Shareholders’ equity part 2 quiz and answers

If the entity’s share capital is retired, the share capital is reduced by the

Par value

Fair value

Cost

Face amount

If the retirement results in a loss wherein the redemption cost exceeds the par value, such loss will be
debited first to the

Retained earnings

Premium from original issuance

Share premium from treasury shares

Loss on redemption

On December 31, 2021, ABC Company has the following equity accounts:

Ordinary shares, P150 par, 54,000 shares 8,100,000

Share premium 450,0000

Retained earnings 3,400,000

What will be the entry if all the 54,000 shares are called in for cancelation and the company issued no-
par shares with stated value of P42?

Dr: Ordinary shares (par value shares) P8,100,000

Share premium on ordinary shares 450,000

Cr: Ordinary shares (no par value shares) (54,000 shares*P42) P2,268,000

Share premium on recapitalization (balancing figure) 10,332,000

Dr: Ordinary shares (par value shares) 8,100,000

Cr: Ordinary shares (no par value shares) 2,268,000

Share premium on recapitalization 5,832,000

No entry will be made

Dr: Ordinary shares (par value shares) 8,100,000

Share premium on ordinary shares 450,000

Cr: Ordinary shares (no par value shares) 2,268,000

Share premium on ordinary shares 10,332,000

On December 31, 2021, ABC Company has the following equity accounts:

Ordinary shares, P150 par, 54,000 shares 8,100,000

Share premium 450,0000

Retained earnings 3,400,000

What will be the entry if all the 54,000 shares are called in for cancelation and the company issued no-
par shares with stated value of P180?

Dr: Ordinary Shares (par value shares) 8,100,000

Share premium on ordinary shares 450,000

Retained Earnings (balancing figure) 1,170,000

Cr: Ordinary shares (no par value) (54,000*P180) P9,720,000

No entry will be made

Dr: Ordinary Shares (par value shares) 8,100,000

Share premium on ordinary shares 450,000

Retained Earnings 3,400,000

Cr: Ordinary shares (no par value) 9,720,000

Dr: Ordinary Shares (par value shares) 8,100,000

Share premium on ordinary shares 450,000

Cr: Ordinary shares (no par value) 8,550,000

It does not require a formal accounting entry for the recall of all the shares and issuance of the new
shares.

Split down

Split up

Memorandum entry

Share split proper

It changes only the number of shares outstanding and the par value per share.

Share split

Split up

Split down

Share split proper

It is reduced in proportion to the increase in the number of shares.

Fair value

Par value

Share premium

Retained earnings

XYZ Company had 35,000 shares issued and outstanding on the beginning of the year 2020. On the first
quarter, the entity declared a 2-for-1 share split when the fair value of the share was P90. On the last
quarter, the entity declared a P8 per share cash dividend. What will be the correct entry for the date of
declaration?

Dr: Retained earnings (35,000*2*P8) P560,000

Cr: Cash dividends payable P560,000

No entry

Dr: Cash dividend payable 560,000

Cr: Cash 560,000

Dr: Retained earnings 3,150,000

Cr: Cash dividends payable 3,150,000

XYZ Company had 35,000 shares issued and outstanding on the beginning of the year 2020. On the first
quarter, the entity declared a 2-for-1 share split when the fair value of the share was P90. On the last
quarter, the entity declared a P8 per share cash dividend. What will be the correct entry for the date of
record?

Dr: Retained earnings 560,000

Cr: Cash dividends payable 560,000

No entry (No entry will be made on the date of record)

Dr: Cash dividend payable 560,000

Cr: Cash 560,000

Dr: Retained earnings 3,150,000

Cr: Cash dividends payable 3,150,000

XYZ Company had 35,000 shares issued and outstanding on the beginning of the year 2020. On the first
quarter, the entity declared a 2-for-1 share split when the fair value of the share was P90. On the last
quarter, the entity declared a P8 per share cash dividend. What will be the correct entry for the date of
payment?

Dr: Retained earnings 560,000

Cr: Cash dividends payable 560,000

No entry

Dr: Cash dividend payable (35,000*2*P8) P560,000

Cr: Cash P560,000

Dr: Retained earnings 3,150,000

Cr: Cash dividends payable 3,150,000

Assume that the treasury shares are purchased more than the par value, the account/s that shall be
debited will be

Share premium for the purchase price

Treasury shares for the purchase price

Retained earnings for the purchase price and share premium for the excess price

Treasury shares for the purchase price and share premium for the excess price

Does the share split affect the asset and the shareholders’ equity?

Yes

No

Only the asset

Only the shareholders’ equity