ST.

VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

SUBJECT TITLE: INTERMEDIATE ACCOUNTING 3 COO – FORM 12

INSTRUCTOR: JESSA P. CASTELLANO, CPA
SUBJECT CODE: FA5

FINAL MODULE

ERROR CORRECTION; SINGLE ENTRY;

HYPERINFLATION; AND CURRENT COST ACCOUNTING

ERROR CORRECTION

1. Regency Company reported net income for the years 2022 and 2023 at
P550,000 and P700,000 respectively. Your audit of the company’s accounts
disclosed the need for adjustments as follows:

2022 2023
Overstatement of ending inventory 29,000 33,000
Omission of depreciation on newly acquired equipment 15,000 15,000
Understatement of commission receivable 22,000 18,000
A purchase of merchandise was not recorded until the
following year, but included in the year’s inventory 60,000

The adjusted net income for 2023 was:

a. 700,000
b. 677,000
c. 708,000
d. 737,000

2. Bren Company’s beginning inventory at January 1, 2023 was understated by

P26,000 and its ending inventory was overstated by P52,000. As a result, Bren’s
cost of goods sold for 2023 was

a. 26,000 understated
b. 26,000 overstated
c. 78,000 understated
d. 78,000 overstated

3. Toronto Company failed to recognize accruals and prepayments during its first
year of operations. The earnings before tax, accruals and prepayments at the
end of the year are:

Earnings before tax 5,000,000

Items not recognized at year-end were as follows:

Prepaid insurance 200,000

Accrued wages 250,000
Rent revenue collected in advance 300,000
Interest receivable 100,000

The correct earnings before tax should be

a. 4,750,000
b. 5,250,000
c. 5,000,000
d. 4,950,000

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

4. Victoria company’s statements for 2022 and 2023 included errors as follows:

Ending inventory Depreciation

2022 200,000 understated 50,000 understated
2023 300,000 overstated 100,000 overstated

How much should retained earnings be retroactively adjusted at January 1,

2024?

a. 250,000 increase
b. 250,000 decrease
c. 400,000 decrease
d. 200,000 decrease

5. During 2023, Paul Company discovered that the ending inventories reported on
its financial statements were incorrect by the following amounts:

2021 60,000 understated

2022 75,000 overstated

Paul uses the periodic inventory system to ascertain year-end quantities that are
converted to peso amounts using the FIFO cost method. Prior to any
adjustments for these errors and ignoring income taxes, Paul’s retained earnings
at January 1, 2023 would be

a. Correct
b. 15,000 overstated
c. 75,000 overstated
d. 135,000 overstated

6. Canal Company reported the following net income:

2021 6,000,000
2022 6,500,000

In the determination of the net income, the following items are ignored:

2022 2023
Prepaid insurance 100,000 150,000
Accrued salaries 50,000 200,000
Unearned rental income 250,000 450,000
Accrued interest receivable 300,000 400,000

The correct net income for 2023 should be

a. 6,100,000
b. 6,300,000
c. 6,400,000
d. 6,500,000

7. Shannon Corporation began operations on January 1, 2022. Financial

statements for the years ended December 31, 2022 and 2022 contained the
following errors:

2022 2023
Ending inventory 160,000 understated 150,000 overstated
Depreciation expense 60,000 understated
Insurance expense 100,000 overstated 100,000 understated
Prepaid insurance 100,000 understated

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

In addition, on December 31, 2023, fully depreciated machinery was sold for
P108,000 cash, but the sale was not recorded until 2024. There were no other
errors during 2022 or 2023 and no corrections have been made for any of the
errors. Ignoring income taxes, what is the total effect of the errors on the amount
of working capital at December 31, 2023?

a. 42,000 overstated
b. 58,000 understated
c. 60,000 understated
d. 98,000 understated

8. Glory Company manufactures kerosene heaters for home use. The company’s
December 31 financial statements contained the following errors:

2022 2023
Ending inventory 200,000 under 300,000 over
Depreciation 50,000 under

An insurance premium of P150,000 was prepaid in 2022 to cover 2022, 2023 and
2024. The entire amount was charged to expense in 2022. On December 31,
2023, fully depreciated machinery was sold for P250,000 cash but the sale was
not recorded until 2024. There were no other errors during 2022 and 2023, and
no corrections have been made for any of the errors.

Before any of the above errors were corrected, the company’s net income figures
for 2022 and 2023 were determined to be P6,500,000 and P8,000,000,
respectively. What is the correct net income for 2023?

a. 7,700,000
b. 7,450,000
c. 8,100,000
d. 7,650,000

SINGLE ENTRY

9. Trend Company provide the following information for the year 2023:

Net loss 100,000

Total assets at December 31 3,000,000
Ordinary share capital at December 31 1,000,000
Share premium 500,000
Dividend declared 700,000
The debt-to-equity ratio (liabilities + equity) is 50% at December 31, 2023. What
is the retained earnings account balance on January 1, 2023?

a. 1,100,000
b. 1,300,000
c. 500,000
d. 600,000

10. The following changes in account balances of Star Corporation during 2023 were
presented below.
Increase
Assets 800,000
Liabilities 200,000
Ordinary share capital 400,000
Share premium 100,000

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

Assuming there were no changes to retained earnings other than for a dividend
payment of P100,000, the net income for the year 2023 was
a. 600,000
b. 700,000
c. 200,000
d. 100,000

11. Presented below are changes in all the account balances of Camadillo Company
for the current year, except for retained earnings.
Increase
(Decrease)
Cash 790,000
Accounts receivable, net 240,000
Inventory 1,270,000
Investments (470,000)
Accounts payable (380,000)
Bonds payable 820,000
Ordinary share capital 1,250,000
Share premium 130,000

What was the net income for the current year, assuming that there are no entries
in the retained earnings account except for net income and a dividend
declaration of P190,000 which was paid in the current year?

a. 1,200,000
b. 1,190,000
c. 200,000
d. 10,000

12. Following data are selected information for Marbel Company for the current year:

Cash balance, January 1 130,000

Accounts receivable, January 1 190,000
Collections from customers 2,100,000
Stockholders’ equity, January 1 380,000
Total assets, January 1 750,000
Total assets, December 31 880,000
Cash balance, December 31 160,000
Accounts receivable, December 31 360,000
Total liabilities, December 31 390,000

The net income for the current year is

a. 490,000
b. 150,000
c. 110,000
d. 70,000

HYPERINFLATION

13. The following assets appear on the balance sheet of X Company:

Cash in bank 2,000,000

Accounts receivable 4,000,000
Inventory 1,500,000
Available for sale securities 500,000
Patent 1,000,000
Advances to employees 200,000
Advances to suppliers 400,000
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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

Prepaid expenses 100,000

In preparing financial statements in a hyperinflationary economy, how much

should the company classify as monetary assets?

a. 6,200,000
b. 6,600,000
c. 6,700,000
d. 7,700,000

14. The following liabilities appear on the balance sheet of Y Company:

Accounts payable 1,000,000

Accrued expenses 500,000
Bonds payable 3,000,000
Finance lease liability 4,000,000
Unearned revenue 300,000
Advances from customers 1,200,000
Estimated warranty liability 200,000
Deferred tax liability 400,000

In preparing financial statements in a hyperinflationary economy, how much

should the company classify as monetary liabilities?

a. 4,500,000
b. 8,500,000
c. 9,700,000
d. 8,900,000

15. Rubia Company showed the following information for purposes of preparing
hyperinflationary financial statements on December 31, 2023:

Note receivable (note was received on October 1, 2022) 2,400,000

Price index numbers:

October 1, 2022 80
January 1, 2023 100
December 31, 2023 400
Average for 2023 250

What is the fraction that should be used in restating the note receivable on
December 31, 2023?

a. 400/150
b. 400/250
c. 400/80
d. 400/400

16. Veranus Company operates in a hyperinflationary economy and provides the

following statement of financial position on December 31, 2023:

Property, plant and equipment 900,000

Inventory 2,700,000
Cash 350,000
Share capital issued 12/31/2019 400,000
Noncurrent liabilities 500,000
Current liabilities 700,000
Retained earnings 2,350,000

The general price index had moved on December 31 of each year as follows:
2019-100, 2020-130, 2021-150, 2022-240 and 2023-300.

5
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

The property, plant and equipment were purchased on December 31, 2021. The
noncurrent liabilities were loans raised on December 31, 2022. What is the
balance of retained earnings on December 31, 2023 after adjusting for
hyperinflation?

a. 2,350,000
b. 2,750,000
c. 3,550,000
d. 2,625,000

17. The following liabilities and equity relate to Maximus Company operating in a
hyperinflationary economy:

Before restatement After restatement

Liabilities 2,000,000 2,500,000
Share capital 5,000,000 8,500,000
Revaluation Surplus 1,000,000 ?
Retained earnings 1,500,000 ?
Total liabilities and equity 9,500,000 16,000,000

What would be the balances of revaluation surplus and retained earnings after
restatement?

Revaluation surplus Retained earnings

a. 0 5,000,000
b. 5,000,000 0
c. 1,000,000 4,000,000
d. 3,500,000 1,500,000

18. Camia Company provided the following information about the company’s
inventory during 2023:

Inventory – January 1 1,650,000

Purchases 5,400,000
Inventory – December 31 2,400,000

The relevant index numbers are:

January 1, 2023 110

December 31, 2023 370
Average index for 2023 240

What is the cost of goods sold in a hyperinflationary income statement?

a. 9,075,000
b. 3,468,750
c. 6,475,000
d. 2,250,000

19. M Company’s property, plant and equipment at December 31, 2023 were:

Year acquired Percent depreciated Cost Index number

2021 30 3,000,000 100
2022 20 2,000,000 125
2023 10 1,000,000 300

Depreciation is calculated at 10% straight line. A full year’s depreciation is

charged in the year of acquisition. There were no disposals in 2023. What

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

amount of depreciation would be included in the 2022 income statement adjusted

for hyperinflation?

a. 1,480,000
b. 1,800,000
c. 1,620,000
d. 600,000

20. C Company’s financial position did not change during 2023. The general price
index was 120 on January 1 and 300 on December 31, 2023. The statement of
financial position on January 1 and December 31, 2023 is:

Cash 250,000
Accounts receivable 500,000
Trading securities 400,000
Inventory 2,500,000
Land 1,350,000
5,000,000

Accounts payable 1,500,000

Mortgage payable 500,000
Share capital 2,500,000
Retained earnings 500,000
5,000,000

What is the purchasing power gain or loss for 2023?

a. 1,875,000 gain
b. 1,875,000 loss
c. 1,275,000 gain
d. 1,275,000 loss

21. The following information pertains to A Company for the year ended December
31, 2023.

Net monetary assets – January 1 880,000

Sales 3,900,000
Purchases 2,340,000
Expenses 975,000
Income tax 585,000
Cash dividend paid on December 31, 2023 200,000

The sales, purchases, expenses and income tax accrued evenly during the year.
Selected general price index numbers are:

January 1 110
December 31 280
Average for the year 195

What is the gain or loss on purchasing power during the year?

a. 1,360,000 gain
b. 1,360,000 loss
c. 200,000 gain
d. 200,000 loss

CURRENT COST ACCOUNTING

Nos. 22 and 23 are based on the following information:

Transaction regarding the land of Simple Company are summarized below:

7
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

a. The entity purchased land on January 1, 2023 for P500,000 cash. On

December 31, 2023, the land has a current replacement cost of P600,000.
b. On December 31, 2024, the land has a current replacement cost of
P750,000.
c. The entity sold the land for P1,000,000 cash on December 31, 2025. On this
date, the current replacement cost of the land is P800,000.

22. What is the realized holding gain to be reported in the 2025 income statement?

a. 300,000
b. 250,000
c. 50,000
d. 0

23. What is the gain on sale of land to be reported in 2025 under current cost
accounting?

a. 500,000
b. 250,000
c. 200,000
d. 150,000

24. Information with respect to Roundtree Company’s cost of goods sold for 2023 is:

Units Historical cost

Inventory – January 1 10,000 530,000
Purchases 45,000 2,790,000
Goods available for sale 55,000 3,320,000
Inventory – December 31 (15,000) ( 945,000)
Cost of goods sold 40,000 2,375,000

Roundtree estimates that the current cost per unit of inventory was P58 at
January 1, 2023 and P72 at December 31, 2023. In Roundtree’s income
statement restated to average current cost, the realized holding gain form the
inventory sold is

a. 225,000
b. 135,000
c. 350,000
d. 505,000

25. Kerr Company purchased a machine for P1,150,000 on January 1, 2023, the
entity’s first day of operation. At the end of the year, the current cost of the
machine was P1,250,000. The machine has no residual value, has a five-year
life, and is depreciated by the straight line method. For the year ended December
31, 2023, the amount of depreciation expense which would appear in the current
cost income statement is

a. 140,000
b. 230,000
c. 240,000
d. 250,000

End

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

EARNINGS PER SHARE

1. Karla Corporation provided the following information for year 2023:

Preference share, P100 par, 10% cumulative,

10,000 shares 1,000,000
Ordinary share, P100 par, 50,000 shares 5,000,000
Net income for the year 2,000,000

How much is the basic earnings per share?

a. 30
b. 38
c. 42
d. 46

2. The following information pertains to Tidwell Corp.’s outstanding stock for 2023:

Ordinary share, P5 par value

Shares outstanding, 1/1/23 20,000
2-for-1 stock split, 4/1/23 20,000
Shares issued, 7/1/23 10,000

Preference share, P10 par value, 5% cumulative

Shares outstanding, 1/1/23 4,000

How many shares should Tidwell use to calculate 2023 BEPS?

a. 40,000
b. 45,000
c. 50,000
d. 54,000

3. On January 1, 2023, Apex Corporation, whose stock is publicly traded, had

100,000 ordinary shares issued and outstanding. On April 1, 2023, Apex issued a
10% stock dividend. The number of shares to be used in the computation of
earnings per share for 2023 is

a. 100,000
b. 105,000
c. 107,500
d. 110,000

4. Jones Corporation’s capital structure was as follows:

2023 2022
Outstanding shares of stock:
Ordinary 110,000 110,000
Convertible preference 10,000 10,000
8% convertible bonds P1,000,000 P1,000,000

During 2023, Jones paid, dividends of P3.00 per share on its preference share.
The preference shares are convertible into 20,000 ordinary shares and the 8%
bonds are convertible into 30,000 ordinary shares. Net income for 2023 is
P850,000. The income tax rate is 32%. The diluted earnings per share for 2023
should be

a. 5.46
b. 5.65
c. 5.81
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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

d. 7.45

5. Strauch Company had one class of ordinary share outstanding and no other
securities that, are potentially convertible into ordinary share. During 2022,
100,000 ordinary shares were outstanding. In 2023, two distributions of additional
ordinary shares occurred: On April 1, 20,000 treasury shares were sold, and on
July 1, a 2-for- 1 stock split was issued. Net income was P410,000 in 2023 and
P350,000 in 2022. What amounts should Strauch report as earnings per share in
its 2023 and 2022 comparative income statement?

2023 2022
a. 1.78 3.50
b. 1.78 1.75
c. 2.34 1.75
d. 2.34 3.50

6. Deaton, Inc. had 300,000 ordinary shares issued and outstanding at December
31, 2022. On July 1, 2023, an additional 50,000 ordinary shares were issued for
cash. Deaton also had issued unexercised stock options to purchase 40,000
ordinary shares at P15 per share outstanding at the beginning and end of 2023.
The average market price of Deaton’s ordinary share was P20 during 2023.

What number of shares should be used in computing diluted earnings per share
for the year ended December 31, 2023?

a. 325,000
b. 335,000
c. 360,000
d. 365,000

Nos. 7 to 10 are based on the following information:

Sarapova Corporation provided the following information for 2023:

10%convertible bonds payable, each P1,000

bond convertible into 10 ordinary shares 4,000,000
Ordinary shares, P100 par, 250,000 shares
authorized, 100,000 shares issued 10,000000
Net income 5,000,000
Income tax rate 35%

7. How much is the basic earnings per share?

a. 45.50
b. 50.00
c. 52.35
d. 56.40

8. How much is the diluted earnings per share?

a. 37.57
b. 38.50
c. 44.60
d. 50.00

9. Assume that the convertible bond payable is issued on April 1, 2023, how much
is the basic earnings per share?
a. 35.00
b. 50.00
c. 51.50
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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

d. 62.25

10. Assume that the convertible bond payable is issued on April 1, 2023, how much
is the diluted earnings per share?
a. 21.65
b. 26.75
c. 32.50
d. 39.96

11. Troupe Company had 100,000 ordinary shares issued and outstanding at
December 31, 2022. On July 1, 2023, Troupe issued a 10% stock dividend.
Unexercised call options to purchase 20,000 shares of Troupe’s ordinary shares
(adjusted for the 2023 stock dividend) at P20 per share were outstanding at the
beginning and end of 2023. The average market price of Troupe’s ordinary
shares (which was not affected by the stock dividend) was P25 per share during
2023. Net income for the year ended December 31, 2023 was P550,000. What
should be Troupe’s 2023 DEPS, rounded to the nearest centavo?

a. P4.82
b. P5.00
c. P5.05
d. P5.24

12. XYZ Company provided the following information for 2023:

Net loss (5,000,000)

Ordinary share, P100 par, 100,000 shares 10,000,000
Preference share, P100 par, 10% cumulative, 20,000
shares convertible into 40,000 ordinary shares 2,000,000

How much is the basic loss per share?

a. (50)
b. (52)
c. (54)
d. (55)

13. Shane Company had 100,000 ordinary shares issued and outstanding at January
1, 2023. During the current year, Shane also had the ordinary share transactions
listed below.

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 stock dividend
December 31 Split the share 3 for 1

What is the weighted average number of shares that should be used in

calculating earnings per share?

a. 288,000
b. 864,000
c. 882,000
d. 972,000

Nos. 14 and 15 are based on the following information:

Graff Corporation provided the following information:

Net income

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 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

2021 1,375,000
2022 1,762,500
2023 2,400,000

Ordinary shares outstanding prior to rights issue 50,000

Rights issue during 2022-one new ordinary share for each 5
outstanding or a total of 10,000
Date of exercise of rights April 1, 2022
Market value of share immediately prior to exercise of rights
(market value of share right-on) 110
Exercise or subscription price 50

14. How much is the basic earnings per share for 2021?

a. 20
b. 25
c. 28
d. 30

15. How much is the basic earnings per share for 2023?

a. 25
b. 30
c. 38
d. 40

End

12
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

BOOK VALUE PER SHARE

1. Tarr Corporation’s shareholders’ equity at December 31, 2023 consisted of the

following:

Preference share — 12%, P50 par, 20,000 shares

issued 1,000,000
Ordinary share, P25 par, 100,000 shares issued 2,500,000
Share premium 200,000
Retained earnings 400,000
Retained earnings appropriated for contingencies 100,000
Revaluation surplus 300,000

Dividends on preference share have been in arrears since 2021. The preference
share has a liquidating value of P55 per share and a call price of P58 per share.
What is the book value per share of preference share?

a. 61
b. 56
c. 55
d. 58

2. Hoyt Corporation’s current balance sheet reports the following shareholders’

equity:

5% cumulative preference share, par value P100

per share; 25,000 shares issued and outstanding 2,500,000
Ordinary share, par value P35 per share; 100,000 shares
issued and outstanding 3,500,000
Share premium on ordinary shares 1,250,000
Retained earnings 3,000,000

Dividends in arrears on the preference share amount to P250,000. If Hoyt were

to be liquidated, the preference shareholders would receive par value plus a
premium of P500,000. The book value per share of ordinary share is

a. 77.50
b. 75.00
c. 72.50
d. 70.00

3. Baker Company had 5,000 shares of P500 par value ordinary share outstanding
and 500 shares of P1,000 par preference share outstanding. The current
market price of the ordinary share is P1,200 per share and total stockholders’
equity amounts to P3,600,000. The preference shareholders have a liquidation
preference of P1,400 per share and no dividends are in arrears. The book value
per share of ordinary share is currently

a. 510
b. 520
c. 580
d. 818

4. TR Company was organized on January 1, 2023 with the following capital

structure:

10% cumulative preference share, par value P10, liquidation value P12,
authorized, issued and outstanding 100,000 shares, P1,000,000.

13
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

Ordinary share, par value P100, authorized 40,000 shares, issued and
outstanding 30,000 shares, P3,000,000.

The net income for the year ended December 31, 2023 was P6,000,000 and no
dividends were declared. What is the December 31, 2023 book value per
ordinary share?

a. 290
b. 293
c. 300
d. 333

5. The shareholders’ equity of Retro Company on December 31, 2023 includes the
following:

12% Preference share, 20,000 shares, P100 par value 2,000,000

14% Preference share, 10,000 shares, P300 par value 3,000,000
Ordinary share, 50,000 shares, P100 par value 5,000,000
Retained earnings 2,240,000
Share premium 1,500,000

The 12% stock is cumulative and fully participating. The 14% stock is
noncumulative and fully participating. Dividends in arrears are for 3 years. What
is the book value per share of ordinary share?

a. 132
b. 126
c. 100
d. 112

6. The board of directors of Lora Company wishes to declare a dividend whereby

ordinary shareholders are to receive a total per share dividend of P4. The
shareholders’ equity on December 31, 2023 appears as follows:

Preference share, P100 par, 7% participating up to 10%,

noncumulative, 100,000 shares authorized,
25,000 shares issued 2,500,000
Ordinary share, P25 par, 250,000 shares authorized and issued
6,250,000
Share premium 1,250,000
Retained earnings 5,000,000

The total amount of the dividend that must be declared to meet the per share
goal of the board of directors is

a. 1,175,000
b. 1,700,000
c. 1,000,000
d. 1,250,000

7. The capital accounts of Tunn Company have the following balances as of

December 31, 2023.

12% nonparticipating, noncumulative preference

share, par value of P100 per share, 10,000 shares 1,000,000
10% fully participating, cumulative preference share, par value
of P100 per share, 25,000 shares 2,500,000
Ordinary share, par value P100 per share, 75,000 shares
7,500,000

14
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

The company plans to declare cash dividends. It has not paid a cash or a stock
dividend before. There has been no change in the capital balances since Tunn
started operations five years ago. The company has the following reported net
income and loss for the five years of business:

2019 1,500,000 loss

2020 1,000,000 loss
2021 500,000 loss
2022 1,750,000 income
2023 6,250,000 income

If the maximum amount available for dividend on December 31, 2023 is declared
and paid, how much shall be distributed to the ordinary shareholders?

a. 3,750,000
b. 2,910,000
c. 500,000
d. 750,000

Nos. 8 to 10 are based on the following information:

The following are selected accounts on the books of Sunrise Company on

December 31. 2023:

Preference share, 12% cumulative and fully participating

P100 par, of 20,000 shares, issued 15,000 shares which 1,000
shares are in the treasury 1,500,000
Treasury preference share, at cost 110,000
Subscribed preference share 200,000
Subscriptions receivable- preference share 130,000
Ordinary share, par value P100, authorized 50,000
shares, issued 30,000 shares of which 1,000 shares are
reacquired 3,000,000
Treasury ordinary share, at cost 70,000
Subscribed ordinary share 500,000
Subscriptions receivable – ordinary share 200,000
Share premium 300,000
Retained earnings unrestricted 968,000
Retained earnings appropriated 680,000

The last dividend payment to preference share was made in 2018.

8. How much is the outstanding ordinary share at December 31, 2023?

a. P3,000,000
b. P3,500,000
c. P3,400,000
d. None of these

9. How much is the book value per share of the preference share at
December 31, 2023?

a. P162
b. P172
c. P167
d. None of these

10. How much is the book value per share of the ordinary share at
December 31, 2023?

15
 ST. VINCENT
COLLEGE OF SCIENCE AND TECHNOLOGY
Cagamutan Norte, Leganes, Iloilo - 5003
Tel. # (033) 396-2291 ; Fax : (033) 5248081
Email Address : [email protected]

a. P124
b. P144
c. P126
d. None of these

End

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