Assessment – Shareholder’s Equity

1. The accounts shown below appear in the December 31, 2018 trial balance of Hollow Corp:
Preference share, authorized, P50 par P 10,000,000
Unissued preference share 3,600,000
Ordinary share, authorized, P20 par 4,000,000
Unissued ordinary share 2,000,000
Subscription receivable, preference share 380,000
Subscription receivable, ordinary share 360,000
Subscribed preference share 600,000
Subscribed ordinary share 440,000
Treasury share, preference, at cost 1,360,000
Share premium 1,700,000
Accumulated profits and losses 2,000,000
All subscription receivables are due in year 2019.
How much is the total shareholders’ equity of Hollow Corp?
a. 11,040,000 c. 12,400,000
b. 11,780,000 d. 13,760,000

2. Steam Co. disclosed the following information for the year ended December 31, 2018:
Bonds Payable P 300,000
Share premium on ordinary share 50,000
Donated capital 40,000
Treasury share at cost 20,000
Ordinary share capital, par P100 500,000
Ordinary share option warrants 100,000
Investments in Available for sale securities 70,000
Share premium from treasury share 15,000
Accumulated profits and losses 135,000
What is the total shareholders’ equity of Steam Co. for the year ended December 31, 2018?
a. P720,000 c. P820,000
b. P760,000 d. P860,000

3. Hallway Co. issued 20,000 shares of its P10 par value ordinary share and 40,000 shares of its P10
par value convertible preference share for a total amount of P1,800,000. At this date, Hallway’s
ordinary share was selling P20 per share and the convertible preference share was selling for P30
per share. What amount of the proceeds should be allocated to the ordinary share?
a. 400,000 c. 600,000
b. 450,000 d. 1,350,000

4. On January 1, 2016, Alyanna Co. had 110,000 shares issued and 100,000 shares outstanding.
The entity had the following transactions in 2016:
March 1 Issued 15,000 shares
June 1 Resold 2,500 shares of treasury
Sept 1 Completed a 2-for-1 share split
What is the number of shares outstanding on December 31, 2016?
a. 117,500 c. 235,000
b. 230,000 d. 250,000

5. Rudd Co. had 700,000 ordinary shares authorized and 300,000 shares outstanding on December
31, 2016.
The following events occurred during 2017:
January 31 Declared 10% stock dividend
June 30 Purchased 100,000 shares
August 1 Reissued 50,000
November 30 Declared 2-for-1 stock split
On December 3, 2017, how many ordinary shares are outstanding?
a. 560,000 c. 630,000
b. 600,000 d. 660,000

6. Hallway Co. issued 20,000 shares of its P10 par value ordinary share and 40,000 shares of its P10
par value convertible preference share for a total amount of P1,800,000. At this date, Hallway’s
 ordinary share was selling P20 per share and the convertible preference share was selling for P30
per share. What amount of the proceeds should be allocated to the ordinary share?
a. P400,000 c. P600,000
b. P450,000 d. P1,350,000

7. Hallway Co. issued 20,000 shares of its P10 par value ordinary share and 40,000 shares of its P10
par value convertible preference share for a total amount of P1,800,000. At this date, Hallway’s
ordinary share was selling P20 per share and the convertible preference share was selling for P30
per share. What amount of the proceeds should be allocated to the ordinary share?
a. P400,000 c. P600,000
b. P450,000 d. P1,350,000

8. Corridor Co. issued 6,000 shares of its P100 par ordinary share to Max L. as compensation for
1,000 hours of legal services performed. Max L. usually bills P500 per hour for legal services. On
this date of issuance, the share was selling at a public trading at P150 per share. By what amount
should the share premium account of Corridor Co. increase as a result of the issuance of those
shares?
a. P300,000 c. P900,000
b. P600,000 d. P3,000,000

9. Martyr Co. issued 15,000 shares of its P100 par ordinary share in acquiring aland that was
recently appraised at P1,700,000. The ordinary share is actively selling at P120 per share. What is
the amount of share premium to be credited on the issuance of shares?
a. P200,000 c. P500,000
b. P300,000 d. P600,000

10. On July 1, 2018, Boon exchanged 20,000 shares of its P200 par value of equity shares for land. A
few months ago, the land was appraised by an independent appraiser at P5,000,000. Boom shares
are currently traded at the stock exchange at P300. The earnings per share is P40. How much
should be debited to land account?
a. P4,000,000 c. P6,000,000
b. P5,000,000 d. P7,000,000

11. Ribbon Co. issued 10,000 of its 6% preference share; par P100, at P125 er share. Each share
carried a detachable share warrant for one share pf Ribbon’s ordinary share, P40 par, at a
specified option price of P50 per share. Immediately after issuance, the market value of Ribbon’s
preference share was P1,140,000 and the warrants was P60,000. What portion of the proceeds
should be credited to ordinary share warrants outstanding?
a. None c. P62,500
b. P60,000 d. P250,000

12. The shareholders’ equity section of Fan Co. revealed the following information on December 31,
2018:
Preference share (P100 par), P2,300,000; share premium in excess of par-preference, P805,000;
ordinary share (P15 par), P5,250,000; share premium in excess of par-ordinary, P2,750,000;
subscribed ordinary share, P50,000; Accumulated profits and losses, P1,900,000; and
subscriptions receivable-ordinary, P400,000. How much is the legal capital?
a. P7,550,000 c. P11,150,000
b. P7,600,000 d. P13,055,000

13. On July 1, 2018, Solo Co. has 200,000 shares of P10 par ordinary share outstanding and the
market price of the share is P12 per share. On the same date, Solo declared a 1 for 2 reverse share
split. The par of the share was increased from P10 to P20. Immediately before the split, the total
Share Premium was P900,000. What should be the balance in Solo’s Share Premium account
after the reverse stock/split is effected?
a. None c. P1,300,000
b. P900,000 d. P1,700,000
14. The following capital accounts are shown in the balance sheet of Laughing Corp:
Ordinary share, 10,000 shares, par value P100 P 1,000,000
Share Premium-Ordinary share 20,000
Share Premium-treasury share 30,000
Accumulated profits and losses 750,000
Treasury share, 2,000 shares at cost 250,000
The entire 2,000 treasury shares were sold for P200,000.
What would be the balance of the Accumulated Profits and Losses account after this sale?
a. 250,000 c. 730,000
b. 700,000 d. 750,000

15. Francisco Co. was organized on January 2, 2018 with 300,000 ordinary shares with a P6 par
value authorized. During 2018, Francisco had the following stock transactions:
January 2 Issued 60,000 shares at P10 per share
March 8 Issued 20,000 shares at P11 per share
May 11 Purchased 7,500 shares at P12 per share
July 2 Issued 15,000 shares at P13 per share
August 17 Sold 5,000 treasury shares at P14 per share
Francisco uses the FIFO method for purchase sale purposes. If Francisco uses the cost method to
record treasury stock transactions, how much would be the Share Premium at December 31,
2018?
a. 445,000 c. 465,000
b. 455,000 d. 485,000

16. The shareholders’ equity section of Bless Corp. balance sheet at December 31, 2018 was as
follows:
Ordinary share (P10 par value, authorized 1,000,000
shares issued and outstanding 900,000 shares) P 9,000,000
Share Premium 2,700,000
Accumulated Profits and Losses 1,300,000
Total Shareholders’ Equity P 13,000,000
On Jan. 2, 2014, Bless purchased and retired 100,000 shares of its own equity for P1,800,000.
Immediately after retirement of these 100,000 shares, the balance in the Share Premium and
Accumulated Profits should be
Share Premium Accumulated Profits
a. 900,000 1,300,000
b. 1,400,000 800,000
c. 1,900,000 1,300,000
d. 2,400,000 800,000

17. During 2018, Lamb Co. issued 10,000 shares of P100 par value convertible preference share for
P110 per share. One preference share can be converted into 3 shares of Lamb’s P25 par ordinary
share at the option of the preference shareholder. On December 31, 2019, when the market value
of the ordinary share was P40, the entire preference share was converted. How much should
Lamb credit to Share Premium as a result of the conversion?
a. None c. P350,000
b. P100,000 d. P450,000

18. The company’s shareholder’ equity on June 30, 2018 consists of the following:
Ordinary Share, P100 par, 4,000 shares issued and outstanding P 400,000
Share Premium 240,000
Accumulated Profit and Losses 320,000
On August 1, 2018, Office Co. issued rights to shareholders to subscribe to additional shares of
its ordinary share. One right was issued for each share owned. A shareholder could purchase one
additional share for P10 right plus P60 cash. The rights expire on November 30, 2018. On August
1, 2018, the market value of the share with the right attached was P160, while the market price of
the right alone was P8. How much should the Office Co.’s Accumulated Profits and Losses
account decrease as a result of the issuance if the share rights on August 1, 2018?
a. None c. P32,000
b. P20,000 d. P40,000
 19. In May 2018, Spar Co. made a dividend distribution of one right for each of its 24,000 ordinary
shares outstanding. Each right was exercisable for the purchase of 1/0 of a share of Spar’s P50
variable rate preference share at an exercise price of P80 per share. On March 15, 2019, none of
the rights had been exercised and Spar redeemed them by paying each shareholder P10 per right.
What is the effect on the shareholders’ equity as a result of the redemption of share rights?
a. P2,400 decrease c. P240,000 decrease
b. P48,000 decrease d. P720,000 decrease

20. Chester Co. grants 2,000 share options to each of its five directors on July 1, 2013. The options
vest on June 30, 2017. The fair value of each option on July 1, 2013 is P5 and it is anticipated that
all of the share options will vest on June 30, 2017. What will be the accounting entry in the
financial statements for the year ended December 31, 2014?
a. Increase equity P50,000, increase in expense income statement P50,000
b. Increase equity P10,000, increase in expense income statement P10,000
c. Increase equity P12,500, increase in expense income statement P12,500
d. Increase equity zero, increase in expense income statement zero

On January 1, 2016, H Co. granted 20,000 shares with a fair market value of P30 per share to its key
officers, conditional upon the completion of three years’ service. By the end of 2017, the share price has
dropped to P26 per share. Immediately, H Co. adds a cash alternative to the grant, whereby the officer can
choose whether to receive 20,000 shares or cash equal to the value of 20,000 shares on vesting date,
which is on December 31, 2018. December 31, 2018, the share price is P24.

21. What amount of remuneration cost should the company recognize in its December 31, 2018 profit
or loss?
a. 160,000 c. 400,000
b. 200,000 d. 600,000

22. What is the balance of the liability component of the instrument as of December 31, 2017?
a. None c. P346,667
b. P80,000 d. P480,000

23. What is the balance of the liability component of the instrument as of December 31, 2018?
a. None c. P346,667
b. P80,000 d. P480,000

24. What is the balance of the equity component of the instrument as of December 31, 2017?
a. 53,333 c. 346,667
b. 80,000 d. 400,000

25. What is the balance of the equity component of the instrument as of December 31, 2017?
a. 53,333 c. 346,667
b. 80,000 d. 400,000

26. The company granted Vati Cann, a top executive of Rome Corp., a share option on December 31,
2016, when the market price of the company’s share was P90 per share. The share option allows
Vati to acquire 2,000 shares of P15-value ordinary share for P85.50 per share after completing a
2-year service period. The option expires on December 31, 2017. On April 15, 2017, Vati Cann
exercised the option. How much is the Share Premium from the exercise of the share option on
April 15, 2017?
a. 132,000 c. 141,000
b. 135,000 d. 150,000

27. The Accumulated Profits and Losses account of Gabby Co. shows the ff. postings:
Debit:
Share Dividends P 500,000
Uninsured fire loss 175,000
Prior year’s errors 214,000
Reserved for bond redemption 300,000
Credit:
Beginning balance 1,120,000
Net income for the year 760,000
 Excess of par value 250,000
Gain on sale of treasury shares 150,000
Ending balance 1,091,000
What is the correct balance of the Accumulated Profits account to be reported in the company’s
year-end financial statement?
a. 691,000 c. 2,241,000
b. 2,091,000 d. 2,910,000

28. New Castle Co. had the following classes of shares outstanding as of December 31, 2018:
Ordinary shares, P20 par value, 20,000 outstanding; Preference shares, 6% P100 par value,
cumulative and fully participating, 1,000 shares were outstanding.
The last payment of preference dividend was on December 31, 2015. On December 31, 2018, a
total cash dividend of P90,000 was declared. What are the amounts of dividends payable on both
the ordinary and preference shares, respectively?
a. P57,600 and P32,400 c. P67,200 and P22,000
b. P62,400 and P27,600 d. P72,000 and P18,000

Generic Corp. paid dividends of P200,000 and P300,000 at the end of 2018 and 2019 respectively. The
corporation has not paid any other dividends since its organization on January 2, 2018. The outstanding
shares are 20,000, 12% preference shares, par P100 and 30,000 ordinary shares, par P100.
29. If preference shares is non-cumulative and non-participating, how much would be received in
2018 by the preference and ordinary shareholders, respectively?
a. P100,000 and P100,000 c. P160,000 and P40,000
b. P150,000 and P50,000 d. P200,000 and P0

30. If preference shares were cumulative and nonparticipating, how much would the preference and
ordinary shareholders, respectively, receive in 2019?
a. P150,000 and P150,000 c. P280,000 and P20,000
b. P240,000 and P60,000 d. P300,000 and P0

31. Screensaver Corp. Accumulated Profits and Losses at December 31, 2018 amounted to
P2,000,000. On that date, Screensaver declared and distributed its investment property, that was
carried under the fair value model, as property dividend. The investment property which was
acquired at a historical cost of P300,000 has a fair market value of P450,000 on December 31,
2018. On the date of declaration and distribution, by what amount should Accumulated Profits
and Losses be charged?
a. None c. P300,000
b. P150,000 d. P450,000

On October 31, 2018, Noah Co. declared its non-current asset as a dividend with a carrying value of
P2,000,000 and has a current fair value of P1,800,000. On December 31, 2018, non-current asset has a
fair value of P1,700,000. The non-current asset was distributed on March 31, 2019 when its fair value was
P1,600,000.
32. What amount should be charged to retained earnings at the time the dividend was declared?
a. P1,600,000 c. P1,800,000
b. P1,700,000 d. P2,000,000

33. What amount of property dividends payable should the company disclosed in their December 31,
2018 statement of financial position?
a. P1,600,000 c. P1,800,000
b. P1,700,000 d. P2,000,000

On October 31, 2018, New Moon Co. declared its non-current asset (land) as a dividend with a carrying
value of P2,000,000 and has a current fair value of P1,850,000. On December 31, 2018, the non-current
asset has a fair value of P2,100,000. The non-current asset was distributed on March 31, 2019 when its
fair value was P2,250,000.
34. What amount should be charged to retained earnings at the time the dividend was declared?
a. 1,850,000 c. 2,100,000
b. 2,000,000 d. 2,250,000

35. What amount of property dividends payable should the company disclose in their December 31,
2018 statement of financial position?
 a. 1,850,000 c. 2,100,000
b. 2,000,000 d. 2,250,000

36. What amount of asset held for disposal should the company disclose in their December 31, 2018
statement of financial position?
a. 1,850,000 c. 2,100,000
b. 2,000,000 d. 2,250,000

37. Harmony Corp. declared share dividends of 1 share for every 5 shares owned on its 200,000
issued and outstanding ordinary shares with a par value of P50 per share. At the time of
declaration, the market value of ordinary shares was P80 per share and P100 per share at the time
the shares were issued. What amount should be charged to the Accumulated profits and Losses
account and credit liability accounts, respectively?
a. P2,000,000 and P0 c. P4,000,000 and P0
b. P2,500,000 and P2,500,000 d. P4,000,000 and P4,000,000

38. The shareholders’ equity of Harmful Co. on January 1, 2018 is as follows:

Ordinary shares, P20 par, 60,000 shares authorized, 30,000
Shares issued and outstanding P 600,000
Share Premium 100,000
Accumulated Profits 325,000
On June 2018 the company declared and issued a 15% share dividend. The market value of the
share on June 1 is P26 per share. No additional shares of ordinary were issued between January 1
and June 1, 2018. How much is the total contributed capital after the share dividend?
a. P780,000 c. P817,000
b. P790,000 d. P924,000

39. On January 2, 2018, Mining Corp declared a cash dividend of P600,000 to shareholders of record
on January 19, 2018 and payable on February 14, 2018. The following data pertain to 2017:
Net income for the year ended December 31, 2017 P 190,000
Share premium, December 31, 2017 675,000
Accumulated profits, December 31, 2017 425,000
The P600,000 dividend includes a liquidating dividend of
a. None c. P410,000
b. P175,000 d. P485,000

40. On December 31, 2018, Crane Corp. reported a P3,500,000 of appropriated accumulated profits
for the construction of a new building, which was completed in 2019 at a total cost of P3,000,000.
In 2019, the company appropriated P2,400,000 of accumulated profits for the construction