PHINMA University of Pangasinan ACC 109 Intermediate Accounting 4

College of Management and Accountancy Series of 2024

NAME: _____________________________________ STUDENT NUMBER: _________________________

YEAR/BLOCK: ______________________________ DATE: _____________________________________
Quiz on SHAREHOLDERS’ EQUITY PART I SET B
Multiple Choice Choose the best answer for each of the following questions and indicate the letter in your answer
sheet. Use CAPITAL LETTERS ONLY.

1. In accounting for shareholders’ equity, the accountant is concerned with which of the following?
A. Determining the total amount of shareholders’ equity
B. Recording the source of each of the various elements of shareholders’ equity
C. Distinguishing between realized and unrealized revenue
D. Making sure that the directors do not declare dividends in excess of retained earnings

2. The purchase of treasury ordinary shares

A. Decreases outstanding ordinary shares
B. Decreases authorized ordinary shares
C. Decreases issued ordinary shares
D. Has no effect on ordinary shares outstanding

3. Which statement best describes a possible result of treasury share transactions?

A. May increase but not decrease retained earnings.
B. May increase net income if the cost method is used.
C. May decrease but not increase net income.
D. May decrease but not increase retained earnings.

4. When an entity calls in all of the preference shares for more than the original issue price, the excess over the original issue
price should be
A. Charged against retained earnings
B. Accounted for as loss on exchange
C. Charged against share premium on ordinary shares
D. Charged to a discount on preference shares

5. If shares are issued to extinguish a financial liability, what is the initial measurement of the shares issued?
A. Par value of the shares
B. Fair value of liability extinguished
C. Fair value of the shares
D. Book value of the shares

6. Treasury shares are

A. Issued but not outstanding shares.
B. Shares held as an investment by the treasurer of the corporation.
C. Shares held as an investment of the corporation.
D. Issued and outstanding shares.

7. What is the primary reason a company might issue preferred stock rather than debt?
A. To guarantee dividends for shareholders
B. To retain voting rights for existing shareholders
C. To avoid interest expense
D. To increase financial leverage

8. Which of the following statements about treasury stock is correct?

A. Treasury stock is an asset of the company.
B. Treasury stock increases total shareholders' equity.
C. Treasury stock decreases total shareholders' equity.
D. Treasury stock is recorded at its market value.

9. When a company declares a cash dividend, which of the following accounts is debited?
A. Cash C. Common Stock
B. Dividends Payable D. Retained Earnings

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10. If a company has authorized 1,000,000 shares, issued 600,000 shares, and repurchased 50,000 shares as treasury stock,
how many shares are outstanding?
A. 600,000
B. 550,000
C. 950,000
D. 1,000,000

11. A company’s shareholders’ equity includes the following:

Common Stock: P1 par, 200,000 shares authorized, 120,000 shares issued, 100,000 shares outstanding
Additional Paid-in Capital: P300,000
Retained Earnings: P500,000
Treasury Stock: 20,000 shares at P5 per share
What is the total shareholders’ equity?
A. P900,000
B. P1,000,000
C. P1,300,000
D. P1,200,000

12. A company issues 10,000 shares of P1 par value common stock for P15 per share. What is the journal entry to record this
transaction?
A. Debit Cash P150,000, Credit Common Stock P150,000
B. Debit Cash P10,000, Credit Common Stock P150,000
C. Debit Cash P150,000, Credit Common Stock P10,000, Credit Additional Paid-in Capital P140,000
D. Debit Cash P140,000, Credit Additional Paid-in Capital P140,000

13. A company’s board of directors declares a 2-for-1 stock split. Before the split, the company has 50,000 shares outstanding
with a par value of P10 per share. What will the par value and the number of shares outstanding be after the split?
A. Par value: P10; Shares outstanding: 100,000
B. Par value: P20; Shares outstanding: 25,000
C. Par value: P5; Shares outstanding: 50,000
D. Par value: P5; Shares outstanding: 100,000

14. Which of the following increases the balance of Retained Earnings?

A. Net income
B. Stock dividends
C. Cash dividends
D. Issuance of preferred stock

15. When a company issues shares of stock for a non-cash asset, at what value should the transaction be recorded?
A. The fair market value of either the asset received or the shares issued, whichever is more clearly determinable
B. The par value of the shares issued
C. The book value of the asset received
D. The average market price of the shares over the last 30 days

16. When preference shares are called in by the issuer for less than original issue price, proper accounting for the redemption
A. Increases the amount of dividends available to ordinary shareholders
B. Increases reported income for the period
C. Increases the treasury shares held by the entity
D. Increases the contributed capital of the ordinary shareholders

17. Redeemable preference shares should be

A. Included as liability.
B. Included with ordinary shares.
C. Excluded from the statement of financial position.
D. Included as a contra item in shareholders' equity.

18. Dividend paid on redeemable preference shares shall be accounted for as

A. Direct deduction from retained earnings
B. Component of other comprehensive income
C. Interest expense as component of finance cost
D. Deduction from share premium

19. Cumulative preference dividends in arrears should be reported as

A. A footnote.
B. An increase in current liabilities.
C. An increase in equity.
D. An increase in noncurrent liabilities for the current portion liabilities for the long-term portion.
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20. Noncumulative preference dividends in arrears
A. Must be paid before any other cash dividend can be distributed.
B. Are disclosed as a liability until paid.
C. Are paid to preference shareholders if sufficient funds remain after payment of the current preference dividend.
D. Are not paid and not disclosed.

Use the following information for the next two questions

At the beginning of current year, an entity had 125,000 issued ordinary shares and 25,000 treasury shares. During the current
year, transactions involving ordinary shares were:
Jun 1 13,000 shares of treasury were sold.
Nov 1 A 3 for 1 share split took effect.
Dec 1 4,000 ordinary shares were purchased to be held as treasury

21. At year-end, how many ordinary shares were issued?

A. 325,000
B. 375,000
C. 414,000
D. 495,000

22. At year-end, how many shares are outstanding?

A. 225,000
B. 325,000
C. 335,000
D. 359,000

23. An entity was incorporated on January 1, 2022 with the following authorized capitalization:
Ordinary share capital, 150,000 shares, no par, P100 stated value 15,000,000
Preference share capital, 100,000 shares, 10% fixed rate, P50 par value 5,000,000
During 2022, the entity issued 100,000 ordinary shares at P120 per share and 20,000 preference shares at P60 per share. In
addition, on December 1, 2022, subscriptions for 30,000 preference shares were taken at a purchase price of P75. These
subscribed shares were paid for on January 15, 2023. On December 31, 2022, the entity purchased 5,000 ordinary shares at
P150 per share to be held as treasury. Net income for 2022 was P4,000,000. What amount should be reported as total
contributed capital on December 31, 2022?
A. 14,700,000
B. 15,450,000
C. 13,200,000
D. 19,450,000

24. An entity was organized on January 1, 2022. On that date, it issued 200,000 ordinary shares of P10 par value at P15 per
share. The entity was authorized to issue 400,000 ordinary shares. During the period January 1, 2022 through December 31,
2023, the entity reported net income of P750,000 and paid cash dividend of P400,000. On January 5, 2023, the entity
purchased 12,000 ordinary shares at P12 per share. On December 31, 2023, 8,000 treasury shares were sold at P8 per share
and the remaining treasury shares were retired. The entity used the cost method of accounting for treasury shares.
What amount should be reported as total stockholders’ equity on December 31, 2023?
A. 3,318,000
B. 3,350,000
C. 3,270,000
D. 3,286,000

25. During the year, an entity issued for P110 per share, 15,000 convertible preference shares of P100 par value. One preference
share may be converted into three ordinary shares of P25 par value at the option of the preference shareholder.
At the year-end, all of the preference shares were converted into ordinary shares. The market value of the ordinary share at
the conversion date was P40. What amount should be credited to share premium as a result of conversion?
A. 525,000
B. 375,000
C. 150,000
D. 0

26. During the current year, an entity issued 10,000 ordinary shares with P100 par value and 20,000 convertible preference
shares with P200 par value for 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 should be reported as share premium from ordinary shares?
A. 2,200,000
B. 2,600,000
C. 3,000,000
D. 3,800,000

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 Use the following information for the next two questions
An entity was organized at the beginning of current year with 100,000 authorized shares of P100 par value. During the current
year, the following transactions occurred:
January 1 Sold 40,000 shares at P150 per share.
February 1 Issued 5,000 shares for legal services with fair value of P650,000.
The shares on this date are quoted at P140 per share.
March 1 Purchased 10,000 treasury shares at a cost of P100 per share.
October 31 Issued P5,000,000 convertible bonds at 120. The bonds are quoted at 98 without the conversion feature.
November 15 Declared a 2 for 1 share split when the market value of the share was P160.
December 15 Sold 30,000 shares at P75 per share.
December 31 The net income for the year was P4,000,000.
December 31 Paid cash dividend of P15 per share.

27. What amount should be recognized as share premium at year-end?

A. 4,050,000
B. 3,250,000
C. 4,000,000
D. 2,900,000

28. What amount should be reported as total shareholders’ equity at year-end?

A. 12,500,000
B. 13,000,000
C. 12,300,000
D. 11,500,000

Use the following information for the next five questions

During the current year, the entity had the following transactions affecting shareholders’ equity:
Number of shares Price per share
Issue of preference shares 6,000 150
Issue of ordinary shares 20,000 70
Retirement of preference shares 1,000 190
Purchase of treasury ordinary shares 5,000 80
Share split, par value reduced to P5 2 for 1
Reissue of treasury ordinary shares 5,000 50

At the beginning of current year, the shareholders’ equity on January 1, 2021 comprised the following:
Preference share capital P100 par, 30,000 shares, 10% 3,000,000
Ordinary share capital, 100,000 shares, P10 par 1,000,000
Preference share premium 1,200,000
Ordinary share premium 4,000,000
Retained earnings 5,000,000

At year-end, dividends were paid an ordinary shares at P10 per share and on the preference shares at the 10% preference
rate. Net income for the year was P3,000,000.

29. What amount should be reported as ordinary share capital at year-end?

A. 1,000,000
B. 1,200,000
C. 2,400,000
D. 2,000,000

30. What amount should be reported as share premium at year-end?

A. 6,660,000
B. 6,670,000
C. 6,500,000
D. 6,710,000

31. What amount should be reported as retained earnings at year-end?

A. 5,300,000
B. 5,250,000
C. 5,310,000
D. 5,210,000

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32. What amount should be reported as preference share capital at year-end?
A. 3,600,000
B. 3,400,000
C. 3,500,000
D. 3,300,000

33. What amount should be reported as total shareholders’ equity at year-end?

A. 16,560,000
B. 16,300,000
C. 16,460,000
D. 16,500,000

34. An entity provided the following data at year-end:

Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500.000
Retained earnings unappropriated 600,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 100,000

What total amount should be reported as shareholders’ equity?

A. 5,500,000
B. 4,900,000
C. 4,800,000
D. 5,100,000

35. An entity reported the following shareholders’ equity at the beginning of the current year:
Share capital, P10 par 5,000,000
Share premium 2,000,000
Retained earnings 1,500,000
During the current year, the entity had the following share transactions:
• Acquired 20,000 treasury shares for P1,000,000
• Sold 15,000 treasury shares at P60 per share.
• Sold the remaining treasury shares at P45 per share.
What amount should be reported as share premium at year-end?
A. 2,150,000
B. 2,125,000
C. 2,000,000
D. 1,975,000

Use the following information for the next three questions

At the beginning of current year, an entity was authorized to issue 100,000 shares with P50 par value. The entity had the
following share capital transactions during the current year:
Jan 1 Sold 80,000 shares at P60 per share.
May 1 Reacquired 4,000 treasury shares at P65 per share
Jul 1 Approved a share split of 5 for 1.
Oct 31 Declared and issued a 10% share dividend when the market value of a share is P25.
Dec 31 Reissued all of the treasury shares at P30.
Dec 31 Net income for the year was P3,000,000

36. What amount should be reported as share capital at year-end?

A. 4,000,000
B. 3,800,000
C. 4,380,000
D. 3,760,000

37. What total amount should be reported as share premium at year-end?

A. 1,710,000
B. 1,370,000
C. 1,400,000
D. 1,970,000

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38. What amount should be reported as total shareholders’ equity at year-end?
A. 7,800,000
B. 7,560,000
C. 8,400,000
D. 8,140,000

39. At year-end, an entity canceled 5,000 shares of P50 par value held in treasury at an average cost of P120 per share. Before
recording the cancelation of the treasury shares, the entity had the following shareholders’ equity:
Share capital, 50,000 shares originally issued at P75 2,500,000
Share premium 1,250,000
Retained earnings 1,000,000
Treasury shares, at cost 600,000
What amount should be reported as share premium outstanding at year-end?
A. 1,250,000
B. 650,000
C. 1,125,000
D. 900,000

40. Which of the following transactions will not affect the total shareholders' equity of a company?
A. Declaring a cash dividend
B. Declaring and distributing a stock dividend
C. Issuing common stock at par value
D. Purchasing treasury stock

41. A company’s retained earnings balance increased by P150,000 during the year. If its net income for the year was P250,000,
what amount of dividends did it declare?
A. P150,000
B. P250,000
C. P400,000
D. P100,000

42. The two primary account classifications within shareholders’ equity are
A. Contributed capital and retained earnings
B. Preference shares and retained earnings
C. Ordinary shares and retained earnings
D. Preference shares and ordinary shares

43. Contributed capital does not include

A. Share premium
B. Treasury shares
C. Preference share capital
D. Ordinary share capital

44. Which is not a basic right of a shareholder?

A. The right to participate in earnings.
B. The right to inspect the accounting records of the corporation.
C. The right to vote in the election of directors and in the determination of policies.
D. The right to share in the net assets of the corporation upon liquidation

45. The preemptive right of an ordinary shareholder is the right to

A. Share proportionately in corporate assets upon liquidation.
B. Receive cash dividends before they are distributed to preference shareholders.
C. Share proportionately in any new issue of shares of the same class.
D. Exclude preference shareholders from voting rights.

46. Authorized shares refer to the total number of shares

A. Issued
B. Issued and outstanding
C. That can be issued
D. Held in treasury

47. Outstanding shares are

A. Shares in the hands of shareholders
B. Shares that are performing well in the public market
C. Shares that have been authorized for issue
D. Shares held in the corporate treasury

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48. Shares that have a fixed per-share amount printed on each share certificate are called
A. Par value shares
B. Stated value shares
C. Fixed value shares
D. Uniform value shares

49. The par value of a share represents the

A. Liquidation value of the share
B. Book value of the share
C. Amount received by the corporation when the share is originally issued
D. Legal nominal value assigned to the share

50. When collectibility is reasonably assured, the excess of the subscription price over the stated value of the no par share capital
subscribed should be recorded as
A. No par share capital
B. Share premium when the subscription is collected.
C. Share premium when the shares are issued.
D. Share premium when the subscription is recorded

****END OF QUIZ****

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PHINMA University of Pangasinan ACC 109 Intermediate Accounting 4
College of Management and Accountancy Series of 2024

NAME: _____________________________________ STUDENT NUMBER: _________________________

YEAR/BLOCK: ______________________________ DATE: _____________________________________

Quiz on SHAREHOLDERS’ EQUITY PART I SET B

ANSWER SHEET

General Instructions
1. Strictly, no cell phone is allowed during the examination.
2. Borrowing, lending, and substitution/replacement of calculators while the examination is in progress are strictly
prohibited.
3. Use black ballpen only. Avoid using correction tape and friction pen. Strictly, no erasure.
4. Use CAPITAL LETTERS ONLY.
5. Your writing should be good and legible; it does not mean your writing has to be beautiful but it should be legible
(clear enough to read) with a neat and clean copy. Students who get good marks have good writing with a neat
and clean copy. Students who fail have a dirty copy with poor and illegible writing. Don’t try to fill pages
unnecessarily and write fast with illegible writing.
6. Strictly no cheating.
SCORE:

1 11 21 31 41

2 12 22 32 42

3 13 23 33 43

4 14 24 34 44

5 15 25 35 45

6 16 26 36 46

7 17 27 37 47

8 18 28 38 48

9 19 29 39 49

10 20 30 40 50

Checked by:

____________________________________

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