Name: ______________________________________________________________

Final Examination for ACT 13

Choose the correct answer on the choices provided.

1. In January 2023, Finley Corporation, a newly formed company, issued 10,000 shares of its Php 10
par common stock for Php 15 per share. On July 1, 2023, Finley Corporation reacquired
1,000 shares of its outstanding stock for Php 12 per share. The acquisition of these treasury shares

a. decreased total stockholders'

equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders'
equity.
b. increased total stockholders'
equity.
c. did not change total
stockholders' equity.
d. decreased the number of issued
shares.
a. decreased total stockholders' equity
b. increased total stockholders' equity
c. did not change total stockholders' equity.
d. decreased the number of issued shares.

2. Treasury shares are

a. shares held as an investment by the treasurer of the corporation.
b. shares held as an investment of the corporation.
c. issued and outstanding shares.
d. issued but not outstanding shares

3. “Gains" on sales of treasury stock (using the cost method) should be credited to
a. paid-in capital from treasury stock.
b. capital stock.
c. retained earnings.
d. other income.

4. A primary source of stockholders' equity is

a. income retained by the corporation.
b. appropriated retained earnings.
c. contributions by stockholders.
d. both income retained by the corporation and contributions by stockholders

5. Which of the following best describes a possible result of treasury stock transactions by a
corporation?
a. May increase but not decrease retained earnings.
b. May increase net income if the cost method is used.
c. May decrease but not increase retained earnings.
d. May decrease but not increase net income.

6. Cash dividends are paid on the basis of the number of shares

a. authorized.
b. issued.
c. outstanding.
d. outstanding less the number of treasury shares

7. Which of the following statements about property dividends is not true?

a. A property dividend is usually in the form of securities of other companies.
b. A property dividend is also called a dividend in kind.
c. The accounting for a property dividend should be based on the carrying value (book value) of the
nonmonetary assets transferred.
d. All of these statements are true.

8. Houser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2022,
Houser distributed these shares of stock as a dividend to its stockholders. This
is an example of a
a. property dividend. b. stock dividend. c. liquidating dividend d. cash dividend

9. If management wishes to "capitalize" part of the earnings, it may issue a

a. cash dividend. b. stock dividend. c. property dividend. d. liquidating dividend

10. The declaration and issuance of a stock dividend larger than 25% of the shares previously
outstanding
a. increases common stock outstanding and increases total stockholders' equity.
b. decreases retained earnings but does not change total stockholders' equity.
c. may increase or decrease paid-in capital in excess of par but does not change total stockholders'
equity.
d. increases retained earnings and increases total stockholders' equity

11. What effect does the issuance of a 2-for-1 stock split have on each of the following?
Par Value per Share Retained Earnings
a. No effect No effect
b. Increase No effect
c. Decrease No effect
d. Decrease Decrease

12. Assume common stock is the only class of stock outstanding in the Manley Corporation. Total
stockholders' equity divided by the number of common stock shares outstanding is called
a. book value per share.
b. par value per share.
c. stated value per share.
d. market value per share

13. When accounting for the purchase of treasury stock, which of the following should you do?
a. Credit the equity Account c. Debit the cash account
b. Debit the treasury stock account d. Credit the paid in capital account

14. What are shares that represent the number of shares the company can issue as stated in its articles
of incorporation?
a. Authorized shares c. Issued shares
b. Incorporated shares d. Outstanding shares

15. Which of the following is a reason that a company may repurchase its shares?
a. To decrease interest in the company's shares on the open market
b. To satisfy management bonuses when there are too many authorized shares available
c. To de-stabilize the market value of the share by removing supply from the market
d. To avoid a takeover by another company

16. What is a dividend?

a. The amount of money that a company retains by reinvesting its annual profits back into the business.
b. The amount of money that a company makes that it chooses to give back to its shareholders.
c. The amount of money that a company makes.
d. The profit gain from the stocks owned.

17. MM Company has 560,000 shares of P10 par value common stock outstanding. During the year MM
declared a 5% stock dividend when the market price of the stock was P48 per share. Two months later
MM declared a P0.60 per share cash dividend. As a result of the dividends declared during the year,
retained earnings decreased by:
a. 336,000 b. 1,344,000 c. 1,680,000 d. 1,696,800
18. On December 1, 2022, Abel Corporation exchanged 20,000 shares of its Php 10 par value common
stock held in treasury for a used machine. The treasury shares were acquired by Abel at a cost of Php 40
per share, and are accounted for under the cost method. On the date of the exchange, the common
stock had a market value of Php 55 per share (the shares were originally issued at Php 30 per share). As
a result of this exchange, Abel's total stockholders' equity will increase by
a. Php 200,000. b. Php 800,000. c. Php 1,100,000. d. Php 900,000

19. Written, Inc. has outstanding 300,000 shares of Php 2 par common stock and 60,000 shares of no-
par 8% preferred stock with a stated value of Php 5. The preferred stock is cumulative
and nonparticipating. Dividends have been paid in every year except the past two years and the current
year.
Assuming that Php 150,000 will be distributed as a dividend in the current year, how much will the
common stockholders receive?
a. Zero. b. Php 78,000. c. Php 102,000. d. Php 126,000

20. Assuming that Php 63,000 will be distributed as a dividend in the current year, how much will the
preferred stockholders receive?
a. Php 21,000. b. Php 24,000. c. Php 48,000. d. Php 63,000.

21. Assuming that Php 183,000 will be distributed, and the preferred stock is also participating,how
much will the common stockholders receive?
a. Php 111,000. b. Php 90,000. c. Php 93,000. d. Php 48,000

22. Yoder, Inc. has 50,000 shares of Php 10 par value common stock and 25,000 shares of Php 10 par
value, 6%, cumulative, participating preferred stock outstanding. Dividends on the preferred stock are
one year in arrears. Assuming that Yoder wishes to distribute Php 135,000 as dividends, the
common stockholders will receive:
a. Php 30,000. b. Php 55,000. c. Php 80,000. d. Php 105,000.

23. Mann Co. has outstanding 50,000 shares of 8% preferred stock with a Php 10 par value and 125,000
shares of Php 3 par value common stock. Dividends have been paid every year except last year and
the current year. If the preferred stock is cumulative and nonparticipating and Php 250,000 is
distributed, the common stockholders will receive
a. Php 0. b. Php 170,000. c. Php 210,000. d. Php 250,000

24. On May 1, 2023, Ziek Corp. declared and issued a 10% common stock dividend. Prior to this
dividend, Ziek had 100,000 shares of Php 1 par value common stock issued and
outstanding. The fair value of Ziek 's common stock was Php 20 per share on May 1, 2023.As a result of
this stock dividend, Ziek's total stockholders' equity
a. increased by Php 200,000. c. decreased by Php 10,000
b. decreased by Php 200,000. d. did not change

25. Statement 1: All dividends, except for liquidating dividends, reduce the total stockholders’ equity of
a corporation
Statement 2: Treasury stock is a company’s own stock that has been reacquired and retired
a. Both statements are true c. Only statement 1 is correct
b. Both statements are false d. Only statement 2 is correct

26. Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
a. Liquidity b. Profitability c. Marketability d. Solvency

27. In analyzing the financial statements of a company, a single item on the financial
statements
a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
c. is significant only if it is large.
d. should be accompanied by a footnote
28. Long-term creditors are usually most interested in evaluating
a. liquidity and solvency. c. liquidity and profitability
b. solvency and marketability. d. profitability and solvency.

29. Each of the following is a liquidity ratio except the

a. acid-test ratio c. debt to total assets ratio
b. current ratio. d. inventory turnover

30. Walker Clothing Store had a balance in the Accounts Receivable account of Php 437,500 at the
beginning of the year and a balance of Php 500,000 at the end of the year. Net credit sales during the
year amounted to Php 3,000,000. The average collection period of the receivables in terms of
days was:
a. 53 days b. 365 days c. 60 days d. 57 days

31. Asset turnover measures

a. how often a company replaces its assets.
b. how efficiently a company uses its assets to generate sales.
c. the portion of the assets that have been financed by creditors.
d. the overall rate of return on assets.

32. Silas Corporation had net income of Php 240,000 and paid dividends to ordinary
shareholders of Php 40,000 in 2022. The weighted average number of shares outstanding in 2022 was
60,000 shares. Silas Corporation's ordinary shares are selling for Php 76 per shareon the New York Stock
Exchange. Silas Corporation's price-earnings ratio is
a. 3.2 times b. 19 times c. 22.8 times d. 12.7 times

33. Farr Company reported the following on its income statement: Income before income taxes Php
600,000 Income tax expense: 150,000 Net income: Php 450,000. An analysis of the income statement
revealed that interest expense was Php 60,000. Farr Company's times interest earned was
a. 11 times b. 10 times c. 8.5 times d. 7.5 times.
34. The debt to total assets ratio measures
a. the company's profitability.
b. whether interest can be paid on debt in the current year.
c. the proportion of interest paid relative to dividends paid.
d. the percentage of the total assets provided by creditors

35. A supplier to a company would be most interested in the company’s

a. asset turnover. b. profit margin. c. current ratio. d. earnings per share.

36. Baden Company had Php 375,000 of current assets and Php 150,000 of current liabilities before
borrowing Php 75,000 from the bank with a 3-month note payable. What effect did the
borrowing transaction have on the amount of Baden Company's working capital?
a. No effect b. Php 75,000 increase c. Php 150,000 increase d. Php 75,000 decrease

37. Dooley Corporation had net income of Php 200,000 and paid dividends to ordinary
shareholders of Php 40,000 in 2022. The weighted average number of shares outstanding in 2022 was
50,000 shares. Dooley Corporation's ordinary shares are selling for Php 30 per share. Dooley
Corporation's price-earnings ratio is
a. 6 times. b. 7.5 times. c. 4 times. d. 9.4 times.

38. Davis Corporation reported net income Php 58,000, net sales Php 500,000, and average assetsPhp
800,000 for 2022. The 2022 profit margin was
a. 5.8%. b. 11.6%. c. 62.5%. d. 160%
39. The purchases-raw materials account is debited when:
a. indirect materials are placed into production
b. direct materials are placed into production
c. indirect materials are purchased
d. direct materials are purchased

40. Each of the following is true with respect to product costs, except:
a. Product costs are deducted from revenue when manufacturing process is completed
b. Product costs are not regarded as expenses of the current period
c. Product costs represent inventoriable costs
d. Direct labor is an example of a product cost.

41. Which of the following is not likely to be treated as a product costs?

a. Depreciation on the factory
b. Salary of sales manager
c. Salary paid to factory workers
d. Portion of the cost of running the quality control department

42. The wage of a timekeeper in the factory would be classified as:

a. prime cost b. direct labor c. indirect labor d. administrative expense

Items 43 and 44 are based on the following data of Matatag Company for the month of March 2023.
March 1 March 31
Materials 40,000 50,000
Work in Process 25,000 35,000
Finished Goods 60,000 70,000
March 1 to 31, 2023
Direct Labor Cost 120,000
Factory Overhead 108,000
Cost of Goods Sold 378,000

43. The total amount of direct materials purchased during March was:
a. 50,000 b. 170,000 c. 180,000 d. 220,000

44. The cost of goods manufactured during March, 2023 was:

a. 378,000 b. 388,000 c. 398,000 d. 428,000
45. A dividend which is a return to stockholders of a portion of their original investments is a
a. liquidating dividend. b. property dividend. c. liability dividend. d. participating
dividend

46. The rate of return on common stock equity is calculated by dividing:

a. net income less preferred dividends by average common stockholders’ equity.
b. net income by average common stockholders’ equity.
c. net income less preferred dividends by ending common stockholders’ equity.
d. net income by ending common stockholders’ equity
47. Noncumulative preferred dividends in arrears:
a. are not paid or disclosed.
b. must be paid before any other cash dividends can be distributed.
c. are disclosed as a liability until paid.
d. are paid to preferred stockholders if sufficient funds remain after payment of thecurrent
preferred dividend.

48. Total stockholders' equity represents:

a. a claim to specific assets contributed by the owners.
b. the maximum amount that can be borrowed by the enterprise.
c. a claim against a portion of the total assets of an enterprise.
d. only the amount of earnings that have been retained in the business

49. Stock that has a fixed per-share amount printed on each stock certificate is called:
a. stated value stock. b. fixed value stock. c. uniform value stock. d. par value stock.

50. Gannon Company acquired 6,000 shares of its own common stock at Php 20 per share on February
5, 2023, and sold 3,000 of these shares at Php 27 per share on August 9, 2023.The market value of
Gannon's common stock was Php 24 per share at December 31, 2022, and Php 25 per share at
December 31, 2023. The cost method is used to record treasury stock transactions. What account(s)
should Gannon credit in 2023 to record the sale of 3,000 shares?
a. Treasury Stock for Php 81,000.
b. Treasury Stock for Php 60,000 and Paid-in Capital from Treasury Stock for Php 21,000.
c. Treasury Stock for Php 60,000 and Retained Earnings for Php 21,000.
d. Treasury Stock for Php 72,000 and Retained Earnings for Php 9,000