend and share split, respectively?
a. Decrease and Decrease
b. No effect and Decrease
c. No effect and No effect
d. Decrease and No effect
59. When a dividend is declared and paid in stock
a. Total shareholders’ equity does not change.
b. Total shareholders’ equity decreases.
c. The current ratio increases.
d. The amount of working capital decreases.
60. Undistributed stock dividends shall be reported as
a. A current liability
b. An addition to share capital outstanding
c. A reduction in total shareholders’ equity
d. A note to financial statements
61. These are transactions in which the entity receives goods or services as consideration for equity instruments
of the entity, including shares and share options.
a. Equity settled share-based payment transactions
b. Cash settled share-based payment transactions
c. Equity payment transactions
d. Cash payment transactions
62. For equity settled share-based payment transactions, the entity shall measure the goods or services received
and the corresponding increase in equity
I. Directly, at the fair value of the goods or services received.
II. Indirectly, by reference to the fair value of the equity instruments granted, if the fair vlaue of the goods
or services received cannot be estimated reliably.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
63. It is the difference between the fair value of the shares to which the counterparty has the right to subscribe
and the price the counterparty is required to pay for those shares.
a. Fair value
b. Intrinsic value
c. Market value
d. Book value
64. It is the date on which the entity and another party agree to a share-based payment arrangement, being when
the entity and the counterparty have a shared understanding of the terms and conditions of the arrangement.
a. Grant date
b. Measurement date
c. Exercise date
d. End of reporting period
65. What is the date on which the fair value of the equity instrument granted is measured?
a. Measurement date
b. Grant date
c. Exercise date
d. End of reporting period
66. For transactions with employees and other providing similar services, the fair value of the equity instrument
granted is measured on
a. Exercise date
b. Grant date
c. End of reporting period
d. Beginning of the year of grant
67. It is a contract that gives the holer the right, but not the obligation, to subscribe to the entity’s shares at a
fixed or determinable price for a specified period of time.
a. Share option
b. Share warrant
c. Share appreciation right
d. Share split
68. If the share options do not vest until the employee completes a specified service period, the compensation is
a. Not recognized as expense
b. Recognize as expense immediately
c. Recognized as expense over the service or vesting period
d. Recognized as expense over a reasonable period not exceeding 10 years
69. In what circumstances is compensation expense immediately recognized under a share option plan?
a. In all circumstances.
b. In circumstances when the options are exercisable within two year for services rendered over the next
two year.
c. In circumstances when the options are granted for prior service and the options are immediately
exercisable.
d. In no circumsatances is compensation expense immediately recognize.
70. Which of the following statements is true if there is an “accelearation of vesting”?
I. The entity shall recognize immediately the compensation expense that otherwise would have been
recognized for services received over the remainder of the vesting period.
II. Any payment made to the employees on the cancelation or settlement of the grant shall be accounted for
as repurchase of equity interest and any payment in excess of the fair value of share options shall be
recognized as expense.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
71. Which of the following transactions involving the issuance of shares does not come within the definition of
a “share-based” payment under PFRS 2?
a. Employee share purhase plans
b. Employee share option plans
c. Share-based payment relating to an acquisition of a subsidiary
d. Share appreciation rights
72. Which of the following statements is true regarding the requirements of PFRS 2?
a. Private entities are exempt.
b. “Small” entities are exempt.
c. Subsidiaries using their parent entity’s shares as consideration for goods and services are exempt.
d. There are no exemptions from PFRS 2.
73. Many shares and most share options are not traded in an active market. Therefore, it is often difficult to
arrive at a fair value of the equity instrument being issued. Which of the following option valuation techniques
should not be used as a measure of fair value in the first instance?
a. Black-Scholes model
b. Binomial model
c. Monte-Carlo model
 d. Intrinsic value
74. The entity has issued a range of share options to employees. What type of share-based payment transaction
does this represent?
a. Asset settled share-based payment transaction
b. Equity settled share-based payment transaction
c. Cash settled share-based payment transaction
d. Liability settled share-based payment transaction
75. Which of the following statements in relation to share options granted to employees in exchange for their
services is true?
I. The services received shall be measured at the fair value of the employees’ services.
II. Fair value shall be measured at the date the options vest.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
76. How is compensation expense measured for equity settled share-based payments?
a. Use the normal hourly rate of the employees.
b. Measure the intrinsic value of options as the difference between market price and exercise price at
measurement date.
c. Measure the fair value of options using an option-pricing model.
d. Measure the difference between the market price and the fair value of the options.
77. In accounting for share-based compensation, what interest rate is used to discount both the exercise price of
the option and the future dividend stream?
a. The entity’s known incremental borrowing rate.
b. The current market rate that entities in that particular industry use to discount cash flows.
c. The risk-free interest rate.
d. Any rate that entities can justify as being reasonable.
78. These are transactions in which the entity acquires goods or services by incurring liabilities to the supplier
of those goods or service for amounts that are based on the price of the entity’s shares and other equity
instruments.
a. Equity transactions
b. Cash payment transactions
c. Purchase transactions
d. Cash settled share-based payment transactions.
79. For cash settled share-based payment transactions, an entity shall measure the goods or services received
and the liability incurred at
a. Fair value of the goods and services received
b. Fair value of the liability
c. Either the fair value of the goods or services received or the fair value of the liability
d. Neither the fair value of the goods or services received nor the fair value of the liability
80. For cash settled share-based payment transactions, until the liability is settled, the entity is required to
remeasure the fair value of the liability at each reporting date and at the date of settlement and any changes in
fair value are
a. Included in profit or loss
b. Included in retained earnings
c. Treated as component other comprehensive income
d. Not recognized
81. If share-based payment transaction provides that the employees have the right to choose the settlement
whether in cash or shares, the entity is deemed to have issued
a. A compound financial instrument
b. An equity instrument
c. A liability instrument
d. Either an equity instrument or a liability instrument but not both
82. If share-based payment transaction provide a choice whether the entity settles in cash or issues equity
instruments, the entity is required to account for the transaction as
I. Cash settled share-based payment transaction if the entity has incurred a liability to settle in cash or
other asset.
II. Equity settled share-baed payment transaction if no liability has been incurred by the entity.
a. I only
b. II only
c. Either I or II
d. Neither I nor II
83. An entity has entered into a contract with another entity which will supply a range of services. The payment
for those services will be in cash and based upon the price of the entity’s ordinary shares on completion of the
contract. What type of share-based payment transaction does this represent?
a. Asset settled share-based payment transaction
b. Liability settled share-based payment transaction
c. Cash settled share-based payment transaction
d. Equity settled share-based payment transaction
84. A cash settled share-based payment transaction will increase which of the following?
a. A current asset
b. A noncurrent asset
c. Equity
d. A liability

85. What is the measurement date for a share-based payment to employees that is classified as a liability?
a. The service inception date
b. The grant date
c. The settlement date
d. The end of reporting period
86. For an entity that has only ordinary shares outstanding, total shareholders’ equity divided by the number of
shares outstanding represents the
a. Return on equity
b. Stated value per share
c. Book value per share
d. Price-earnings ratio
87. The effect of recording a 100% stock dividend would be to
a. Decrease the current ratio, decrease working capital and decrease book value per share.
b. Leave inventory turnover unaffected, increase earnings per share and increase book value per share.
c. Leave working capital unaffected, decrease earnings per share and decrease book value per share.
d. Leave working capital unaffected, decrease earnings per share and decrease the debt to equity ratio.
88. Which of the following shareholder rights is most commonly enhanced in an issue of preference shares?
a. The right to vote for the board of directors.
b. The right to maintain one’s proportional interest in the entity.
c. The right to receive a full cash dividend before dividends are paid to other classes of share capital.
d. The right to vote on major corporate issues.
89. Which of the following features of preference share would most likely be opposed by ordinary
shareholders?
a. Convertible
b. Callable
c. Redeemable
d. Participating
90. An entity has not declared or paid dividends on its cumulative prefernce shares in the last three years. The
dividends in arrears shall be reported
a. In a note to the financial statements
b. As a reduction in shareholders’ equity
c. As a current liability
d. As a noncurrent liability
91. An entity acquired some of its own ordinary shares at a price greater than both their par value and original
issue price. The entity uses the cost method of accounting for treasury shares. What is the impact of this
acquisition on total shareholders’ equity and book value per ordinary share, respectively?
a. Increase and Increase
b. Increase and Decrease
c. Decrease and Increase
d. Decrease and Decrease
92. It is the amount which the preference shareholders normally receive upon liquidation of the entity.
a. Liquidation value
b. Par value
c. Book value
d. Fair value
93. In the absence of liquidation value, the preference shareholders shall receive what amount in the event of
liquidation?
a. Liquidation value
b. Par value or stated value
 c. Book value
d. Fair value
94. Which of the following statements is true in relation to “call price” of preference share?
I. The call price is the amount paid to preference shareholders upon redemption of preference share during
the lifetime of the entity.
II. In the absence of liquidation value, the call price is considered in computing book value per share.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
95. Preference as to dividends means
I. If dividends are declared, the preference shareholders have the right to receive dividends first before
ordinary shareholders are paid a dividend.
II. The preference shareholders have the right to receive an amount equal to par value or liquidation value
of their shareholdings in the event of liquidation in addition to cumulative dividends in arrears.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
96. When the right to receive dividend is forfeited in any one year in which dividend is not declared, the
preference share is said to be
a. Cumulative
b. Noncumulative
c. Participating
d. Nonparticipating
97. Which is a required disclosure on the face of income statement in relation to earnings per share?
a. Basic earnings per share only
b. Diluted earnings per share only
c. Neither basic nor diluted earnings per share
d. Both basic and diluted earnings per share
98. EPS disclosures are
a. Required for all public and nonpublic entities
b. Required for public entities and encouraged for nonpublic entities.
c. Encouraged for public entities and required for nonpublic entities.
d. Encouraged for all entities.
99. An ordinary share
a. Is an equity instrument that is subordinate to all other classes of equity instrument.
b. Is a financial instrument or other contract that may entitle its holder to ordinary shares.
c. Is a financial instrument that gives the holder the right to purchase ordinary shares.
d. Is any contract that gives rise to both a financial asset of one entity and a financial liability or equity
instrument of another entity.
100. It is a financial instrument or other contract that may entitle its holder to ordinary shares.
a. Ordinary share
b. Preference share
c. Equity instrumetn
d. Potential ordinary share
101. Earnings per share shall be computed on the basis of
a. Ordinary shares outstanding at the end of the yar
b. Ordinary shares outstaniding at the beginning of the year
c. Ordinary shares outstanding at the middle of the year
d. Average ordinary shares outstanding during the year.
102. Which of the following statements is incorrect in relation to presentation of earnings per share?
I. An entity shall present on the face of the income statement basic and diluted earnings per share for
income from continuing operations.
II. An entity that reports a discontinued operation is not required to disclose the basic and diluted earnings
per share for the discontinued operation either on the face of the income statement or in the notes.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
103. In computing basic earnings per share, an entity would include which of the following?
a. Dividends on nonconvertible cumulative preference shares
 b. Dividends on ordinary shares
c. Interest on convertible bonds
d. Number of nonconvertible cumulative preference shares
104. In computing basic earnings per share, the amount of preference dividends on noncumulative preference
shares shall be
a. Deducted from net income whether declared or not
b. Deducted from net income only when declared
c. Added to net income only when declared
d. Ignored
105. In computing basic earnings per share, the full amount of the required preference dividends on cumulative
preference shares for the period shall be
a. Ignored
b. Deducted from net income only when declared
c. Deducted from net income whether declared or not
d. Added to net income whether declared or nto
106. In computing basic loss per share, the required annual preference dividend on cumulative preference shares
shall be
a. Ignored
b. Deducted from the net loss whether declared or not
c. Added to the net loss whether declared or not
d. Added to the net loss only when declared.
107. An entity has an ordinary “A” class, nonvoting share, which is entitled to a fixed dividend of 6% per
annum. The “A” class ordinary share shall
a. Be included in the “per share” calculation after adjustment for the fixed dividend.
b. Be included in the “per share” calculation for EPS without adjustment for the fixed dividend.
c. Not be included in the “per share” calculation for EPS
d. Be included in the calculation of diluted EPS.
108. Earnings per share shall be calculated before accounting for which of the following items?
a. Preference dividend for the period.
b. Ordinary dividend
c. Taxation
d. Minority interest
109. Ordinary shares issued as part of a business combination are included in the EPS calculation from
a. The beginning of the accounting period.
b. The date of acquisition.
c. The end of the accounting period.
d. The midpoint of the accounting year.
110. When an entity makes a bonus issue, share split, stock dividend or a rights issue
a. The previous year’s EPS is not adjusted for the issue.
b. The previous year’s EPS is adjusted for the issue.
c. Only a note of the effect on the previous year’s EPS is made.
d. Only the diluted EPS for the previous year is adjusted.
111. If a bonus issue occurs between the year-end and the date that the financial statements are authorized for
issue
a. The EPS for both the current and the previous year are adjusted
b. The EPS for the current year only is adjusted
c. No adjustment is made to EPS
d. Diluted EPS only is adjusted.
112. If a new issue of shares for cash is made between the year-end and the date that the financial statements are
authorized for issue
a. The EPS for both the current and the previous year are adjusted.
b. The EPS for the current year only is adjusted.
c. No adjustment is made to EPS.
d. Diluted EPS only is adjusted.
113. The weighted average number of shares outstanding during the period for all periods other than the
conversion of potential ordinary shares shall be adjusted for
a. Any change in the number of ordinary shares without a change in resources.
b. Any prior period adjustment.
c. Any new issue of shares of cash.
d. Any convertible instruments settled in cash.
114. Which of the following statements in relation to earnings per share is true?
I. Earnings per share amounts shall not be presented if they are negative, i.e. loss per share.
 II. Earnings per share amounts calculated for discontinued operations shall be presented.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
115. An entity is calculating the weighted average number of ordinary share in issue during the current year.
During the year, it issued new ordinary shares for cash at full market price and made a 1 for 8 bonus issue.
Which of the following statements is true?
I. New shares issued as a result of bonue issue shall be time apportioned from their date of issue.
II. New shares issued for cash at full market price shall be time apportioned from their date of issue.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
116. Where ordinary shares are issued but not fully paid, the ordinary shares are treated in the calculation of
basic EPS
a. In the same way as fully paid ordinary shares.
b. As a fraction of an ordinary share to the extent that they are entitled to participate in dividends.
c. In the same way as warrants or options and are included only in diluted EPS
d. Are ignored.
117. Earnings per share disclosures are required only for
a. Entities with complex capital structure.
b. Entities that change their capital structure during the reporting period.
c. Public entities.
d. Private entities.
118. Where in the financial statements should basic and diluted EPS for income from continuing operation be
reported?
a. In the accompanying notes
b. In management’s discussion and analysis
c. In the income statement
d. In the statement of cash flows
119. An entity that reports a discontinued operation shall present basic and diluted earnings per share for those
line items
a. Only on the face of the income statemnet.
b. Only in the notes to financial statements.
c. Either on the face of the income statement or in the notes to financial statements.
d. Only if management chooses to do so as these amounts are not required to be disclosed either on the
face of the income statement or in the notes.
120. Earnings per share shall be reported for all of the following, except
a. Continuing operations
b. Discontinued operations
c. Net income
d. Net cash flow from operating activities
121. What is the correct treatment of a stock dividend issued in mid-year when computing the weighted average
number of ordinary shares outstanding for earnings per share purposes?
a. The stock dividend should be weighted by the lenght of time that the additional shares are outstanding
during the period.
b. The stock dividend should be included in the weighted average number of shares outstanding only if the
additional shares result in a decrease of three percent or more in earnings per share.
c. The stock dividend should be weighted as if the additional shares were issued at the beginning of
the year.
d. The stock dividend should be ignored since no additional capital was received.
122. It is a financial instrument that gives the holder the right to purchase ordinary shares
a. Warrant or option
b. Debt or equity instrument convertible into ordinary share
c. Employee plan that allows employees to receive ordinary shares as part of their remuneration.
d. Contractual arrangement requiring issuance of ordinary shares upon the satisfaction of certain
conditions.
123. Potential ordinary shares include all of the following, except
a. Financial liabilities or equity instruments, including preference shares, that are not convertible
into ordinary shares
b. Share warrants
 c. Share options or employee plans that allow employees to receive ordinary shares as part of their
remuneration
d. Shares which would be issued upon the satisfaction of certain conditions resulting from contractual
arrangements, such as purchase of a business
124. Options and warrants are dilutive if
a. The exercise price is lower than the average market price.
b. The exercise price is higher than the average market price.
c. The exercise price is equal to the average market price.
d. The option shares represent 20% of the ordinary shares actually outstanding.
125. Under the treasury share method, the number of potential ordinary shares is equal to
a. Option shares
b. Option shares minus assumed treasury shares acquired
c. Assumeed treasury shares acquired
d. Option shares actually issued during the year
126. For employee share options, the exercise price shall include
a. Fair value of the share options
b. Intrinsic value of the share options
c. Carrying amount of the share options
d. Par value of the share options
127. It is a reduction in earnings per share or an increase in loss per share resulting from the assumption that
convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued
upon the satisfaction of specified conditions.
a. Dilution
b. Antidilution
c. Either dilution or antidilution
d. Neither dilution nor antidilution
128. In computing diluted EPS, interest expense on convertible bond payable shall be
a. Added back to net income at gross
b. Added back to net income net of tax
c. Deducted from net income net of tax
d. Ignored
129. In computing diluted EPS, dividends on convertible cumulative preference shares shall be
a. Ignored
b. Deducted from net income, whether declared or not
c. Deducted from net income only when declared
d. Added to net income net of tax
130. A written put option is
a. A contract that requires an entity to repurchase its own ordinary shares.
b. A contract that gives the holder the right to sell ordinary shares at a specified price for a given period.
c. A financial instrument that gives the holder the right to purchase ordinary shares.
d. An agreement to issue ordinary shares that is dependent on the satisfaction of specified conditions.
131. If the written put options are “in the money” (choose the incorrect one)
a. It is assumed that at the beginning of the period sufficient ordinary shares will be issued at the average
market price to raise the proceeds to satisfy the contract.
b. It assumed that the proceeds from the issue are used to buy back the ordinary shares covered by the
written put options.
c. The resulting incremental ordinary shares shall be included in computing diluted earnings per share.
d. The resulting incremental ordinary shares shall be included in computing basic earnings per
share.
132. Which of the following statements in relation to the term “dilution” in EPS computation is true?
I. A reduction in earnings per share is an example of dilution.
II. A reduction in loss per share is an example of dilution.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
133. All of the following items must be disclosed in relation to earnings per share, except
a. Forecast earnings per share for the following financial year.
b. Instruments that could potentially dilute basic earnings per share in the future but were not included in
the diluted EPS because they are antidilutive in the current period.
c. The weighted average number of ordinary shares used to calculate earnings per share.
d. The earnings figures used in calculating basic and diluted earnings per share.
134. If a share option is converted on March 31 of the current year
a. The potential ordinary shares are included in diluted EPS up to March 31, and in basic EPS from
the date converted to the year-end, both weighted accordingly.
b. The ordinary shares are not included in the diluted EPS calculation but are included in basic EPS.
c. The ordinary shares are not included in the basic EPS but are included in diluted EPS.
d. The effects of the share option are included only in previous year’s EPS calculation.
135. In calculating whether potential ordinary shares are dilutive, the profit figure used as the “control number”
is
a. Net profit after tax including discontinued operations.
b. Net profit forom continuing operations
c. Net profit before tax including discontinued operations.
d. Retained profit for the year after dividends.
136. Which of the following statements is true concerning EPS calculation?
I. Potential ordinary shares issued by a subsidiary shall be included in diluted EPS as they could
potentially have an impact on the net profit for the period and the number of shares to be included in the
calculation.
II. An entity shall disclose diluted EPS only if it differes from basic EPS by a material amount.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
137. Earnings per share as reported in the income statement shall be computed on the basis of
a. The number of shares outstanding at the end of the year.
b. A weighted average of the number of shares outstanding during the year regardless of the extent of
fluctuations.
c. A weighted average of the number of shares outstanding during the year except that minor
fluctuations in the number of shares may be disregarded.
d. The number of shares outstanding in the middle of the year.
138. How will the annual interest or preference dividend affect annual net earnings available to ordinary
shareholders each year?
a. Annual net earnings available to ordinary shareholders are reduced by annual interest but not by
preference dividends.
b. Annual net earnings available to ordinary shareholders are reduced by preference dividends but not by
annual interest.
c. Annual net earnings available to ordinary shareholders are reduced by both annual interest and
preference dividends.
d. Annual net earnings available to ordinary shareholders are not reduced by annual interest or preference
dividends.
139. What is the inherent justification underlying the concept of potential ordinary shares in an earnings per
share computation?
a. Form over substance
b. Substance over form
c. Form and substance considered equally
d. Substance over form or form over substance depending on the circumstances
140. The “if converted” method of computing earnings per share assumes conversion of convertible securities
as of the
a. Beginning of the earliest period reported or at time of issuance, if later.
b. Beginning of the earliest period reported regardless of time of issuance.
c. Middle of the earliest period reported regardless of the time issuance.
d. Ending of the earliest period reported regardless of the time of issuance.
141. The nature of diluted earnings per share involving adjustment for share options can be described as
a. Historical because earnings per histroical
b. Historical because it indicates an entity’s valuation
c. Pro forma because it indicates potential changes in number of shares
d. Pro forma because it indicates potential changes in earnings.
142. At the middle of the current year, an entity granted employees share-bbased payments in the form of
compensatory share options. How should the entity account for the outstaniding options in calculating earning
per share for the current year if the options are not antidilutive?
a. Include the options in the denominator of basic and diluted earnings per share for the entire year.
b. Include the options in the denominator of diluted earnings per share for the entire year.
c. Include the options in the denominator of diluted earnings per share weighted by number of
months outstanding.
 d. Ignore the options in the calculation of diluted earnings per share.
143. In determining diluted EPS, dividends on nonconvertible cumulative preference shares should be
a. Disregarded
b. Added back to net income whether declared or not
c. Deducted from net income only if declared
d. Deducted from net income whether declared or not
144. The EPS computation that is forward-looking and based on assumptions about future transactions is
a. Diluted EPS
b. Basic EPS
c. Continuing operations EPS
d. Discontinued operations EPS
145. The main purpose of reporting diluted earnings per share is to
a. Provide a comparison figure for debt holders.
b. Indicate earnings shareholders shall receive in future periods.
c. Distinguish between entities with a complex capital structure and entities with a simple capital structure.
d. Show the maximum possible dilution of earnings.
146. In calculating diluted earnings per share, which of the following should not be considered?
a. The weighted average number of ordinary shares outstanding
b. The amount of dividends declared on cumulative preference shares
c. The amount ocf cash dividends declared on ordinary shares.
d. The number of ordinary shares resulting from the assumed conversion of bonds payable outstanding.
147. When computing diluted EPS, the treasury share method can be used for which of the following?
a. Convertible preference share
b. Convertible bond payable
c. Share option
d. Rights issue
148. In applying the treasury share method of computing diluted earnings per share, when is it appropriate to
use the average market price of ordinary share during the year as the assumed repurchase price?
a. Always
b. Never
c. When the average market price is higher than the exercise price.
d. When the average market price is lower than the exercise price.
149. For an entity having several different issues of convertible securities, share options and warrants, the
standard requires selection of the combination of securities producing
a. The lowest possible earnings per share.
b. The highest possible earnings per share.
c. The earnings per share figure midway between the lowest possible and the highest possible earnings per
share.
d. Any earnings per share figure between the lowest possible and the highest possible earnings per share.
150. Which of the following statements is true regarding the effect that dilutive convertible bonds have on the
earnings per share computation?
a. The number of shares the bonds would be converted is added to the denominator and bonds interest net
of tax is subtracted from the numerator.
b. The number of shares the bonds would be converted is added to the denominator and interest net
of tax is added to the numerator.
c. The number of shares the bonds would be converted is subtracted from the denominator and interest net
of tax is subtracted from the numerator.
d. The number of shares the bonds would be converted is subtracted from the denominator and interest net
of tax is added to the numerator.