Name _______________________________________

Intermediate Accounting 3
Quiz No. 2
Basic Earnings Per Share

I. Problems (2 points)
_____ 1. On December 31, 2027 and 2026, ABC Company had 100,000 ordinary shares and 10,000
cumulative preference shares of 5%, P100 par value. No dividends were declared on
either the preference or ordinary share in 2027 or 2026.Net income for the current year
was P900,000. What amount should be reported as basic earnings per share?
a. 8.50 b. 9.50 c. 9.00 d. 5.00

_____ 2. ABC Company reported the following capital structure on January 1, 2027:

Shares issued and outstanding

Ordinary share capital 200,000
Preference share capital 50,000

On October 1, 2027, the entity issued a 20% share dividend on ordinary shares and
declared the annual cash dividend of P10 per preference share. The preference shares
are noncumulative, nonparticipating and nonconvertible. Net income for the year ended
December 31, 2027 was P2,746,000. What amount should be reported as basic earnings
per share?
a. 8.20 b. 8.72 c. 9.36 d. 7.82

_____ 3. ABC Company had the following capital structure during 2026 and 2027:
Preference share capital, P10 par, 10% cumulative,
16,000 shares issued and outstanding 160,000
Ordinary share capital, P5 par, 200,000 shares
issued and outstanding 1,000,000

The entity reported net income of P500,000 for the year ended December 31, 2027. The
entity paid no preference dividends during 2026 and paid P10,000 in preference
dividends during 2027. What amount should be reported as basic earnings per share?
a. 2.42 b. 2.45 c. 2.48 d. 2.50

_____ 4. During the current year, ABC Company had the following two classes of share capital
issued and outstanding for the entire year:
Ordinary share capital, 200,000 shares, P10 par 2,000,000
Preference share capital, 2,000 shares, P100 par,
12%.convertible share for share into ordinary share 200,000

The net income for the current year was P1,800,000 and the income tax rate was 30%. In
the computation of basic earnings per share, what is the amount to be used as earnings?
a. 1,824,000 b. 1,776,000 c. 1,224,000 d. 1,800,000

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_____ 5. During the current year, ABC Company had outstanding 200,000 ordinary shares and
20,000 cumulative preference shares with a P10 per share dividend. Each preference
share is convertible into five ordinary shares. The entity had a P2,800,000 net loss for the
year. No dividends were paid or declared What amount should be reported as basic loss
per share?
a. 15.00 b. 16.00 c. 10.00 d. 14.00

_____ 6. ABC Company had 100,000 equity shares in issue on January 1, 2027. On July 1, 2027, the
entity issued 20,000 new shares by way of a 1 for 5 bonus. On October 1, 2027, the entity
issued 32,000 new shares for cash at full market price. When calculating basic earnings
per share, what is the average number of shares?
a. 120,000 b. 128,000 c. 152,000 d. 118,000

_____ 7. On December 31, 2027, ABC Company had 500,000 ordinary shares issued and
outstanding, 400,000 of which had been issued and outstanding throughout the year,
100,000 of which were issued on October 1, 2027. Net income for the year was
P5,100,000. What amount should be reported as basic earnings per share?
a. 10.10 b. 12.75 c. 12.00 d. 11.35

Use Illustration 1 to answer numbers 8 and 9

Illustration 1
ABC Company had one class of ordinary share capital outstanding and no other securities that are
potentially convertible into ordinary shares. During 2027, 100,000 shares were outstanding. In
2028, two distributions of additional ordinary shares occurred:
April 1 - 20,000 treasury shares: were sold.
July 1 - A 2-for-1 share split was issued.

The net income for 2028 was P4,100,000 and the net income for 2027 was P3,500,000.

_____ 8. What amount should be reported as basic earnings per share for 2028 in the comparative
income statement for 2028?
a. 20.50 b. 17.83 c. 23.43 d. 17.08
_____ 9. What amount should be reported as basic earnings per share for 2027 in the comparative
income statement for 2028?
a. 35.00 b. 17.50 c. 15.22 d. 14.58

_____ 10. ABC Company had 600,000 ordinary shares outstanding on January 01, issued 120,000
shares on May 1, purchased 60,000 treasury shares on September 1, and issued 90,000
shares on November 1. What is the weighted average number of shares outstanding?
a. 675,000 b. 750,000 c. 660,000 d. 810,000

II. Problems (3 points)

__________ 1. ABC Company provided the following information in relation to the share capital
for the current year:
January 01 Shares outstanding 1,200,000
April 01 Shares issued 400,000

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 October 01 Treasury shares purchased ?
December 01 Issued a 100% share dividend

The entity’s net income and earnings per share for the current year are P4,440,000
and P1.50, respectively. Compute the number of treasury shares purchased on
October 01.

__________ 2. ABC Company provided the following information for the current year:
January 01 Shares outstanding 400,000
April 01 2-for-1 share split 400,000
July 01 Shares issued 200,000

What is the average number of shares?

__________ 3. ABC Company had the following transactions during the year:
January 01 Ordinary shares outstanding 300,000
February 01 Issued a 20% share dividend
March 01 Issued ordinary shares for noncash 120,000
July 01 Issued ordinary shares for cash 60,000

If the net income for the current year was P1,075,000, compute the EPS.

__________ 4. ABC Company provided the following information for the current year:
01/01 12/31
10% Preference shares, cumulative, P100 par P4,000,000 P4,000,000
Ordinary Share Capital, P50 par 6,000,000 8,200,000
Share Premium 3,000,000 ?
Treasury shares, at cost 720,000
Retained earnings 3,000,000 3,400,000

Share capital transactions for the current year:

March 31 – Declared a 10% ordinary share dividend. Ordinary shares’ market
value was P130.
July 01 – Issued ordinary shares, resulting in the share premium of P50 per share
October 01 – Acquired 12,000 treasury shares at P120 per share
December 01 – Reissued 6,000 treasury shares at P70 per share

Compute the ending balance of the share premium.

__________ 5. Using the information in number 4, compute the net income for the current year.

__________ 6. Using the information in number 4, compute the average number of ordinary
shares

__________ 7. Using the information in number 4, compute the basic EPS

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