Name: __________________________________ Section: ________________________ ACC 109_P1 Quiz #2

1. If an entity wishes to "capitalize" retained earnings, it may issue

a. Cash dividend c. Liquidating dividend
b. Property dividend d. Share dividend

2. On January 1, 2024, ABC Mining Company declared a cash dividend of P700,000 to shareholders of record on January 15, 2024
and payable on February 15,2024. The entity reported the following information on December 31,2023:
Accumulated depletion 200,000
Share capital 1,000,000
Share premium 300,000
Retained earnings 600,000
How much is the liquidating dividend?
a. 100,000 c. 200,000
b. 800,000 d. 600,000

Dividend declared 700,000

Less: Retained earnings balance (600,000)
Liquidating dividend 100,000
Any amount paid in excess of the retained earnings balance is a liquidating dividend or return of capital. This liquidating dividend is
legal under the wasting asset doctrine embodied in the Philippine Corporation Code.

3. ABC Company reported the following shareholders' equity on January 1, 2014:

• Share capital, P5 par, 600,000 shares authorized,
200,000 shares issued and outstanding 1,000,000
• Share premium 6,000,000
• Retained earnings 2,800,000
On January 31, 2014, the entity reacquired 10,000 shares at P30 per share to be held as treasury. On July 1, 2014, the entity
declared and issued a 30% stock dividend. On December 31, 2014, the entity declared and paid cash dividend of P10 per share.
The net income for the year was P3,000,000. What is the unappropriated balance of retained earnings on December 31, 2014?
a. 2,600,000 c. 2,700,000
b. 2,745,000 d. 3,045,000

Retained earnings – January 1, 2014 2,800,000

Stock dividend (57,000 x 5) (285,000)
Cash dividend (247,000 x 10) (2,470,000)
Net income 3,000,000
Appropriation for treasury shares (10,000 x 30) (300,000)
Unappropriated balance – 12/31/2014 2,745,000

Shares issued – January 1, 2014 200,000

Treasury shares (10,000)
Outstanding shares 190,000
Stock dividend (30% x 190,000) 57,000
Total outstanding shares 247,000

4. When a stock dividend is declared and issued

a. The current ratio increases. c. The amount of working capital decreases.
b. Total shareholders' equity decreases. d. Total shareholders' equity does not change.

5. Which of the following statements about property dividends is not true?

a. A property dividend is also called a dividend in kind.
b. A property dividend is usually in the form of securities of other entities.
c. The accounting for a property dividend should be based on the carrying amount of the noncash asset transferred.
d. All of these statements are true.

6. The following stock dividends were declared and distributed by Sol Corp.:
Percentage of ordinary shares
outstanding at declaration date Fair value Par value
10 ₱15,000 ₱10,000 (small share dividends-10%-use Fair Value)
28 40,000 30,800 (large share dividend- 28% -more than 20%- use par value)

What aggregate amount should be debited to retained earnings for these stock dividends?
a. 40,800 c. 50,000
b. 45,800 d. 55,000

7. Cash dividends are paid on the basis of the number of shares

a. Issued
b. Authorized
c. Outstanding
d. Outstanding less the number of treasury shares

8. A dividend which is a return to shareholders of a portion of their original investment is

Name: __________________________________ Section: ________________________ ACC 109_P1 Quiz #2
a. Liability dividend c. Liquidating dividend
b. Property dividend d. Participating dividend

9. When an entity settles the property dividend payable, it shall recognize the difference between the carrying amount of the asset
distributed and the carrying amount of the dividend payable in
a. Profit or loss c. Equity
b. Other comprehensive income d. Retained earnings

10. Ray Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of ₱2 par value common stock, which had
a fair value of ₱5 per share before the stock dividend was declared. This stock dividend was distributed 60 days after the
declaration date. By what amount did Ray’s current liabilities increase as a result of the stock dividend declaration?
a. 0 c. 1,000
b. 500 d. 2,500
Share Dividends Payable is NOT a liability. It is an adjunct equity acct, meaning addition to equity.
Other Dividends Payable acct such as Cash DP, and Property DP are liability accts..

On November 1, 2023, ABC Company declared a property dividend of equipment payable on March 1, 2024. The carrying amount of the
equipment is P3,000,000 and the fair value is P2,500,000 on November 1, 2023. However, the fair value less cost to distribute the
equipment is P2,200,000 on December 31, 2023 and P2,000,000 on March 1, 2024.

11. What is the dividend payable on December 31, 2023? Use FV less cost of disposal (FV METHOD)
a. 0 c. 2,200,000
b. 2,500,000 d. 3,000,000

12. What is the measurement of the equipment on December 31, 2023? Use FV less cost of disposal (FV METHOD)
a. 2,000,000 c. 2,200,000
b. 2,500,000 d. 3,000,000

13. What amount of impairment loss is recognized on December 31,2023? CA-FV ON DEC 31 (2,200,000-3,000,000)
a. 0 c. 800,000
b. 300,000 d. 500,000

14. What amount of loss on distribution of property dividend is recognized on March 1,2024? FV ON MARCH 1-CA (2,000,000-
3,000,000)
a. 0 c. 200,000
b. 300,000 d. 1,000,000

15. On May 31, 2014, Sol Company declared a 10% stock dividend. The market price of the 30,000 outstanding shares of P20 par
value was P90 per share on that date. The stock dividend was distributed on July 31, 2014, when the share market price was
P100. What amount should be credited to share premium for the stock dividend?
a. 210,000 c. 240,000
b. 270,000 d. 300,000
Small Stock Dividends -10% so use Fair Value

Dr:Retained Earnings (@FV since small stock dividends) (30,000 *10% * P90) 270,000
Cr:Stock Dividends Payable @Par always (30,000 *10%*20) 60,000
Cr: Share premium (difference of the two items) 210,000

ABC Co. declared cash dividends of P60 per share. On dividend declaration, ABC Co. has 10,000 ordinary shares issued, 2,000
subscribed shares and 1,200 shares held in treasury. (Different set of amounts per section. Refer to the separate picture)

16. The number of outstanding shares_________________

17. Total cash dividends___________________

18. Prepare journal entries for the following transactions: (4pts each)
The board of directors of ABC Corp. declared a dividend of P20 per share on September 29, 2023, payable February 15, 2024,
to shareholders of record on December 31, 2023. The entity had 30,000 shares issued and outstanding with par value of P100.

September 29, 2023?

Retained Earnings 600,000

Dividends Payable 600,000

December 31, 2023?

No entry

February 15, 2024?

Dividends Payable 600,000
Cash 600,000