FINANCIAL ACCOUNTING AND REPORTING II

FINAL QUIZ 2/3

1. The accounts shown below appear in the December 31, 2003 trial of Hollow Corporation:
Preferred stock, authorized P0 par P10,000,000
Unissued preferred stock 3,600,000
Common stock, authorized P20 par 4,000,000
Unissued common stock 2,000,000
Subscription receivable, preferred stock 380,000
Subscription receivable, common stock 360,000
Subscribed preferred stock 600,000
Subscribed common stock 440,000
Treasury stock, preferred, at cost 1,360,000
Additional paid-in capital 1,700,000
Retained earnings 2,000,000
All subscription receivables are due in year 2004. How much is the total
stockholder’s equity of Hollow Corporation?
a. 11,040,000
b. 11,780,000
c. 12,400,000
d. 13,760,000

2. Compute for the Stockholder’s Equity using the following data;

Bonds payable P300,000

Additional paid-in capital on common stock 50,000
Donated capital 40,000
Treasury stock at cost 20,000
Common stock, par P100 500,000
Common stock option warrants 100,000
Investments in marketable securities 70,000
Additional paid-in capital from treasury stock 15,000
Retained earnings 135,000
a. 720,000
b. 760,000
c. 820,000
d. 860,000

3. The Magic Lamp Corporation was incorporated on January 1, 2002, with following authorized
capitalization:
· 40,000 shares of common stock, no par value, stated value P40 per share
· 10,000 shares of 5% cumulative preferred stock, par value of P10 per share

During 2002, Magic Lamp issued 24,000 shares of common stock for a total of P1,200,000 and
6,000 shares of preferred stock at P16 per share. In addition, on December 19,2002, subscriptions
for 2,000 shares of preferred stock were taken at a purchase price of P17. These subscribed shares were
paid for on January 4, 2003. What should Magic Lamp report as total contributed capital on its December
31,
2002 balance sheet?

a. 1,040,000
b. 1,262,000
c. 1,296,000
d. 1,330,000

4. The stockholders’ equity of May Co. revealed the following on January 1, 2007: Preference Share,
P100 par value P230,000
Paid-in Capital in Excess of Par - Preference 80,500
Ordinary Share, P15 par value 525,000
 Paid-in Capital in Excess of Par – Ordinary 275,000
Subscribed Ordinary Share 5,000
Retained Earnings 190,000
Notes Payable 400,000
Subscription Receivable — Ordinary 40,000
How much is the legal capital of the company?
a. P1.3055M c. P0.76M
b. P1.115M d. P0.755M

5. Queenie Corporation was incorporated on January 2, 2007. The following

information pertaining to Queenie’s ordinary stock transactions:
1/2/07 Number of shares authorized 80,000
1/1/07 Number of shares issued 60,000
7/1/07 Number of shares reacquired but not canceled 5,000
12/1/07 Two-for-one stock split
What is the number of shares of Queenie’s ordinary share outstanding at December
31, 2007?
a. 150,000 c. 115,000
b. 120,000 d. 110,000

6. Corridor Company issued 6,000 shares of its P10 par common stock to Max L. as
compensation for 1,000 hours of legal services performed. Max L. usually bills P500 per
hour for legal services. On this data of issuance, the stock was selling at a public trading at
P150 per share.

By what amount should the additional paid in capital account of Corridor Company will
increase as a result of the issuance of those shares?
a. 60,000
b. 440,000
c. 900,000
d. 3,000,000

7. On July 1, 2003, Boom exchanged 2,600 shares of its p24 par value stock for land. A few
months ago, the land was appraised by an independent appraiser at P100,000. Boom is
currently trading at the stock exchange at P45. Earnings per share is P40. How much should
be debited to Land account?
a. P 62,400
b. P100,000
c. P104,000
d. P117,000

8. In 2006, Inna Corporation acquired 6,000 shares of its Pl0 par value ordinary shares at P36
per share. During 2007, Inna issued 3,000 of these shares at P50 per share. Inna uses the
cost method to account for its treasury stock transactions. What accounts and amounts should
Inna credit in 2007 to record the issuance of the
3,000 shares?
Treasury Additional Retained Common
Stock Paid-in Capital Earnings Stock
a. - P102,000 P42,000 P6,000
b. - P144,000 - P6,000
c. P108,000 P 42,000 - -
d. P108,000 - P 42,000 -

9. Way Co. reported the following in its statement of equity on January 1, 2007:
Ordinary Share, PS par value, 200,000 shares
authorized; 100,000 shares issued P 500,000
Additional Paid-in Capital 1,500,000
Retained Earnings 516,000
P2,516,000
Less Treasury Stock, 5,000 shares at cost 40,000
Total shareholders’ equity P2,476,000
 The following events occurred in 2007:
May 1 1,000 shares of treasury stock were sold for P10,000.
July 9 10,000 shares of previously unissued ordinary share were sold for P12 per
share.
October 1 The distribution of a 2-for-1 stock split resulted in the ordinary share’s par
value being halved.
Jennifer accounts for treasury stock under the cost method.
How many shares are issued and outstanding at December 31, 2007?
a. 220,000 and 216,000
b. 220,000 and 212,000
c. 110,000 and 106,0900
d. 100,000 and 95,000

10. Compute for the Stockholder’s Equity using the following data;

Bonds payable P300,000

Additional paid-in capital on common stock 50,000
Donated capital 40,000
Treasury stock at cost 20,000
Common stock, par P100 500,000
Common stock option warrants 100,000
Investments in marketable securities 70,000
Additional paid-in capital from treasury stock 15,000
Retained earnings 135,000
a. 720,000
b. 760,000
c. 820,000
d. 860,000
11. Following are shown on the balance sheet of Pay Company:
Capital Stock, P100 par, 1,000 shares P100,000
Premium on Capital Stock 2,000
Additional Paid-in Capital from Treasury Stock 3,000
Retained Earnings 75,000
Treasury Stock, 200 shares at cost 25,000

The whole 200 shares of treasury stock were sold for P20,000. How would the resale of the
treasury stock be recorded?
a. Cash 20,000
Treasury Stock 20,000
b. Cash 20,000
Premium on Capital Stock 2,000
Additional Paid-in Capital from Treasury Stock 3,000
Treasury Stock 25,000
c. Cash 20,000
Retained Earnings 5,000
Treasury Stock 25,000
d. Cash 20,000
Additional Paid-in Capital from Treasury Stock 3,000
Retained Earnings 2,000
Treasury Stock 25,000

12. On July 1, 2005, Alto Corporation declared a 1 for 5 reverse stock split, when the market
value of stock was P100 per share. Prior to the split, Alto had P1,000,000 credited to
capital stock, divided into 100,000 shares issued and outstanding. After the split, the par value
of the stock is
a. 2 b. 10 c. 20 d. 50

13. X grant of 30,000 stock appreciation rights enables key employees to receive cash equal to
the difference between P20 and the market price of the stock on the date each right is exercised.
The service period is year 2000 through year 2002, and the rights are exercisable in
 2003and 2004. The market price of the stocks was P25 and P28 on December 31,. 2000
and 2001, respectively. As of December 31, 2001, what amount of liability should be reported
by X pertaining to stock appreciation right?
a. 240,000 b. 160,000 c. 110,000 d. 165,000

14. On May 31, 206, Ball Corporation’s board of directors declared a 10% stock dividend. The market
price of Ball’s 30,000 outstanding shares of P20 par value common stock was P80 per share on that date.
The stock dividend was distributed on July 31, 2006, whn the stock’s market price was P100 per share.
What amount should Ball credit to additional paid in capital for this stock dividend?
a. 0
b. 240,000
c. 180,000
d. 300,000
15. The Powerpoint Corporation has two classes of stock outstanding: 9%, P20 par Preference and
P70 par Ordinary. During the fiscal year ending December 31, 2008, the company had the following
equity transactions in chronological order:

No. of Price per

Shares Share
Issue of preference share 10,000 P28
Issue of ordinary share 35,000 70
Reacquisition and retirement of preference 2,000 30
Purchase of treasury ordinary share 5,000 80
Stock split 2-for-1
Reissue of treasury ordinary share 5,000 52
Balances of the accounts in the shareholders’ equity section of the December 31, 2007 balance sheet
were:
Preference Share, 50,000 shares P1,000,000
Ordinary Share, 100,000 shares 7,000,000
Paid-in Capital in Excess of Par, Preference 400,000
Paid-in Capital in Excess of Par, Ordinary 1,200,000
Retained Earnings 550,000
Dividends were paid at the end of the fiscal year on the common stock at P1.20 per share and on the
preferred stock at the preferred rate. Net income for the year was P850,000. How much should be the
amount of Preference Share shown on the December 31, 2007 balance sheet?
a. P1,220,000 b. P1,160,000 c.
P1,140,000 d. P1,116,000

16. On March 30, 2007, Mitz Co. declared a 30% ordinary share dividend. Shares were selling on the
market on this date at P25 per share. The par value is Pl0 per share and 180,000 shares are outstanding. In
distributing the stock dividend, Mitz Co. issued fractional share warrants totaling 600 shares. Assuming
that 60% of the warrants are exercised and the remaining warrants expire, the entry to record the
exercise and expiration of the fractional share warrants is -
a. Fractional Share Warrants Issued 15,000
Ordinary Share 9,000
PIC from Forfeited Warrants 6,000
b. Fractional Share Warrants Issued 6,000
Ordinary Share 3,600
PIC from Forfeited Warrants 2,400
c. Fractional Share Warrants Issued 15,000
Ordinary Share 3,600
PIC from Forfeited Warrants 11,400
d. Fractional Share Warrants Issued 15,000
Ordinary Share 15,000

17. Quebec Corporation, a calendar-year company, had sufficient retained earnings in 2007 as a basis for
dividends, but was temporarily short of cash. Quebec declared a dividend of P100,000 on April 1,
2007, and issued promissory notes to its stockholders in lieu of cash. The notes, which were dated
April 1, 2007, had a maturity date of March 31, 2008, and a 10% interest rate. How should Quebec
account for the scrip dividend and related interest?
a. Debit Retained Earnings for P110,000 on April 1, 2007.
b. Debit Retained Earnings for P110,000 on March 31, 2008.
 c. Debit Retained Earnings for P100,000 on April 1, 2007 and debit Interest Expense for P10,000 on
March 31, 2008.
d. Debit Retained Earnings for P100,000 on April 1, 2007 and debit Interest
Expense for P7,500 on December 31, 2007.

18. The directors of Pete Corporation, whose P50 par value ordinary share is currently selling at P70
per share, have decided to issue a stock dividend. Pete has an authorization for 250,000 ordinary
shares, has issued 100,000 shares of which 10,000 shares are now held as treasury, and desires to
capitalize P945,000 of the Retained Earnings balance. To accomplish this, the percentage of stock
dividend that the directors should declare is -
a. 18.9% c. 12%
b. 15% d. 9%
19. Sine Co. had outstanding 20,000 shares of P100 par value 8%
cumulative preference shares and 30,000 shares of P50 par value ordinary shares on December 31, 2007.
At December 31, 2006, dividends in arrears on the preference shares were P80,000. Cash dividends
declared in 2007 totaled P300,000. The amounts paid to preference shareholders and ordinary
shareholders are:
a. P80,000 and P220,000
b. P160,000 and P140,000
c. P220,000 and P80,000
d. P240,000 and P60,000

20. At December 31, 2006 and 2007, Eagle Company had outstanding 4,000 shares of P100 par value
12% cumulative, fully participating preference share and 20,000 of Pl0 par value ordinary share. At
December 31, 2006, dividends in arrears on the preference share were P24,000. Cash dividend declared
in 2007 totaled P108,000.What are the amounts of dividend per share on the preference and ordinary
shares, respectively?
a. P20.00 and Pl.40 c. P18.00 and Pl.40
b. P20.00 and Pl.80 d. P18.00 and Pl.80

21. On March 2, 2007, Nanette Corporation issued 4,000 shares of 6% cumulative P100 par value
preference share for P434,000. Each preference share carried one nondetachable stock warrant
which entitles the holder to acquire at P17, one share of Nanette’s Pl0 par ordinary stock. On March 2,
2007, the market price of the preference share without the warrants was P90 per share and the market price
of the stock warrants was P15 per warrant. What is the amount credited to Paid-in Capital in Excess of
Par- Preference by Nanette on the issuance of the stock?
a. P0 c. P34,000
b. P8,000 d. P62,000
22. On July 1, 2007, Tools Company granted stock options to key employees for the purchase of 20,000
shares of the company’s ordinary stock at P25 per share. The options are intended to compensate
employees for the next two years. The options are exercisable within a four-year period beginning July
1, 2009 by grantees still in the employ of the company. The market price of Tools’ ordinary share was
P33 per share at the date of grant. No stock options were terminated during the year. How much should
Tools charge to compensation expense for the year ended December 31, 2007?
a. P0 c. P80,000
b. P40,000 d. P160,000

23. On May 1, 2007, Maine Company issued P2 million, 20-year, 10% bonds for P2,120,000. Each
P1,000 bond had a detachable warrant eligible for the purchase of one share of Maine’s P50 par ordinary
share for P60. Immediately after the bonds were issued, Maine’s securities had the following market
values: 10% bonds without warrants — P1,040; Warrants — P20; Ordinary Share P50 par — P56.
What amount should Maine record as additional paid-in capital?
a. P120,000 c. P40,000
b. P80,000 d. P0

24. Below is the stock holders’ equity section of P

Preferred stock, 7%, P100 par value, 30,000 shares authorized
and issued, total liquidation value, P3,200,000 P3,000,000
Common stock, no par, 50,000 shares, authorized and issued 1,500,000
Donated Capital 500,000
 Retained Earnings 4,500,000
All preferred dividends have been fully paid.
How much is the book value per share of common stock?
a. 125.80 b. 126.00 c. 130.00 d. 300

25. E Corp.s balance sheet reports the following stock holders’ equity:
5% Cumulative Preferred stock, P100 par, 5,000 shares issued
and outstanding……………………………………………P500,000
Common stock, P10 par, 50,000 shares issued and outstanding, P500,000
APIC………………………………………………………p300,000
Retained Earnings ………………………………………..P 700,000
Diviedends in arrears on the preferred stock amount tp P50,000. If E Corp were to be liquidated, the preferred
stockholders would receive par value plus premium of P10/share. How much would be the book value per
share on common stock?
a. 24,000 b. 28,000 c. 29.50 d. 30.00

26. The stockholders’ equity of J Corp. on December 31, 2003 shown the following balances:
10% Preferred stock, 5,000 shares, P100 par……………………P500,000
12% Preferred stock, 6,000 shares, P100 par…………………… 600,000
Common stock, 10,000 shares, P40 par………………………… 400,000
APIC…………………………………………………………… 320,000
Retained Earnings………………………………………………. 480,000
The 10% Preferred stock is cumulative and fully participating, while the 12% preferred stock is non
cumulative and fully participating. Dividends in arrears are 2 years.
What is the book value per share of common stock?
a. 44.00 b. 59.68 c. 60.27 d. 102.80

27. The stockholder’s equity of S Corp. shows the following balances on December 31, 2003:
10% Preferred stock, cumulative and non participating, P100 par, with liquidation value of P110, 20,000
shares………………………………………..P2,000,000
Common stock, P100 par, 30,000 shares……………………. 3,000,000
Subscribed Common stock…………………………………. 1,000,000
Subscription Receivable……………………………………. 600,000
Treasury stock, 5,000 of common, at cost……………………….400,000
APIC……………………………………………………………..660,000
Retained earnings…………………………………………….. 1,580,000
What is the book value per share of common stocks, assuming preferred dividends are in arrears since 2001?
a. 144.00 b. 149.70 c. 155.42 d. 161.14
28. Ayos Company had the following capital structure during 2006:
Preferred stock, P 100 par, 4% cumulative, 25,000 shares
Issued and outstanding 2,500,000
Common stock, P50 par, 200,000 shares issued and outstanding 10,000,000

Ayos reported net income of P5,000,000 for the year ended December 31, 2006. Ayos paid no preferred
dividends during 2005 and paid P160,000 in preferred dividends during 2006. In its December 31, 2006
income statement, what amount should Ayos report as basic earnings per share?
a. 24.50
b. 24.20
c. 24.80
d. 25
29. At January 1, 2006, Will Company had 500,000 shares of common stock outstanding. On October 1,
2006, an additional 120,000 shares of common were issued for cash. Will also had P4,000,000 of 8%
convertible bonds outstanding at December 31, 2006, which are convertible into 100,000 shares of
common. What is the number of hares that should be used in computing diluted earnings per share on
December 31, 2006?
a. 720,000
b. 630,000
c. 600,000
d. 530,000
Ans key
ACCCD BDCBC DDBCB BDBDA CBCBB BAAD