Partnership and Corporation

Chapter 7 Retained Earnings Quiz

Part II. Write your answers on the answer sheet provided. Round your final answer to the nearest PESO.

1. ABC Corporation’s outstanding shares at Dec 31, 2021 consisted of the following:
-40, 000 shares outstanding of 5% cumulative preference shares, P15 par value, and participating as to
dividends.
-200, 000 share outstanding of ordinary shares, P5 par value

On Dec 2021, the board of directors declared total dividends of 400, 000. Two year’s dividends were in arrears.
(a) How much is the total dividends payable for preference shares? (b) What is the dividends payable per
preference share? (Round off to 2 decimal places) (c) How much is the total dividends payable for ordinary
shares? (d) What is the dividends payable per ordinary share? (Round off to 2 decimal places)

2. ANT Corporation has 100, 000 shares of P10 par value ordinary shares outstanding. On Jan 25, 2021, the
corporation declared the following dividends:
- 10% share dividends when the shares had a fair value of P15
- Property dividends with a fair value of 200, 000.

a. By what amount did the liability change on Jan 25, 2021? (Indicate if increase or decrease)
b. By what amount did the total share capital change on Jan 25, 2021? (Indicate if increase or decrease)
c. By what amount did the total retained earnings change on Jan 25, 2021? (Indicate if increase or decrease)

3. Below is the shareholders’ equity of Ross Corporation:

8% Cumulative preference shares P150 par, 10, 000 shares
authorized,8, 000 share issued and outstanding 1, 200, 000
Ordinary shares P40 par, 100, 000 shares authorized,
75, 000 shares issued and outstanding 3, 000, 000
Share premium 2, 040, 000
Retained earnings 3, 120, 000
Total shareholders’ equity 9, 360, 000
The liquidation value of preference share is P162 per share. There are 2 years dividends in arrears. Compute the
(a) Book value per share of preference shares, (b) Book value per share of ordinary shares (c) assume that the
preference shares are participating, compute the BV/share of preference shares.

4. Joshua Corporation has the following balances on Dec 31, 2020,

Ordinary shares, P10 par, 500, 000 shares authorized, 200, 000 shares issued 2, 000, 000
Share premium – Ordinary 1, 000, 000
Retained earnings 5, 000, 000
Treasury shares (@ cost P15) 300, 000

The following are the transactions during Dec 2021:

Mar 5 The corporation reissued 5, 000 shares of treasury for P17.
June 1 The corporation declared a 10% share dividends when the market value was P14.
Aug 30 The corporation distributed the dividends declared on June 1.
Oct 1 The corporation declared a 2 for 1 share split.
Dec 1 The corporation declared cash dividends amounting to P0.50 per share for share on record on Dec 15
and payable of Dec 31.
Dec 31 The corporation paid cash dividends declared on Dec 1.
Requirements:
a. What is the number of shares outstanding for the year ending Dec 31, 2021?
b. How many shares were distributed on Aug 30, 2021?
c. Considering all the transactions above, is there an effect on total liabilities? If yes, how much and
indicate if the change is decrease or increase.
d. What is the cost of treasury shares on the Dec 31, 2021?
e. What is the balance of retained earnings on Dec 31, 2021?
5. The following information was abstracted from the accounts of David Corporation:
Total profit since incorporation 3, 500, 000
Total cash dividends declared (of which only 3/4 is paid) 300, 000
Total property dividends declared (not yet paid) 500, 000
Cash proceeds from sale of treasury stock at cost 80, 000
Total value of share dividends declared and distributed 200, 000
Gain on treasury share transaction 10, 000
Appropriation for plant expansion 500, 000
Cash donation from shareholders 100, 000
a. What is the balance of unappropriated retained earnings at the end of the period?
b. What is the balance of total retained earnings at the end of the period?

6. The shareholders’ equity of the Isaac Corporation on Dec 31, 2020, is shown below:
4% Preference shares, P50 par, 10, 000 shares authorized, 7, 000 shares issued 350, 000
Share premium – Preference 28, 000
Ordinary shares, P20 par value, 50, 000 shares authorized, 25, 000 shares issued 500, 000
and outstanding
Share premium – Ordinary 90, 000
Retained earnings – unappropriated 837, 000
Retained earnings – appropriated for plant expansion 175, 000

During 2021, the corporation has the following transactions affecting shareholders’ equity.
Jan 3 Purchased 3, 000 shares of treasury-ordinary for 75, 000.
Feb 2 Reissued 500 shares of treasury-ordinary for 10, 500.
Mar 10 Declared cash dividends of P3 for preference shares and P1.00 for ordinary shares.
Apr 10 Paid cash dividends declared on Mar 10.
May 10 Declared 15% preference share dividends when the market price of the share is P58.
June 19 Distributed the preference share dividends declared on May 10.
July 20 Declared property dividends to ordinary shares. The property’s fair value is 150, 000.
Aug 25 Paid the property dividends declared on July 20. The property is recorded in the books at its cost of
P200, 000 with 50, 000 accumulated depreciation.
Dec 31 The appropriated for plant expansion is decreased to 155, 000.
Dec 31 Closed profit amounting to 210, 000.

a. On December 31, 2021, what is the number of the outstanding shares?

b. On the distribution of property dividends, how much is the gain or loss on distribution? (Indicate if it’s a gain
or a loss)
c. What is the balance of total retained earnings on December 31, 2021?
d. What is the balance of the shareholder’s equity on December 31, 2021?

7. San Pedro Corporation has 30,000 shares of 6% cumulative preference shares with P50 par value shares and
80,000 outstanding ordinary shares with P5 par value. No dividends have been paid for three years.

a. How much is the dividends per share of ordinary shares if San Pedro declared P414,400 dividend?
b. Assume that the preference shares are also participating, how much is the dividends per share of ordinary
shares if San Pedro declared P600,000 dividend. (Round to 2 decimal places)
c. Assume that preference shares are not cumulative but participating, how much is the dividends per share of
ordinary shares if San Pedro declared P200,000 dividend. (Round to 2 decimal places)