POLYTECHNIC UNIVERSITY OF THE PHILIPPINES DATE

College of Accountancy and Finance

ACCO101 Financial Accounting and Reporting
Quiz 7: Corporation – Organization, Formation, Dividends BVS EPS Subsequent Trans SCORE
First Semester - Academic Year 2023 – 2024

NAME YEAR AND SECTION

Answer format 000,000. Round off to nearest peso, No Peso Sign, No Centavos, No days, No percent sign, No
Parenthesis

Problem 1A Organization and Formation

ABC Corp. was organized on January l, 2021 with authorized capital of 1,000,000 ordinary shares, P20 par value. The
following transactions affecting the shareholders' equity were recorded during the year.

• Feb. 10: Issued 250,000 shares at P22 per share.

• Apr. 25: Issued 100,000 shares for legal service when the fair value was P24 per share.
• Oct 30: Issued 50,000 shares for a piece of equipment when the value was P26 per share.

3. How much is the balance of ordinary share capital account as of October 30, 2021? Php 8,000,000
4. What amount should be reported as ordinary share premium as of October 30, 2021? Php 1,200,000

Issue Price or
No of At Par
Trans Date FMV Premium
Shares
P Total P Total
01-Feb-22 250,000 20 5,000,000 22 5,500,000 500,000
25-Apr-22 100,000 20 2,000,000 24 2,400,000 400,000
30-Oct-22 50,000 20 1,000,000 26 1,300,000 300,000

Total 8,000,000 9,200,000 1,200,000

No. 3 No. 4
Problem 2A
ABC Corp. was incorporated on January l, 2012 with an authorized 250,000,000 share of no-par ordinary share capital,
stated value P1 and 1,000,000 shares of 10% preference share capital, par value P5. Transactions affecting company's
share capital were as follows:

• January 1: Issued 50,000,000 ordinary shares for cash at P3 per share.

• January 5: Issued 30,000,000 ordinary shares in exchange for assets with total market value of P150,000,000.
• January 15: Received subscriptions for 10,000,000 ordinary shares at P5 and for 1,750,000 preference shares at
P15.
• January 25: Received full payment for subscriptions received on January 15 and the corresponding stock were
issued.

5. What is the total paid-in capital in excess of par for preference shares at the end of the period?
6. What is the total paid-in capital in excess of stated value for ordinary share capital at the end of the period?
7. How much is the total ordinary share capital?
8. How much is the total shareholders' equity at the end of the period?

At Par Issue Price or FMV

Trans Date No of Shares Premium
P Total P Total
Ordinary Shares
01-Jan-22 50,000,000 1 50,000,000 3 150,000,000 100,000,000
05-Jan-22 30,000,000 1 30,000,000 5 150,000,000 120,000,000
15-Jan-22 10,000,000 1 10,000,000 5 50,000,000 40,000,000

90,000,000 350,000,000 260,000,000

Preference Share No. 7 No. 6
15-Jan-22 1,750,000 5 8,750,000 15 26,250,000 17,500,000
No. 5
Total Sharegolder's Equity 376,250,000
No. 8
Problem 3A
The shareholders' equity of ABC Corp. as of March 31, 2022, as follows:
• Preference shares, P100 par value P50,000,000
• Preference shares premium P900,500
• Ordinary share, P15 par value 525,000,000
• Ordinary share premium 275,000,000
• Ordinary share subscribed 525,000.
• Retained earnings 8,900,000.
• Notes payable 40,000,000.
• Subscription receivable — ordinary 7,000,000

9. How much is the legal capital of the corporation?

10. How much is the additional paid-in capital?
11. How much is the total shareholders' equity?
Par No of Shares Value Legal Capital Paid -In Capital
Preference shares, P100 par value P50,000,000 100 500,000 50,000,000 50,000,000
Preference shares premium P900,500 1.80 900,500 900,500
Ordinary share, P15 par value 525,000,000 15 35,000,000 525,000,000 525,000,000
Ordinary share premium 275,000,000 7.8571 275,000,000 275,000,000
Ordinary share subscribed 525,000 15 35,000 525,000 525,000
Retained earnings 8,900,000 8,900,000

Total 860,325,500 575,525,000 275,900,500

No 11 No 9 No 10
Problem 4A
The ABC Corp. was organized on September 1, 2021. On December 31, 2021, the balances pertaining to shareholders'
equity are as follows:

• P20,000,000 - Preference Share Capital, issued and authorized share capital 1,000,000 shares at P20 par
• P5,000,000 - Preference Share Premium
• P15,000,000 - Ordinary Share Capital, issued and authorized share capital 3,000,000 shares of no-par with a
stated value of P10
• P7,500,000 - Paid-in Capital in Excess of Stated Value — Ordinary Share

Additional information during September 2021

• 225,000 preference shares were issued for equipment having a fair market Of P5,250,000.
• All the remaining preference share capital were issued at the end of September for cash.

12. Number of preference shares issued for cash.

13. Price per share of preference share capital issued for cash.
14. Number of ordinary shares issued.
15. Average price per share of the ordinary share capital issued for cash.
16. Total preference shares premium arising from issuance in exchange for equipment.
At Par Issue Price or FMV
Trans Date No of Shares Premium
P Total P Total
Preference Shares 1,000,000 20 20,000,000 5 5,000,000
Equipment 225,000 20 4,500,000 5,250,000 750,000 No. 16

No. 12 775,000 15,500,000 4,250,000

No. 13 25 19,750,000 /775,000

Ordinary Shares 3,000,000 5 15,000,000 3 7,500,000 8

No. 14 No. 15
1,500,000 10 15,000,000 5 7,500,000 15

Problem 6A
On September 30, 2021, ABC Corp. issued 200,000 ordinary share capital with P100 par value in exchange for a piece
of land to be held for a future plant site. ABC Corp.'s ordinary share capital was listed and traded at P270 per share on
the same date. The land has no known market value.

17. How much is the increase in ordinary share premium resulting from this exchange?
Problem 7A
ABC Corp. was authorized to issue 1,000,000 preference shares, P 10 par value and 20,000,000 no-par ordinary shares.
Subscriptions for 400,000 preferences shares was received at P18 with a down payment of 45%.

18. How much was the down payment received by Beige Co. as a result of the subscription?

Problem 8A
19. Which of the following statements about preference share capital is not true'?
a. Preference share capital usually carries the right to vote.
b. Preference share capital dividends are usually paid prior to payment of ordinary share capital dividends.
c. Preference share capital usually shares the right to receive assets pro-rata with the ordinary shareholders in
case of corporate liquidation.
d. In addition to being paid dividends prior to those paid to ordinary shareholders, preference shareholders have
the right to receive assets pro-rata with ordinary shareholders in the event of corporate liquidation.

20. The maximum number of shares of stock that the government gives a corporation permission to issue is the
a. granted shares.
b. authorized shares
c. issued shares.
d. outstanding shares

21. A preference share capital that may be exchanged for ordinary share capital is known as
a. Cumulative
b. Participating
c. Noncumulative
d. Convertible
e. Non-participating

22. A non-cash asset received in exchange for share capital is recorded a

a. its book value.
b. its fair market value.
c. the lower of its book value or fair market value
d. the higher of its book value or fair market value

23. A preference share capital that have no claim on any prior year dividends that may have passed is known as
a. Cumulative
b. Participating
c. Noncumulative
d. Convertible
e. Non-participating

24. The Securities and Exchange Commission's 25%, 25% rule means that
a. at least 25% of total authorized share capital have been subscribed.
b. at least 25% of the total subscription have been paid.
c. at least 25% of total authorized share capital have been subscribed and at least 25% of the total subscription
have been paid.
d. at least 25% of total authorized share capital have been subscribed and paid.

Problem 7B
During the fiscal year 2022. ABC Corp. issued for P150 per share 180,000 shares of P140 par value convertible preference
share capital. One preference share is convertible into four Ordinary shares with a par value of P35. On October 15,
2022, all of the preference shares were converted into ordinary shares. The market value of the ordinary shares the
conversion date was P60 share.

3. What amount should be credited to the ordinary share account? 25,200,000

4. What amount should be debited to the retained earnings account? Zero (0)
5. What amount should be credited to the Paid-In Capital from Conversion of Preference Shares into Ordinary
Shares account? 1,800,000

Preference share capital 21,600,000

Preference share premium 5,400,000
Ordinary share capital 25,200,000
Paid-In Capital from Conversion of
Preference Shares into Ordinary Shares 1,800,000
Problem 1B Dividends BVS EPS Subsequent Trans
The ABC Corp. was organized on March 1. 2022. with authorized capital of 1,000,000 shares of P25 par value, Ordinary
Share Capital. Six Hundred Fifty thousand (650,000) shares were issued for cash at P40 share. During the year, the
company posted a profit of P11,500,000 and distributed dividends of P6,250,000. Please compute for the following:

6. Balance Of ordinary share capital account as of December 31, 2022.

7. Total additional paid-in capital as of December 31, 2022
8. Total contributed capital as of December 31, 2022.
9. Balance of Retained Earnings account as Of December 31, 2022.
10. Total shareholders' equity as of December 31, 2022.
11. Book value per share as of December 31, 2022. (Include centavos, round off to nearest centavo/ 0.00)
12. Dividend per share paid on ordinary share capital as of December 31, 2022. (Include centavos, round off to
nearest centavo/ 0.00)
13. Earnings per share as of December 31, 2022. (Include centavos, round off to nearest centavo/ 0.00)

No of At Par Issue Price or FMV

Trans Date Premium
Shares P Total P Total
Ordinary Shares 650,000 25 16,250,000 15 9,750,000 26,000,000
No. 6 No. 7 No. 8
Retained Earnings 11,500,000 ÷ 650,000 = 17.69 No. 13
Distributed Dividends 6,250,000 ÷ 650,000 = 9.62 No. 12

Retained Earnings Balance 5,250,000 No. 9 5,250,000

31,250,000 No. 10
÷ 650,000
= 48 No. 11

Problem 2B
ABC Corporation was organized on February 3, 2022, with authorized capital of 1,000,000 shares of P15 par value,
Ordinary Share Capital. Transactions during the year were as follows:

• March 4, 2022 – Issued 450,000 shares at P25 per share

• November 2, 2022 – Purchased 45,000 treasury shares at P33 per share
• Profit for the year amounted to P3,200,000.

14. Balance of ordinary share capital account as of December 31, 2022.

15. Total additional paid-in capital as of December 31, 2022.
16. Total shareholders' equity as of December 3 1, 2022.
17. Unappropriated Retained Earnings as of December 3 1, 2022

Premium / Paid in
At Par
Capital
Trans Date No of Shares Total
P Total P Total
Ordinary Shares 450,000 20 9,000,000 5 2,250,000 11,250,000
No. 14 No. 15
Treasury Shares 45,000 30 1,350,000 - 1,350,000
Retained Earnings
Approriated 1,350,000
Unapproriated No. 17 1,850,000 3,200,000

No. 16 13,100,000

Problem 3B
ABC Corp. reported the following in its statement of Shareholders’ Equity as of December 31, 2021:
• Ordinary share. P5 par value, 2,000,000 shares authorized, 1,500,000 shares issued – P7,500,000
• Additional paid-in capital – P2,625,000
• Retained Earnings – 5,206,000
• Less Treasury shares, 350,000 shares at cost – 3,850,000

The following events occurred in 2022.

• May 1 - 120,000 treasury shares were sold for P1,560,000
• July 9 – 200,000 shares previously unissued shares were sold for P12 per share
• Oct 15 – There was a 4-for-1 share split.
• Dec 31 – Profit for the year – 2,350,000

18. Compute for the Total shareholders' equity as of December 31, 2021.
19. Compute for the Total shareholders' equity as of December 31, 2022.
20. Compute for the Total contributed capital and retained earnings as of December 31, 2021.
21. Compute for the Total contributed capital as of December 31, 2022.
 22. How many shares are issued as of December 31, 2022
23. How many shares are outstanding as of December 31, 2022
24. How many shares are authorized as of December 31, 2022
25. What is the new par value after the stock split? (Include centavos, round off to nearest centavo/ 0.00)
26. What is the Book Value per Share as December 31, 2022? (Include centavos, round off to nearest centavo/
0.00)

Premium / Paid in
At Par
Capital
Trans Date No of Shares Total
2021 2022
P Total P Total
Balances Balances
Ordinary Shares 1,500,000 5 7,500,000 2 2,625,000 10,125,000 10,125,000 10,125,000
Current Year Transaction 200,000 5 1,000,000 7 1,400,000 2,400,000 2,400,000
1,700,000 8,500,000 4,025,000 12,525,000 10,125,000 12,525,000
4 for 1 Stock Split x4

6,800,000 No. 25 -> 5 ÷ 4 = 1.25

No. 26 -> 17,791,000 ÷ (6,800,000 - 920,000) = 3.03
Additional Paid in Capital on Sale of Treasury Stock (120,000 x (13-11)) 240,000
10,125,003 12,765,000
Retained Earnings No. 21

2021 No. 17 5,206,000 5,206,000 5,206,000

2022 2,350,000 - 2,350,000

No. 20 15,331,003 20,321,000

Treasury Shares 350,000 11 3,850,000 - 3,850,000 - 3,850,000 - 3,850,000

Sold - 120,000 13 - 1,560,000 =120,000 x 11 1,320,000 1,320,000
4 for 1 Stock Split 230,000
x4 11,481,003 17,791,000
920,000 No. 18 No. 19

Problem 4B
The following information pertains to ABC Corporation.
• Total Profit for the year – P2,100,000
• Total Cash dividends paid – P390,000
• Proceeds from sale of donated shares – P145,000
• Total value of stock dividends distributed – P240,000
• Excess of proceeds over cost of treasury shares sold – P270,000

27. What is the amount of Retained Earnings?

Php 2,100,000 – 390,000 – 240,000 = Php 1,470,000

Problem 5B
On August10, 2022, ABC Corporation split its share capital on a 7-for-4 when the market value was P60 per share. Prior
to the split, ABC Corporation had 900,000 shares at P14 par value share capital.

28. What is the par value of the share capital after the split?

Php 14 x 4 = 54 ÷ 7 = Php 7.71

Problem 6B
On August10, 2022, ABC Corporation split its share capital on a 7-for-4 when the market value was P60 per share. Prior
to the split, ABC Corporation had 900,000 shares at P14 par value share capital.

29. How many shares capital is outstanding after the split?

900,000 ÷ 4 x 7 = 1,575,000