A.

P Lecture & SW
SHAREHOLDERS EQUITY
Book Value
ABC Company provided the following equity balances on December 31, 2013:

10% cumulative preference share capital, par P100 30,000 shares 3,000,000
Ordinary share capital, par P100, 50,000 shares 5,000,000
Retained earnings 4,000,000

Dividends in arrears on the preferences share capital are for 5 years. If the entity were
to be liquidated, the preference share would receive par plus a premium of P300,000.
What is the book value per ordinary share? - 144
 Book Value
ABC Company began operations in January 2009 and reported net income or loss for its five years of operations
as follows:
2009 1,500,000 loss 2012 4,500,000 income
2010 1,300,000 loss 2013 9,000,000 income
2011 1,200,000 loss

On December 31, 2013, the capital accounts were as follows:

Preference share capital (P100 par, 12% participating and
Cumulative, 100,000 shares) 10,000,000
Preference share capital (P100 par, 10% nonparticipating,
Non-cumulative, 50,000 shares) 5,000,000
Ordinary share capital (10 par, 1,000,000 shares) 10,000,000

The entity has never paid cash or stock dividend. The capital accounts have not changed since the entity began
operation. If the maximum amount available for cash dividend is declared on December 31, 2013, what amount
of dividend is payable to the ordinary shareholders? 2,100,00000,000
 Book Value
You are auditing the financial statements of the DEF Corporation as of December 31. 2014. The companys
general ledger shows the following liability and equity accounts at the end of the reporting period.
Accounts payable 530,000
Accrued expenses 41,600
Reserve for bond retirement 320,000
Preference shares, 6% cumulative, 100 par;
6,000 share authorized; 4,000 shares
Issued; 3,700 shares outstanding
(P110 liquidation value per share) 400,000
Ordinary shares, P10 par; 200,000 shares
Authorized; 80,000 shares issued and
Outstanding 800,000
Share premium 154,600
Retained Earnings 262,520
Treasury preference shares, at cost 36,000
What is the book value of the preference shares on December 31, 2014? 116
What is the book value of the ordinary shares on December 31, 2014? 18.40
Quasi-reorganization
ABC Financial and operating circumstances warrant that Negligible Company undergo a quasi-organization on December 31,
2013. The following information may be relevant in accounting for the quasi reorganization.

*Inventory with fair value of 1,000,000 is currently recorded in the accounts at its cost of 1,500,000
*Plant asset with fair value of 3,000,000 are currently recorded at 4,000,000 net of accumulated depreciation.
*Unrecorded accounts payable amount to 300,000
*Individual shareholders contribute 1,500,000 to create additional paid-in capital to facilitate the reorganization.
No new shares are issued to the shareholders.
*The par value of share capital is reduced from 100 to 50
*Immediately before this event, the shareholders equity is as it follows:
Share capital, 100 par value, 50,000 shares 5,000,000
Share premium 500,000
Retain earnings (deficit) (2,000,000)

After the quasi-reorganization, what is the total shareholders equity? - 3,200,000

Earning Per Share
ABC Company had the following capital during 2013:

Preference share capital, P100 par, 10% cumulative, 30,000 shares 3,000,000
Ordinary share capital, 100 par, 50,000 shares 5,000,000

The entity reported net income of P4,000,000 for the current year. There are no
preference dividends in arrears on December 31, 2011. The entity paid no preference
dividends during 2012 and paid P500,000 in preference dividends during 2013. What
amount should be reported as basic earnings per share for 2013? - 74
Earning Per Share
Vincent Company had 100,000 ordinary shares issued and outstanding at the beginning
of current year. During the current year, the entity also had the following ordinary share
transactions.
April 1 Issued 30,000 previously unissued shares
May 1 Split the share 2 for 1
June 30 Purchased 10,000 shares for the treasury
July 30 Distributed a 20 percent bonus issue
December 31 Split the stock 3 for 1
What is the weighted average number of shares for EPS purposes? - 864,000
Earning Per Share

On January 1, 2013, ABC Company had 60,000 ordinary shares

outstanding, P100 par, or a total par value of P6,000,000.
During 2013, the entity issued rights to acquire one ordinary
share at P100 in the ratio of one share for every 5 shares held.
The rights are exercised on March 31, 2013. The market value
of each share immediately prior to March 31, 2013 was P160.
The net income for 2013 was P4,000,000. What amount should
be reported as basic earnings per share for 2013? - 57.14
Diluted Earning Per Share
Benten Company had 300,000 ordinary shares
outstanding on January 1, 2013. On July 1, 2013, an
additional 50,000 shares were issued for cash. The entity
had also unexercised share options to purchase 40,000
shares at P15 per share outstanding at the beginning and
end of 2013. The average market price of a share was
P20 and the ending market price was P30. What is the
number of shares that should be used in computing
diluted earnings per share? 335,000
Diluted Earning Per Share
The capital structure of DEF Company on December 31, 2013 is as follows:

Ordinary share capital 110,000 shares

Convertible noncumulative preference share capital 20,000 shares
10% convertible bonds payable P2, 000,000

Share options to purchase 60,000 shares at P15 were outstanding. Market price of
ordinary share was P22 on December 31, 2013 and averaged P20 during the year. No
value was assigned to the share options. The entity paid preference dividends of P5
per share. The preference shares are convertible into 40,000 ordinary shares. The 10%
bonds are convertible into a total of 30,000 ordinary shares. The net income for 2013
is P650,000. The income tax rate is 30%. What amount should be reported as diluted
earnings per shares for 2013? - 3.94
Diluted Earning Per Share
Carlo Company has outstanding 20,000 written put
options on its ordinary shares with an exercise price of
P350. The average market price of ordinary shares for
the period is P280. In calculating diluted earnings per
share, how many incremental ordinary shares should be
included as a result of the written put options? - 5,000
 Diluted Earning Per Share
The income statement of Boy Company showed a net loss of P3, 000,000
for the year ended December 31, 2013. The entity had shares outstanding
as follows:

Ordinary share capital, P100 par, 50,000 shares 5,000,000

Preference share capital, P100 par, 10% cumulative,
20,000 shares convertible into 20,000 ordinary shares 2,000,000

What is the basic loss per share? - 64

 Shareholders' Equity
During the current year, Karla Company issued 10,000
ordinary shares with P200 par value and 20,000 convertible
preference shares with P200 par value for a total of
P8,000,000. On the date of issuance, the ordinary share is
selling at P360 and the preference share is selling at P270.
What amount of the proceeds should be allocated to the
convertible preference shares? - 4 800 000
Shareholders' Equity
During the current year, VVV Company issued 6% bonds
with a maturity value of P6,000,000, together with
10,000 ordinary shares with P50 par value for a
combined cash amount of P11,000,000. The market
value of the ordinary share cannot be determined. If the
bonds were issued separately, the bonds would have sold
for P4,000,000 on an 8% yield to maturity basis. What
amount should be reported for share premium on the
issuance of the ordinary shares? - 6,500,000
 Shareholders' Equity
ABC Company was organized on January 1, 2013. On that date,
it issued 200,000 shares with P10 par value at P15 per share.
During the period January 1, 2013 through December 31,
2014, the entity reported net income of P2,000,000 and paid
cash dividends of P500,000. On January 5, 2014, the entity
purchased 10,000 shares at P20 per share to be held as
treasury. On December 31, 2014, 5,000 treasury shares were
sold at P30 per share and the remaining treasury shares were
retired. What is the total shareholders equity on December
31,2014? - 4,450,000
Retained Earnings
The shareholders equity of DeMarcus Company on January 1, 2013 contained the
following accounts:

Share capital, 250,000 shares authorized, 100,000 shares outstanding 5,000,000

Share premium 4,000,000
Retained earnings 5,000,000

The board of directors declared a 10% stock dividend on July 1, 2013, when the
market value of the share was P100. The stock dividend was issued on October 1,
2013 when the market value of the share was P150. The share has a par value of P50.
The entity sustained a net loss of P2,500,000 for 2013. What amount should be
reported as retained earnings on December 31, 2013? - 1,500,000
Retained Earnings
Barri Company showed the following shareholders equity on January
1,2013:
Share capital 1,500,000
Share premium 3,000,000
Retained earnings 5,000,000
The entity had 400,000 authorized shares of P5 par value, of which
300,000 shares were issued and outstanding. On July 1, 2013, the entity
declared a property dividend of inventory payable on March 1, 2014. The
inventory had a P1,200,000 carrying amount and a fair value less cost to
distribute of P1,500,000 on July 1.2013, P1,800,000 on December 31,
2013 and P2,000,000 on March 1, 2014. The net income for 2013 was
P3,000,000. What amount should be reported as unappropriated retained
earnings on December 31, 2013? - 6,200,000
Retained Earnings
On December 31, 2013, ABC Company declared a cash
dividend of P4,000,000 to shareholders of record on
December 31, 2013 payable March 31, 2014. On December
31, 2013, the entity reported accumulated depletion of
P1,000,000. share capital of P5,000,000, share premium of
P1,500,000 and retained earnings of P3,000.000. What
amount of liquidating dividend is included in the cash
dividend declared? -1,000,000
 Retained Earnings
ABC Company provided the following information:
* Dividends on 10% 50,000 cumulative preference shares with P100 par
value have not been declared or paid for 3 years.
*Treasury ordinary shares were acquitted at a cost of P1,000,000 during
the year. The treasury shares had not been reissued as at year-end.
*At year-end, the entity appropriated P2,000,000 of retained earnings for
the construction of a new plant.
*Also, P3,500.000 of cash was restricted for the retirement of bonds
payable due in the next year.

What amount of should be reported as appropriated retained earnings? -

3,000,000
ABC Corporation has incurred losses from operations for many years. At the recommendation of the
newly hired president, the board of directors voted to implement a quasi-organization, subject to
shareholders and creditors approval. Immediately, prior to the quasi-reorganization, on June 30,
2010., ABCs statement of financial position was a follows:
Assets
Current Asset P1,375,000
Property, Plant and Equipment (net) 3,375,000
Other noncurrent assets 500,000
Total assets P5,250,000
Liabilities & Shareholders' Equity
Total Liabilities P1,500,000
Ordinary shares, P10 par 4,000,000
Share premium 750,000
Retained Earnings ( 1,000,000)
Total liabilities & Shareholders equity P5,250,000
The shareholders and creditors approved the quasi-organization effective July 1, 2010, to be accomplished by a
reduction in property, plant and equipment (net) of P875,000, a reduction in other noncurrent assets of
P375,000, and a reduction in par value from P10 to P5.
ABCs July 1, 2010, statement of financial position after the quasi-reorganization should show total assets of 4,000,000
The balance in the share premium account after the quasi-reorganization on July 1, 2010 should be 500,000
ABCs deficit after quasi-reorganization on July 1, 2010 should be - 0
ABC Corporation began operations in January 2012, and reported the following results for
each of its three years of operations.
2012 P300,000 loss
2013 30,000 loss
2014 3,950,000 income
At December 31, 2014, the companys capital accounts were as follows:
5% cumulative preference shares, par value P100;
authorized, 100,000 shares; issued and outstanding,
60,000 shares (liquidation value of P105) P6,000,000

Ordinary shares, par value P10; authorized,

1,000,000 shares; issued and outstanding,
800,000 shares 8,000,000

ABC, Inc. has never paid a cash or stock dividend and there has been no change in the capital
accounts since it began operations.
What is the book value of the preference shares on December 31, 2014? - 120
What is the book value of the ordinary shares on December 31, 2014? 13.03
Assume that the following data relative to Eddy Company for 2007 is available:
Net Income P2,100,000
Transactions in Common Shares Change Cumulative
Jan. 1, 2007, Beginning number 700,000
Mar. 1, 2007, Purchase of treasury shares (60,000) 640,000
June 1, 2007, Stock split 2-1 640,000 1,280,000
Nov. 1, 2007, Issuance of shares 120,000 1,400,000

8% Cumulative Convertible Preferred Stock

Sold at par, convertible into 200,000 shares of common
(adjusted for split). P1,000,000

Stock Options
Exercisable at the option price of P25 per share. Average
market price in 2007, P30 (market price and option price
adjusted for split). 60,000 shares

Compute the following:

Compute the basic earnings per share for 2007. - 1.53
Compute the diluted earnings per share for 2007. - 1.57
The following information was taken from the books and records of SSS, Inc.:
I. Net income P 280,000
II. Capital structure:
a. Convertible 6% bonds. Each of the 300, P1,000 bonds is convertible
into 50 shares of common stock at the present date and for the next 10 years. 300,000
b. P10 par common stock, 200,000 shares issued and outstanding during the entire year. 2,000,000
c. Stock warrants outstanding to buy 16,000 shares of common stock at P20 per share.
III. Other information:
a. Bonds converted during the year None
b. Income tax rate 30%
c. Convertible debt was outstanding the entire year
d. Average market price per share of common stock during the year P32
e. Warrants were outstanding the entire year
f. Warrants exercised during the year None
Compute Basic earnings per share 1.40
Compute Diluted earnings per share. 1.32