The NEPAL COMPANY is authorized to issue 600,000 shares of P10 par © ordinary share capital. Nepal’s accounting year ends an December The following transactions oecurred in 2012, the company’s first of operations. a) Issued 20,000 shares at P20 per share; received cash. b) Issued 2,500 shares to attorneys for services. in securing the corpo- rate charter and for preliminary legal costs of organizing the corpora- tion. The value of the services was P85,000. .c) Issued 300'shares, valued objectively at P15,000, to the employees instead of paying them cash wages. qd) Issued 325,000 shares in exchange for a building valued at P3,000,000 and land valued at P4,000,000. (The building was origi- nally acquired by the investor for P2,500,000 and has P1,000,000 of accumulated depreciation; the land was originally acquired for P1,500,000.) 1. What is the ordinary share capital balance on December 31, 2012? A. P3,453,000 C. P3,490,000 B. P3,478,000 D, P4,278,000 2. The amount of share premium to be reported on Nepal's statement of financial position. at December 31, 2012, is A. P3,962,000 C. P3,022,000 B. P4,047,000 D. -P4,022,000 3. ‘The amount of organization expense to be charged against Nepal's income for 2012 is A, P85,000 : C. P25,000 B. PO D. P60,000The following are PAKISTAN COMPANY'S equity accounts at December 34, 2011: Ordinary share capital, par value P10; euthorized 200,000 shares; issued and outstanding 120,000 shares P1,200,000 Share premium 180,000 Retained earnings 720,000 Pakistan Company uses the cost method of accounting for treasury shares, The following transactions occurred in 2012: a. Acquired 8,000 ordinary shares for P144,000. b. Sold 6,500 treasury shares at P20 per share c. Retired the remaining treasury shares What is the share premium balance on December 31, 2012? A. P117,000 C.. P181,000 B. P168,000 = D. P193,000As the newly appointed auditor in 2012 for JORDAN COMPANY, you have analyzed the company’s "Share Premium” account. The following is 2 summary of the account since the inception of Jordan Company. Debits Credits Cash dividends ~ preference shares 160,000 Cash dividends - ordinary shares 195,000 Excess of amount paid in over Par value of ordinary shares 375,000 Net income 500,000 Gain on early extinguishment of debt 42,000 Treasury preference shares; issued and reacquired at par 0,000 Loss on litigation 75,000 Correction of a prior period error. __23,009 543,000 917,000, Credit balance of share premium account 374,000 217.000 Pauz.000 1. What is Jordan's correct net income for 2012? A. P500,000 C. P444,000 8, 467,000 ©. P477,000 2. What is the correct retained eamings balance (before appropriation for treasury shares) as at the end of the current year? A. P444,000 . 89,000 B. 135,000 D. P112,000 3. What is the correct share premium balance as at the end of the cur- rent year? . 781,000 Se D. P375,000 8. P600,000ISRAEL COMPANY is authorized to issue 200,000 of P10 par value ord nary shares, and 60,000 of 6% cumulative and nonparticipating prefer- ence shares, par value P100 per share. The company engaged in the following share capital transactions through December 31, 2012: @) 50,000 ordinary shares were Issued for P650,000 and 20,000 prefer ence shares for machinery valued at P2,600,000, b) Subscriptions for 9,000 ordinary shares have been taken}. and “ of the subscription price of P18 per share has been collected. i shares will be issued upon collection of the subscription price in full:c) 2,000 treasury ordinary shares have been Purchased for Pi2 and accounted for under the cost method. The post-closing retained earnings balance at December 31, 2012, is P420,000. What is Israel's total shareholders’ equity at December 31, 2012? A. P3,714,800 C. P3,638,800 B. P3,710,800 D. P3,110,800The shareholders’ equity of the OMAN COMPANY as of December. 31, 2011, was as follows: Ordinary shares, P10 par, authorized 300,000 shares; 250,000 shares issued and outstanding P2,500,000 Share premium - issuance 3,500,000 Retained earnings A 1,740,000 On June 1, 2012, Oman reacquired 40,000 ordinary shares at P40. The . following transactions occurred in 2012 with regard to these shares.July 1 Sold 15,000 shares at P48. Aug. 1 — Sold 19,000 shares at P27. Sept. 1 Retired 1,000 shares. The following entries were made by the company’s accountant to record the preceding transactions. 2012 June 1 Treasury shares 1,600,000 Cash 1,600,000 July 1 Cash 720,000 Treasury shares 720,000 Aug. 1 Cash 513,000 Treasury shares 513,000 Sept. 1 Ordinary shares ‘ 10,000 “Treasury shares 40,000 Oman’s net income for 2012 was P135,000. Based on the preceding information, determine the correct balances of the following accounts: 1, Treasury shares ‘A. P160,000 : c. P210,000 B. P190,000 ‘1D. P200,000 2. Ordinary shares A. P2,490,000 C. P2,460,000 B. 2,500,000 D._ P2,210,000 3. Share premium - issuance ‘A. 3,486,000 C. P3,620,000 B.. P3,500,000 D. P3,606,0004. Share premium — treasury shares A. P120,000 C. P240,000 B. PO D. P710,000 5... Retained earnings (before appropriation for treasury shares) A. P1,732,000. C. ; P1,597,000 ‘ B. P1,859,000 D. . P1,718,000The shareholders’ equity section of BAHRAIN CORPORATION’ statement of financial position as of December 31, 2011, is as follows: Ordinary share capital (P5 par, 250,000 shares authorized, 137,500 issued and outstanding) P687,500 Share premium 275,000 Total paid-in capital P-962,500 Unappropriated retained earnings P667,500 Appropriated retained earnings 250,000 Total retained earnings 917,500 Total shareholders’ equity 1,880,000 Bahrain Corporation had the following shareholders’ equity transactions during 2012: Jan. 15 Completed the. building renovation for which P250,000 of re tained earnings had been restricted. Paid the contractor P242,500, all of which is capitalized, Mar. 3 Issued 50,000 additional ordinary shares for P8 per share.May 18 Declared a dividend of P1.50 per-share to be paid on July 31, 2012, to shareholders of record on June 30, 2012. June 19 Approved additional building renovation to be funded internal- 'v. The estimated cost of the project is P200,000, and re- tained earnings are to be restricted for that amount. July 31 Paid the dividend. Dec. 31 Declared a property dividend to be paid on January 10, 2013, to shareholders of record on January 5, 2013. The dividend is to consist of equipment with a carrying value of P150,000. The equipment’s fair value at December 31, 2012, is P157,500. Dec. 31 Reported P442,500 of net income on December 31, 2012, in- come statement. 1, The balance in the ordinary share capital account at December 31, 2012, should be A. P1,095,000 Cc. P937,500 B. P1,087,500 D. P687,500 2. The balance in the share premium account at Deember 31, 2012, 38,000 C. P275,000 B. P125,000 . 260,000 “The balance in the unappropriated retainéd earnings account at De- 3. cember 31, 2012, shouldbe A. 921,250 D. P721,250 B. P713,750 . Pra 4. The total shareholders’ enuty at December 31, 2012, should be G 083, ; A. P2,233,750 D. 2,371,250 B. 2,283,750Share-Based Compensation: Grant with Market Condition — At the beginning of year 1, an entity grants to a senior executive 30,000 share options. The grant is conditional upon the executive remaining in the entity’s employ until the end of year 3. The share options can be exercised if the entity's share price increases from P20 at the beginning of year 1 to above P30 at the end of year 3. If the share price is above P30 at the end of year 3, the. share options can be exercised at any time during the next five years, i.e., by the end of year 8. The entity estimates the fair value of the share options on grant date to be P5 per option. This estimate takes into account the following market condition:ty that the share price will exceed P30 at the end of year 3, i.e., the share options become exercisable; and ‘+ The possibility that the share price will not exceed P30 at the end of year 3, i.e., the share options will be forfeited. The following actual events occurred in years 1 to 3: Year 1 + The share price has increased to P24. * The entity’s estimate of the fair value of the options is P4 at the ‘end of year 1. ‘This takes into account whether the market con- n will be satisfied by the end of year 3. Year 2 ‘+ The share price has decreased to P22. However, the entity re- mains optimistic that the share price target will be met by the end of year 3. + The estimated fair value of the share options is P3. Again, this estimate takes into account the market condition noted above. Year 3 «The share price only reaches P28 by the end of year 3. «The estimated fair value of the share options is zero, as the mar- ket condition has not been satisfied. Based on the preceding information, determine the following: 1. Compensation expense for year 1 Ps C. P60,000 ‘A. P50,000 : B, 40,000 D. 30,000 2. Compensation expense for year 2 A. P50,000 0,900 B, P40,000 D. P30, 3. Compensation expense for year 3 A. 50,000 C. P40,000 BPO D. 30,0004, Share options outstanding at the end of year 2 A. P70,000 Cc. P90,000 B. P80,000 D. P100,000 5. Cumulative compensation expense for the three-year period A, PO Cc. P100,000 B. P150,000 D. P70,000\ Share-Based Compensation: Grant with Performance Condition in which the Exereise Price Varies At the beginning of 2012, an entity grants 100 share options each to 1,000 employees. ‘The grant is conditional upon the employees remain- ing in the entity's employ during a vesting period of three years. The exercise price at grant date is estimated at P30, However, the exer- cise price drops to P20 If the entity’s earnings increase by at least an average of 10% per year over the three-year period, On grant date, the entity estimates that the fair value of the share op- tions, with an exercise price of P20, is P10 per option. If the exercise price is P30, the entity estimates that the share options have a fair value of P9 per option. The following actual events occurred: 2012 = 60 employees have left. The entity expects, on the basis of a weighted average probablity, that a further 60 employees will eave during 2013 and 2014, respectively, «The entity's eamings Increased by 12%, and the entity expects that earnings will continue to increase at this rate over the next entity therefore expects that the earnings target {he share options will have an exer two years. The will be achieved, and hence, cise price of P20.2013 At year end, a further 70 employees have resigned. The entity expects that a further 60 employees will leave during 2014. + The entity’s earnings increased by 13%, and it continues to ex. pect that the earnings target will be achieved. 2014 * A further 56 employees have left by the end the year. * Due to a general decrease in market demand, the entity's eam- ings increased by only 3%. Because the earnings target was nat achieved, the 100 vested share options for each employee have exercise price of P30. Based on the preceding information, determine the following: 1. Compensation expense for 2012 A. 270,000 C. 273,333 B. P192,600 D. P244,200 2. Compensation expense for 2013 A. P192,600 C. P273,333, B. P266,667 D. 270,000 3. Compensation expense for 2014 A. P273,333 C.. P266,667 B. 270,000 D. P192,600 4, Share options outstanding at the énd of 2013. A. P540,000 C.. P266,667 B. 810,000 D. P459,267 5. Share options outstanding at the end of 2014 A. P810,000 C. P820,000 B. PO ¥ D. P732,600Share-Based Compensation: Cash-settled Share Appreciation Rights (SARs) (PFRS 2, Implementation Guidance) An entity grants 100 cash share appreciation rights (SARs) to each of its 500 employees, on condition that the employees remain in its employ for the next three years. During year 1, 35 employees have left.\The entity estimates that a fur- ther 60 will leave during years 2 and 3. During year 2, 40 employees have left and the entity estimates that a further 25 will leave during year 3. During year 3, 22 employees have left. At the end of year 3, 150 employees exercised their SARs, another 140 employees exercised thelr SARs at the end of year 4 and the remaining 113 employees exercised their SARs at the end of year 5. The entity estimates the fair value of the SARs at the end of each year? which a liability exists as shown below. At the end of year. 3, all SARS held by the remaining employees vested, The intrinsic values of e SARs at the date of exercise (which equal the cash paid out) at the ¢! of years 3, 4, and 5 are also shown below,Year Fair Value Intrinsic Value 7 P14.40 2 15.50 3 18.20 P15.00 - Bere 21.40 20.00 f 25.00 Based on the preceding information, answer the following: 1. What amount of compensation expense shoud be recognized in year A. P223,200 C. P193,440 B. P211,200 D. P194,400 2, What amount of compensation expense should be recognized in year 2 A. P190,133 Cc. P218,933 B. P222,993 D. P234,433, 3. What amount of compensation expense should be recognized in year’ 2 % A. P272,127 C. P225,000 B, 460,460 D. P177,873. 4, What amount of compensation expense should be recognized in year 4 \. 000 C. P218,640 & Pease D. P241,820 5. What amount of compensation expense should be recognized in year 5? 7 CC. P40,680 f pavowteD D. 282,500 6. What amount of salaries payable should the entity report at the end of year 3? > © pa13,333, A. P241,820 D. P460/460 B. PO7. What amount of salaries payable should the entity report at the end of year 4? A. P241,820 C. P413,333 B. PO D. P460,460Share-Based Compensation: Grant with Settlement Alternatives (PFRS 2, Implementation Guidance) An entity grants to an employee the right to choose either. 1,000 phan- tom shares (i.e., a right to 2 cash payment equal to the value of 1,000 shares) or’1,200 shares with a par value of P10 per share. The grant is conditional upon the completion of three years’ service. If the employee chooses the share alternative, the shares must be held for three years after vesting date. At grant date, the entity’s share price is PSO per share, At the end of years 1, 2 and 3, the share price is P52, P5S-and P60, respectively. The entity does not expect to pay dividends in the next three years. After taking into account the effects of the post-vesting transfer restrictions, the entity estimates that the grant date fair value of the share altera: tive is P48 per share. At the end of year 3, the employee chooses: Scenario 1: The cash alternativeScenario 2: The equity alternative Based on the preceding information, answer the following: 1, What-is the total fair value of the equity component as a result of the share-based payment transaction with settlement alternatives? A. P7,600 Cc. P2,400 B. P10,000 D. PO 2. What is the compensation expense in year 1? A. P17,333 C. P19,333 B. P19,866 D.. P23,334 3. What is the compensation expense in year 2? A. P19,866 C. P21,866 B. P17,333 D. P19,333 4, What is the compensation expense in year 3? A. P23,334 C. P19,333 B. P25,868 D. P19,866 5. If the employee has chosen the cash alternative, the amount to be paid at the end of year 3 should be A. P55,000 C. P52,000 B. P67,600 D. P60,000 6. If the employee has ‘chosen the share alternative, the amount of share premium to be recognized is A. P7,600 C, P60,000 B. P55,600 D. P67,600CHING CHING has been employed as an accountant by IRAN, INC. for a number of years. She handles all accounting duties, including the prepa- ration of financial statements. The following is a statement of earned surplus prepared by Ching Ching for 2012: Tran, Inc. STATEMENT OF EARNED SURPLUS FOR 2012 Balance at January 1, 2012 365,000 Additions: * Change in estimate of 2011 amortization P 5,000 Gain on sale of trading securities 3,000 Interest revenue Net income for 2012 Decreased depreciation due to change in estimated life 2,000 150,000 13,000 173,000 538,000 Deductions: es Dividends declared and paid P100,000 Loss on sale of equipment 2,500 Loss on earthquake 83,000 185,500 Balance at December 31, 2012 352,5001. What is the correct net income of Iran for 2012? A. P87,500 C. P84,500 B. P173,000 D. P82,500 2, What is the correct retained earnings balance as of December 31, 2012? A. P349,500 C. P438,000 D. P352,500 B. P347,500The following selected accounts Were taken from Ic the December 31, 2012, trial balance of INDONESIA CORPORATION: Subscribed share capital P 1,250,000 Treasury shares, 600 shares, at cost 90,000 Unissued share capital 6,000,000 Share premium 180,000 Appropriation for plant expansion 500,000 Retained earnings 1,200,000 Authorized share capital - 100,000 shares 10,000,000 Subscriptions receivable 320,000 The minutes of meetings of the board of directors reveal that on Decem- ber 5, 2012, the company’s board declared a 10% cash dividend payable to shareholders and subscribers of record on December 20, 2012. The. dividend checks are to be distributed on January 10, 2013. The compa ny’s accountant has not recorded this dividend declaration. What is the amount of unrecorded dividend payable? A. P516,000 C. P487,000 B. P519,000 D. P394,000The following are the shareholders’ equity accounts of INDIA COMPANY at Decernber 31, 2012. Ordinary shares, P10 par; authorized 200,000 shares; issued 90,000 shares P900,000 Preference shares, 12% P25 par; authorized 100,000 shares; issued 15,000 shares; cumulative 375,000 Share premium 2,500,000 Retained earnings 4,750,000 Treasury shares (7,500 ordinary shares) 371,250 The preference shares are participating in distribution in excess .of a 15% dividend rate on the ordinary shares. No dividends have been paid in 2010 or 2011. On December 31, 2012, India wants to pay a cash divi- dend of P2 a share to ordinary shareholders. 1. What is the amount to be paid to preference shareholders? A. P153,750 C. P108,750 B. P90,000 D. P135,000 2. What is the amount to be paid to ordinary shareholders? A. P105,750 C, P99,000 B. P123,750 D. P165,000UZBEKISTAN COMPANY reported the following amounts in the share- holders’ equity section of its December 31, 2011, statement of financial position: Preference shares, 10%, P10 par (100,000 shares authorized, 20,000 shares issued) P200,000 Ordinary shares, P5 par (50,000 shares authorized 10,000 shares issued) 50,000 Share premium . 96,000 Retained earnings 600,000 Total 946,000 The following transactions occurred during 2012: i 1. Paid the annual 2011. P1 per share dividend on preference. shares . and P0.50 per share dividend on ordinary shares. These dividends had been declared on December 31, 2011. i2. Purchased 2,000 sh; P20 per shara. > SP2TeS OF its own outstanding ordinary shares for 3. Reissued 7( 00 treasury shares for equipment valued at P25,000. 4, Issued 5,000 preference shares at P15 per share. 5. Declared a 10% share dividen id on the outstanding ordinary she when the shares were seling for PLZ pershare, ie 6. Issued the share dividend, 7. Declared the annual 2012 Pi per share dividend on preference shares and the PO.50 per share dividend on ordinary shares. These dividends are payable in 2013. 8. Appropriated retained earnings for plant expansion, P300,000. 9. The net income for 2012 was P470,000. Appropriated retained earnings for treasury shares. Based on the above data, determine the correct December 32, 2012, balances of each of the following accounts: 1. Preference shares A. 250,000 G Pars 000 B. P200,000 D, P1,000,00 2. Ordinary shares c psss00 * bape) D. 50,000 3. Share premium cc. P132,000 138,090 A, P137,600 D B, P127,0904. Treasury shares A. P26,000 B. P40,000 C D. 5. Unappropriated retained earnings A. P714,775 B. P709,775 G D. P15,000 P14,000 P703,775 P729,775 °