PSBA Integrated Review

Financial Accounting and Reporting – Problem Christian Aris Valix

Book value per share and Quasi-reorganization

1. An entity reported the following shareholder’s equity at year-end:

10% cumulative preference share capital, P20 par, 100,000 shares 2,000,000
Ordinary share capital, P10 par, 400,000 shares 4,000,000
Share premium 2,500,000
Retained earnings 3,700,000
Revaluation surplus 300,000

Dividends on the preference shareholders have not been paid for two years. The preference
shares have a liquidating price of P35 and a call price of P38. Compute book value per
preference share and book value per ordinary share.

2. An entity reported the following shareholder’s equity at year-end:

12% preference share capital, P70 par, 150,000 shares 10,500,000

Ordinary share capital, P100 par, 110,000 shares 11,000,000
Subscribed ordinary share capital, 30,000 shares 3,000,000
Subscription receivable 1,000,000
Share premium 5,000,000
Retained earnings 3,500,000
Treasury ordinary shares, 10,000 shares at cost 600,000

Dividends are in arrears for four years. Compute the book value per preference share and
book value per ordinary share.

3. On December 31, 2021, an entity had 80,000 ordinary shares of P50 par value and 30,000
preference shares of P20 par value, 5% cumulative and participating. The last dividend
payment was on December 31, 2018 and the entity declared dividends of P600,000 for the
year 2021. Compute the amount of dividends payable to the preference and ordinary
shareholders.

4. An entity had incurred heavy losses since inception. The shareholders approved of the quasi-
reorganization. The entity reported the following shareholder’s equity immediately before the
quasi-reorganization:

Share capital, P100 par, 300,000 shares 30,000,000

Share premium 6,000,000
Retained earnings (deficit) (7,500,000)

The quasi-reorganization is to be accomplished by reduction in inventory by P1,000,000,

reduction of PPE by P2,500,000, and reduce the par value per share to P80. Compute total
shareholder’s equity after the quasi-reorganization.

END