UNIVERSITY OF CEBU – BANILAD

COLLEGE OF ACCOUNTANCY
BANILAD, CEBU CITY
Accounting 111B (Corporation – Share Capital)
Name _______________________ Course & yr. __________ Schedule ______________ Score _____________

I – Multiple Choice. Encircle the letter of the best answer in each of the given question/s.

1. Which of the following qualifications is necessary in order that one may be elected president of the corporation?
A. He must be a citizen and a resident of the Philippines.
B. He must be a director of the corporation.
C. He must not be a shareholder or director of a competitor corporation.
D. He must not be a president of any other corporation.
E. All of the above.
2. It is the supreme authority in matters of management of the regular and business affairs of a corporation.
A. board of directors C. minority shareholders
B. majority shareholders D. None of the choices
3. Choose the situation which illustrates the minimum requirement of the law(before the RCCP) to corporate formation:
Authorized Capital Subscribed Capital Paid-in Capital
A. P100,000 P25,000 P5,000
B. 100,000 5,000 5,000
C. 50,000 12,500 3,125
D. 60,000 15,000 5,000
4. The following are the steps in the creation of organization of a corporation except
A. incorporation C. formal organization and commencement of business operations
B. promotion D. None of the choices
5. The par value of ordinary shares is equal to
A. the amount received by the corporation when the share was originally issued.
B. the amount at which the share is currently trading in an organized market.
C. a designated peso amount per share established in the articles of incorporation.
D. the book value of the ordinary shares.
6. The arbitrary value assigned to a share of stock is called
A. market value B. par value C. liquidation value D. book value
7. Right of the corporation to continue as a juridical entity for the period stated in the Articles of Incorporation despite the
death of any shareholder:
A. right of succession B. right of pre-emption C. right of existence D. none of the choices
8. The directors of a corporation are responsible for
A. declaring dividends C. the day to day managing of the business
B. maintaining shareholder records D. preparation of accounting records and financial statements
9. A corporation is being organized with an authorized share capital of P50,000. How much of this P50,000 should be
subscribed and how much must be actually paid?
Amount Subscribed Amount Paid
A. P12,500 P3,125
B. 10,000 2,500
C. 25,000 6,250
D. 12,500 5,000
10. A corporation has the following attributes except
A. an artificial being with a personality separate and apart from its shareholders.
B. created by operation of law.
C. enjoys the right of succession.
D. has the powers, attributes and properties expressly authorized by law or incident to its existence.
E. none of the above.
11. The owners of shares in a stock corporation are called
A. incorporators B. promoters C. members D. shareholders
12. Refers to an equitable right of shareholders to subscribe to newly issued shares of the corporation in proportion to their
present shares in order to maintain their equity in their surplus as well as proportionate standing in the corporation.
A. right of redemption B. pre-emptive right C. right to be sued D. concept of corporate
entity
13. The advantage of a corporation from a partnership is
A. The death of a shareholder will not dissolve the corporation because of its power of succession.
B. Its management is centralized on the board of directors.
C. Shareholders have limited liability.
D. Shareholders are not general agents of the business.
E. All of the above
F. None of the above.
14. The most powerful person in a corporation is the
A. incorporator B. president C. vice-president D. chairman of the board
15. The shareholders or members mentioned in the Articles of Incorporation originally forming and composing the
corporation and who are signatories thereof are called
A. incorporators B. corporators C. promoters D. subscribers E. none of the above
16. One of the following is not a characteristic of the corporate form of organization.
 A. limited liability of shareholders C. continuous existence
B. mutual agency D. centralized authority
17. The ordinary stock of the corporation entitling the owner to pro-rata dividends without any priority over any other
shareholders but equally with all other shareholders except preference shareholders is
A. preference share B. guaranteed share C. convertible share D. ordinary share
18. One who has agreed to take shares from the corporation on the original issue of such share is called
A. incorporator B. member C. promoter D. subscriber D. none of the above
19. No par value shares cannot be issued
A. for less than P5.00
B. with preference as to assets or as to dividends
C. without being fully paid
D. by banks, trust companies, insurance companies, public utilities, and building and loan associations.
E. all of the above
20. Five persons decided to organize a corporation. Which of the following situation illustrates best the minimum
requirement of the law to capital formation?
Authorized Capital Subscribed Capital Pain-in Capital
A. P100,000 P20,000 P5,000
B. 100,000 25,000 5,000
C. 100,000 25,000 6,250
D. 100,000 30,000 6,000
21. A corporation has ordinary shares with a P10 par value. A new share of this stock is issued for P13 to an investor.
Which of the following is correct?
I. The entity will debit ordinary shares for the par value of P10.
II. The entity will debit cash for P13 and credit gain on sale of stock for P3 if the purchaser of the stock was already a
shareholder and is simply buying additional shares.
A. I only B. II only C. both I and II D. neither I nor II
22. The entity has ordinary shares with a P10 par value and fair market value of P15. The entity exchanges 1,000 shares of
this ordinary shares for a real estate property.
I. The land will be debited for P10,000.
II. The ordinary shares account will be credited for P10,000 and no share premium will be recorded.
A. I only B. II only C. both I and II D. neither I nor II
23. An entity was organized in January 2018 with authorized capital of P10 par value ordinary shares. On February 1, 2018,
2 shares were issued at par for cash. On March 1, 2018, the entity’s attorney accepted 5,000 shares of the ordinary
shares in settlement for legal services with a fair value of P60,000. Share premium would increase on
I. February 1, 2018
II. March 1, 2018
A. I onl B. II only C. both I and II D. neither I nor II
24. Poliran Corp. issues 2,000 shares of its P5 par value ordinary shares to Klein as compensation for 500 hours of trust
services performed. Klein usually bills P180 per hour for similar services. On the date of issuance the Poliran Corp.
stock was traded on a public exchange at P100 per share. The journal entry to record the stock issued to Klein would
include a
I. credit to ordinary share for P10,000
II. credit to share premium for P190,000
A. I only B. II only C. both I and II D. neither I nor II
25. Mr. A subscribers to buy 1,000 shares of the ordinary shares of an entity Z for P22 per share, although the par value is
only P10 per share. He pays P4 per share immediately and will pay the remaining P18 per share later. Which of the
following is correct?
I. Share premium is increased at the time of the subscription by P4,000.
II. On the day of the subscription, an ordinary shares subscribed account is increased for the P10 par value of the stock.
A. I only B. II only C. both I and II D. neither I nor II
26. Treasury stock is considered to be
A. authorized and issued shares C. authorized and unissued shares
B. issued and outstanding shares D. unissued and outstanding shares
27. Which of the following statements about treasury stock are correct?
I. Treasury stock does not receive dividends.
II. Treasury stock is not included in the earnings per share calculation.
III. Treasury stock is the same as unauthorized stock.
IV. Treasury stock does not have voting rights.
A. I, II, and IV B. I, II, and III C. II, III, and IV D. I, II, III, and IV
28. When a corporation issues new ordinary shares, which of the following will increase?
I. Total Liabilities
II. Total Assets
III. Quick Assets
IV. Net Worth
A. I and II B. III and IV C. II, III, and IV D. I, II, III, and IV
29. An advtage of a partnership is
A. limited liability B. ability to raise capital C. ease of formation D. transfer of ownership.
30. If a partner in a partnership dies,
A. each remaining partner receives an equal share of the deceased partner’s ownership of the business.
B. the partnership is dissolved.
C. the partner’s spouse takes the deceased partner’s place.
 D. a new partner is added to the partnership.
31. On the balance sheet, a corporation must disclose all of the following except the number of shares
A. authorized B. issued C. unissued D. outstanding
32. Authorized shares are the
A. number of shares that have been distributed to shareholders.
B. total number of shares that can be issued by the corporation at any time.
C. number of shares that are owned by shareholders at the balance sheet date.
D. number of shares the corporation has repurchased.
33. Issued are the
A. number of shares that have been distributed to shareholders.
B. total number of shares that can be issued by the corporation at any time.
C. number of shares that are owned by shareholders at the balance sheet date.
D. number of shares the corporation has repurchased.
34. Outstanding shares are the
A. number of shares that have been distributed to shareholders.
B. total number of shares that can be issued by the corporation at any time.
C. number of shares that are owned by shareholders at the balance sheet date.
D. number of shares the corporation has repurchased.
35. Treasury shares are the
A. number of shares that have been distributed to shareholders.
B. total number of shares that can be issued by the corporation at any time.
C. number of shares that are owned by shareholders at the balance sheet date.
D. number of shares the corporation has repurchased.
36. The difference between issued shares and outstanding shares of stock is
A. authorized stock B. common stock C. preferred stock D. treasury stock
37. When Bradley Corporation incorporated, it was authorized to issue 1,000,000 shares of common stock. It immediately
issued 50,000 shares. In 2015, it issued an additional 20,000 shares. In 2018, it repurchased 5,000 shares with the intent
of reissuing them. On the December 31, 2018, balance sheet, Bradley Corporation would show
A. 50,000 shares issued and 45,000 shares outstanding C. 70,000 shares issued and 70,000 shares outstanding
B. 70,000 shares issued and 65,000 shares outstanding D. 1,000,000 shares issued and outstanding
38. On a statement of financial position, treasury stock is shown as a(n)
A. asset C. deduction from the ordinary shares account
B. liability D. deduction from total shareholders’ equity
39. Which of the following is a characteristic of ordinary shares?
A. voting rights C. Maturing date
B. Guaranteed dividends D. Receives dividends before preference shareholders
40. Ordinary shareholders usually have all of the following rights except to
A. vote to elect the board of directors.
B. share in the assets in a profitable liquidation.
C. participate in day to day operations of the entity.
D. receive their proportional share of dividends, if dividends are declared.
41. Which of the following is a characteristic of preference shares?
A. voting rights C. Maturing date
B. Guaranteed dividends D. Receives dividends before ordinary shareholders
42. Preference shares has preference over ordinary shares relative to
A. dividends and voting rights C. voting rights and assets at liquidation
B. dividends and assets at liquidation D. dividends and maturity date
43. A corporation might repurchase its own stock for all of the following reasons except to
A. vote for the board of directors C. improve financial ratios
B. use for employee compensation D. deter a takeover attempt
44. If a corporation reissued at P400 per share 100 shares of treasury stock that it had previously acquired for P560 per
share and there wasn’t any Share Premium-Treasury, it would debit
A. Loss on Sale of Treasury Stock for P16,000. C. Retained Earnings for P16,000.
B. Share Premium-Ordinary for P16,000 D. Treasury Stock for P16,000.
45. Corpuz, Inc. has issued 200,000 shares of 2 par value ordinary shares at P30. If it repurchases 5,000 shares during 2018
at P40,
A. profit would decrease by P50,000 C. shareholders’ equity would decrease by P50,000
B. profit would decrease by P200,000 D. shareholders’ equity would decrease by P200,000
46. Which of the following is not an advantage of the corporate form of organization?
A. Government regulation C. Limited liability of shareholders
B. Easy transfer of ownership D. Continuous existence of the entity
47. Reissuing treasury stock at a price above cost results in
A. a gain to be reported as a separate item in the statement of recognized income and expense.
B. a prior period adjustment to be reported in the statement of retained earnings.
C. a restriction of retained earnings.
D. an increase in share capital.
48. Which of the following is most relevant in determining the cost of assets acquired in exchange for share capital?
A. fair market value of the share C. par or stated value of the share
B. fair market value of the asset D. issuance price of share already outstanding
49. Treasury stock transactions may result in
A. increases in the balance of retained earnings.
 B. increases or decreases in the amount of profit.
C. increases or decreases in the amount of shares authorized to be issued.
D. decreases in the balance of retained earnings.
50. Par value
A. is the legal capital established for a share of stock. C. represents what a share of stock is worth.
B. is established for a share of stock after it is issued. D. represents the original selling price for a share of stock.
51. The number of shares of issued equals
A. authorized shares minus treasury shares C. unissued shares minus authorized shares
B. outstanding shares plus treasury shares D. subscribed shares plus outstanding shares
52. A corporation was organized in Jan. 2017 with authorized capital of P10 par value ordinary shares. On Feb. 1, 2017,
shares were issued at par for cash. On Mar. 1, 2017, a lawyer accepted 5,000 ordinary shares in settlement for legal
services with a fair market value of P60,000. Share premium increased on
Feb. 1, 2017 March 1, 2017
A. Yes No
B. Yes Yes
C. No No
D. No Yes
53. A corporation’s residual equity is its
A. ordinary and preference share C. ordinary shares
B. preference share D. creditors
54. All of the following normally are found in a corporation’s shareholders’ equity section except
A. Dividends in Arrears. C. Ordinary shares
B. Retained Earnings D. Share premium
55. An individual shareholder is entitled to receive any dividends declared on shares owned, provided the share in held on
the
A. date of declaration C. date of payment
B. date of record D. last day of a fiscal year
56. The maximum number of ordinary shares that may be issued according to the corporation’s charter is referred to as
A. issued shares B. unissued shares C. authorized shares D. outstanding shares
57. Which of the following is not included in Share Capital?
A. Ordinary Shares C. Shares Distributable
B. Donated Capital D. Appropriated Retained Earnings
58. Treasury stock is best described as
A. unissued share
B. an asset acquired by making a cash disbursement
C. reacquired share which was previously outstanding
D. retirement of a portion of outstanding share which increases total equity
59. Preference share that has dividends in arrears is
A. Noncumulative and non-participating preference share
B. Noncumulative and participating preference share
C. Noncumulative preference share
D. Cumulative preference share
60. When ordinary shares is sold on subscription
A. a shareholders’ equity account called Subscriptions Receivable is used to record the par value of the shares issued
B. the Ordinary Shares account is credited when the subscription contract is signed and a down payment is received.
C. the Ordinary Shares account is credited when the subscription price has been fully paid and the share is issued.
D. the Ordinary Shares account is not used. Shares issued on subscription are credited to Subscribed Ordinary Shares, a
permanent shareholders’ equity account.
61. Gains or losses on the purchase and resale of treasury stock may only be recorded in
A. share capital accounts C. retained earnings and share capital accounts
B. income and retained earnings accounts D. income, share capital and retained earnings accounts
62. Bonoan Corporation issued 10,000 shares of P20 par value ordinary shares at P24 per share. Bonoan reacquired 1,000
shares of its own stock at a cost of P30 per share. The entry to record the reacquisition is
A. Share Premium – Treasury 6,000
Treasury Stock 24,000
Cash 30,000
#
B. Share Premium-Treasury 10,000
Treasury Stock 20,000
Cash 30,000
#
C. Treasury Stock 30,000
Cash 30,000
#
D. Treasury Stock 20,000
Share Premium – Treasury 10,000
Cash 30,000
#
63. Cabance Corporation had 100,000 shares of P4 par value ordinary shares outstanding on June 12, 2017. On this date,
Cabance acquired 1,000 of its own shares as treasury stock at a cost of P12 per share. The acquisition was accounted
for by the cost method. As a result of this treasury stock purchase
 A. total assets and total shareholders’ equity were unaffected
B. total assets and total shareholders’ equity decreased.
C. total assets, retained earnings and total shareholders’ equity decreased.
D. total assets were unaffected but retained earnings decreased.
64. Which of the following is the primary element that distinguishes accounting for corporations from accounting for
partnerships?
A. The entity theory relates primarily to the other forms of business organization.
B. The corporation draws a sharper distinction in accounting for sources of capital.
C. In a corporation, retained earnings may be reduced only by the declaration of dividends.
D. Generally accepted accounting principles apply to corporations but have relatively little applicability to other forms
of business organization.
65. When ordinary shares is sold on a subscription basis and the entire subscription price has been collected, the issuance of
the share is recorded by
A. a debit to cash and a credit to Ordinary Shares
B. a debit to Subscription Receivable and a credit to Subscribed Ordinary Shares.
C. a debit to Ordinary Shares and a credit to Subscriptions Receivable
D. a debit to Subscribed Ordinary Shares and a credit to Ordinary Shares.
66. On Feb. 1, 2017 authorized ordinary shares was sold on a subscription basis at a price in excess of par value, and 20%
of the subscription price was collected. On May 1, the remaining 80% of the subscription price was collected. Share
premium increased on
February 1 May 1
A. No Yes
B. No No
C. Yes No
D. Yes Yes
67. Treasury stock was acquired for cash at a price in excess of its par value. The treasury stock was subsequently reissued
for cash at a price in excess of its acquisition price. If the cost method of accounting for treasury stock transactions is
used, what is the effect on retained earnings?
Acquisition of Reissuance of Treasury
Treasury Stock Stock
A. No effect Increase
B. No effect No effect
C. Increase Decrease
D. Decrease Increase
68. The issuance of preference share to shareholders
A. has no effect on preference share outstanding C. decreases preference share authorized
B. increases preference share outstanding D. increases preference share authorized
69. Evangelista Corp. paid a lawyer P5,000 to prepare its articles of incorporation. In recording this transaction, the
corporation should debit
A. ordinary shares B. treasury stock C. donated capital D. organization expense
70. The contributed capital of a corporation does not include
A. the stated value of ordinary shares issued C. share premium
B. retained earnings D. preference share

Problem Solving. Give the requirements accordingly with supporting computation/s.

A. On February 1, 2018, Patag Corp. issued 5,000 shares of P200 par convertible preference shares for P220 per share.
One share of preference shares can be converted into 2 shares of Patag Corp’s P20 par value ordinary shares at the
option of the preference shareholder. On December 31, 2019, when the market value was P80 per share, all of the
preference shares was converted.
Required:
1. What amount should be credited to share premium – preference on February 1, 2018? ____________
2. How much should be credited to share premium – ordinary as a result of the conversion on December 31, 2019?
______________

B. Estrada Inc. was organized on January 2, 2018, with P50,000 authorized shares of P10 par ordinary shares. During
2018, the entity had the following capital transactions:
January 14 issued 20,000 shares at P22 per share
July 28 repurchased 5,000 shares at P32 per share
Dec. 5 reissued the 5,000 shares held in treasury for P38 per share
Required:
1. Under GAAP, how much share premium is recorded by Estrada Inc. on January 14? ___________
2. Assuming Estrada Inc. uses the cost method to account for its treasury stock transactions under GAAP, how much is
recorded for treasury stock on July 28, 2018? ____________
3. Assume Estrada Inc. uses the cost method to account for its treasury stock transactions. Under GAAP, the entry to
record the reissuance of the 5,000 treasury shares on December 5, 2018, would include a credit to
A. gain on sale in the amount of P30,000 C. Share premium in the amount of P30,000
B. retained earnings in the amount of P30,000 D. treasury stock in the amount of P190,000
C. Mizona Corp. issued 10,000 shares of its P2 par value ordinary shares for a building. The building has a fair value o
P1,000,000. Mizona’s ordinary shares is currently selling for P90 per share. Mizona Corp. should record the building at
_______________

D. Victorino Corp. issued 200,000 ordinary shares when is began operations in January 25, 2017 and issued an additional
100,000 shares during 2017. Victorino also issued preference shares convertible into 100,000 shares of ordinary shares.
In 2018, Victorino purchased 75,000 of its ordinary shares and held it in the treasury.
Required: At December 31, 2018, how many shares of Victorino’s ordinary shares were outstanding? ___________

E. On January 1, 2018, Giron Corp. reported the following on its shareholders’ equity section:
Ordinary Shares, P10 par value, authorized 200,000 shares,
Issued 100,000 shares P1,000,000
Share Premium – Ordinary 3,000,000
Retained Earnings 1,032,000
P5,032,000
Treasury Stock, at cost, 5,000 shares ( 80,000 )
Total Shareholders’ Equity P4,952,000

The following events occurred in 2018:

May 1: 1,000 shares of treasury stock were sold for P20,000.
July 9: 10,000 shares of previously unissued ordinary shares were sold for P24 per share.
Oct. 1: The distribution of a 2-for-1 share split resulted in the ordinary shares’ per share par value being halved.

Giron accounts for treasury stock under the cost method.

Required: On December 31, 2018, the total par value of the issued shares should be ___________

F. During 2017, Bradley Corp. issued 5,000 shares of P200 par value convertible preference shares for P220 per share. One
share of preference shares can be converted into three shares of Bradley’s P50 par ordinary shares at the option of the
preference shareholder. On December 31, 2018, when the market value of the ordinary shares was P80 per share, all of
the preference shares were converted.
Required: What amount should Bradley credit to Ordinary shares and Share Premium-Ordinary accounts as a result of
the conversion?
1. Ordinary Shares _____________________
2. Share Premium-Ordinary ______________

G. You are given the following information: Ordinary Shares, P160,000 (P80 par); Share Premium – Ordinary, P400,000;
and Retained Earnings, P800,000.
Assuming only one class of share, the book value per share is ______________

H. Digao Corporation declared the regular quarterly dividend of P4 per share. Digao had issued 12,000 shares and
subsequently reacquired 2,000 shares as treasury stock.
Required: What would be the total amount of the dividend? _________________

I. If Win Corporation has 80,000 ordinary shares authorized, has 50,000 ordinary shares issued, and holds 4,000 ordinary
shares as treasury stock, the total number of outstanding shares of Win Corporation amounts to ___________.
Answer Key:

I-
1. B 16. B 31. C 46. A 61. C
2. A 17. D 32. B 47. D 62. C
3. D 18. D 33. A 48. B 63. B
4. D 19. E 34. C 49. D 64. B
5. C 20. C 35. D 50. A 65. D
6. B 21. D 36. D 51. B 66. C
7. A 22. D 37. B 52. D 67. B
8. A 23. B 38. D 53. C 68. B
9. D 24. C 39. A 54. A 69. D
10. E 25. B 40. C 55. B 70. B
11. D 26. A 41. D 56. C
12. B 27. A 42. B 57. D
13. E 28. C 43. A 58. C
14. D 29. C 44. C 59. D
15. A 30. B 45. D 60. C

Problem Solving.
A. 1. 1,000,000
2. 900,000
B. 1. 240,000
2. 160,000 credit
3. C
C. 1,000,000
D. 225,000
E. 1,100,000
F. 1. 750,000
2. 350,000
G. 1,360
H. 40,000
I. 46,000