College of Business and Accountancy

First Semester 2023-2024

INTEGRATED ACCOUNTING THEORIES AND PRACTICE

Financial Accounting and Reporting
Integrate Quiz
April 22, 2024

1. The components of equity generally recognized by companies in the Statement of Financial Position are:
I. Provisions
II. Debentures
III. Share capital
IV. Other reserves
V. Retained earnings

A. I, II and III only

B. II, III and V only
C. I, III, IV and V only
D. III, IV and V only

2. The par value of ordinary shares represents

A. The liquidation value of the shares.
B. The book value of the shares.
C. The legal nominal value assigned to the shares.
D. The amount received by the corporation when the share
was originally issued.

3. Which of the following features of preference shares makes the security more like debt than an equity
instrument?
A. Redeemable
B. Voting
C. Participating
D. Noncumulative

4. Which of the following is NOT a reason that companies may undertake a share buy-back?
A. As a way to efficiently manage surplus funds
B. To increase the worth per share of the remaining shares
C. As a defense against a hostile takeover
D. To manage the capital structure

5. Under IFRIC 17, noncash asset distribution to owners like property dividends should be recognized as
A. A liability based on the fair value of the asset to be distributed
B. A liability based on the carrying amount of the asset to be distributed
C. A direct deduction from share capital
D. An appropriation of retained earnings

6. For the purpose of calculating diluted EPS, an entity shall adjust the profit attributed to ordinary shareholders by
the after-tax effect of the following item(s) related to dilutive potential ordinary shares:
A. Interest only
B. Dividends only
C. Other income or expenses only
D. Dividend, interest, other income or expenses

7. A “secret reserve” will be created if:

A. A capital expenditure is charged to expense
B. Inadequate depreciation is charged to income
C. Liabilities are understated
D. Shareholders equity is overstated
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8. Redeemable preference shares should be:
A. Included as a liability
B. Included with ordinary shares
C. Excluded from the statement of financial position
D. Included as a contra item in shareholders’ equity

9. The features most frequently associated with preference shares include all of the following, EXCEPT
A. Non-voting
B. Callable at the option of the shareholder
C. Convertible into ordinary shares
D. Preference as to assets in the event of liquidation

10. When preference shares share ratably with the ordinary shareholders in any profit distributions beyond the
prescribed rate this is known as the
A. Participating features
B. Cumulative feature
C. Callable feature
D. Redeemable feature

11. An entity issued bonds with face value of P3,000,000 together with 60,000, P50 par value, ordinary shares and
20,000, P100 par value, preference shares for a total consideration of P10,000,000. If the bonds were issued
separately, they would have sold for P2,500,000. At the date of issuance, the ordinary share was selling for
P100 per share and the preference share was selling for P150 per share.
What amount of the proceeds should be allocated to the preference shares?
A. P2,000,000 C. P2,608,696
B. P2,500,000 D. P3,000,000

12. An entity is considering the proper accounting for these contracts:

 The entity issued 100,000 warrants for P2 each. Each warrant gives the holder the right to acquire one new
P10 ordinary share for P50 during the next four years. The market value of each warrant at the end of the
reporting period is P5.
 At the end of the reporting period, the entity purchased a call option that gives it the right to repurchase
10,000 of its own shares for a fixed price of P60 per share. The entity paid P60,000 for these options.
 At the end of the reporting period, the entity entered into a forward contract that requires it to repurchase
2,000 of its own shares for P120,000 at the end of the next accounting period. No consideration is paid or
received at the inception of the contract. The market interest rate is 10% on the date of agreement.
 At the end of the reporting period, the entity entered into a non-derivative contract to deliver to another
entity as many of the entity’s own ordinary shares as will equal P100,000. This contract is to be settled one
month from the date of agreement.

At the end of the reporting period, the net increase in the entity’s equity as a result of these contracts is
A. P 30,908 C. P140,000
B. P130,908 D. P330,908

13. On 1 February 2020, Entity A enters into a contract with Entity B to pay the fair value of 1,000 of Entity A’s
own outstanding ordinary shares as of 31 January 2021 in exchange for P104,000 in cash (ie P104 per share) on
31 January 2021. The contract should be classified as equity instrument
A. If the contract will be settled net in cash.
B. If the contract will be settled net in shares.
C. If the contract will be settled by delivering a fixed amount of cash and receiving a fixed number of Entity
A’s shares.
D. In any of these.

14. The following information relate to an entity’s equity transactions for the year ended December 31, 2021:
 Received P100,000 from the issuance of a call option that gives the holder the right to purchase 10,000
shares of the entity for a fixed price of P100 per share. Fair value of the option at December 31 is
P110,000.

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  On December 31, 2021, the entity enters into a forward contract that requires the entity to repurchase its
own shares for P60,000 on December 31, 2022. No consideration is paid or received at the inception of the
contract. The market interest rate is 10% on December 31, 2021 and expected to be 12% on December 31,
2022.

The net increase of these transactions on the entity’s equity for the year ended December 31, 2021 is
a. P40,000 c. P 55,454
b. P45,454 d. P100,000

15. Yahairah Corp.'s outstanding share capital at December 15, 2020, consisted of the following:
 30,000 5% cumulative preference shares, par value P10 per share, fully participating as to dividends. No
dividends were in arrears.
 200,000 ordinary shares, par value P1 per share.

On December 15, 2020, Yahairah declared dividends of P100,000. What was the amount of dividends payable
to Yahairah's ordinary shareholders?
A. P10,000 C. P40,000
B. P34,000 D. P47,500

16. Dividends are NOT paid on:

A. Treasury shares
B. Noncumulative performance shares
C. Nonparticipating preference shares
D. All of the choices

17. The following balances are shown in the shareholders' equity of Vaz Company on Dec. 31, 2020:

Preference share capital, P10 par, 100,000 shares P1,000,000

Ordinary share capital, P10 par, 500,000 shares, 5,000,000
Share premium - preference 50,000
Share premium – ordinary 200,000
Retained earnings 100,000
Total P6,350,000

During 2021, the following transactions pertaining to the shareholders' equity were completed:
 Retirement of 5,000 preference shares at P9 per share.
 Purchase of 5,000 ordinary shares at P12 per share to be held as treasury shares.
 Share split, ordinary, 2 for 1.
 Reissue of 2,000 treasury shares at P8 per share.
 Profit for 2021, P300,000.

The total retained earnings at Dec. 31, 2021 is

a. P400,000 c. P392,000
b. P395,000 d. P387,000

18. The December 31, 2020, the balance sheet of TXY reflected the following:

Total assets (market value P298,000) P252,000

Total liabilities P 70,000

Preference shares, P.10 cumulative,
non-participating, P2.20 liquidation
preference per share, 20,000 shares
outstanding 50,000
Ordinary shares, nopar, 30,000 shares
outstanding 120,000
Retained earnings (no dividends were
declared or paid in 2019 - 2020) 12,000
P252,000
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 Assume the company sold all of the assets at December 31, 2020, at market value for cash; paid off the
liabilities and distributed all of the remaining cash to the shareholders. The amount of cash per share that each
common shareholder would receive would be:
A. P4.47 C. P6.07
B. P5.93 D. P8.33

19. The shareholders’ equity account balances for the Zackery, Inc. on December 31, 2019 follows:
12% Preference share capital, P100 par, 20,000 shares P2,000,000
Ordinary share capital, P25 par, 145,000 shares 3,625,000
Subscribed share capital, net of P500,000 subscriptions receivable 1,000,000
Share premium 500,000
Retained earnings 695,000
Treasury shares, 5,000 shares, at cost 400,000

Preference shares have a liquidation value of P110; shares are cumulative, with dividends in arrears for 3 years
including the current year and fully payable in the event of liquidation. The book value of an ordinary share is
a. P22.50 c. P27.78
b. P25.00 d. P29.00

20. Maricris Company’s capital structure was as follows:

2019 2020
Outstanding securities:
Ordinary 1,000,000 1,000,000
Convertible preference 100,000 100,000
10% convertible bonds
payable P30,000,000 P30,000,000

During 2020, Maricris paid dividends of P15 per share on its preference shares. The preference shares are
convertible into 150,000 ordinary shares and the 10% bonds are convertible into 300,000 ordinary shares.
Profit for 2020 was P10,000,000. The income tax rate is 35%. The diluted earnings per share for 2020 should
be
A. P8.50 C. P8.24
B. P8.04 D. P7.50

21. Which statement is incorrect regarding basic EPS?

A. An entity shall calculate basic earnings per share amounts for profit or loss attributable to ordinary equity
holders of the parent entity and, if presented, profit or loss from continuing operations attributable to those
equity holders.
B. Basic earnings per share shall be calculated by dividing profit or loss attributable to ordinary equity holders
of the parent entity (the numerator) by the number of ordinary shares outstanding (the denominator) at the
end of the period.
C. The objective of basic earnings per share information is to provide a measure of the interests of each
ordinary share of a parent entity in the performance of the entity over the reporting period.
D. None of the above.

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