NATIONAL TEACHERS COLLEGE Preliminary Examination

School of Business Financial Accounting and Reporting 3

Academic Year 2024 - 2025
(Barba | Lim)
629 J. Nepomuceno St., Quiapo, Manila

GENERAL INSTRUCTIONS:
Read the following questions carefully and choose the best answer for every item.
Shade or blacken the circle that corresponds to your answer in the answer sheet provided for this assessment.
Erasures are not allowed.
Cheating and any form of communication with your classmates are not tolerated and tantamount to failing the test if proven.

Name:(LN, FN MI.)___________________________________________ Date: _____________________________________________

Student Number:____________________________________________ Professor:_________________________________________

1. The amount printed on a stock certificate is known as:

a. stated value
b. premium
c. discount
d. par value

2. Which of the following is not a characteristic of the corporate form of organization?

a. ownership represented by shares of stock
b. separate legal existence
c. unlimited liability of stockholders
d. can be easily dissolved by the incapacity of one of the owners

3. A person or an entity that has an interest in a corporation is called a

a. proprietor
b. partner
c. stockholder or shareholder
d. entrepreneur

4. The purchase of treasury shares:

a. does not decrease the number of shares issued; only the outstanding shares decrease.
b. does not decrease the number of shares issued and the outstanding shares.
c. does not decrease the number of shares issued; increases the outstanding shares.
d. increases the number of shares issued; only the outstanding shares decrease.

5. The entry to record the receipt of donated shares from a shareholder involves a credit to:
a. Donated Capital
b. Retained Earnings
c. Treasury Stock
d. None of these

6. When a corporation purchases its own stock, what account is debited for the cost of the stock?
a. Common Stock Subscribed
b. Treasury Stock
 c. Preferred Stock
d. Common Stock Receivable

7. The excess of the proceeds from selling treasury stock over its cost should be credited to:
a. Retained Earnings
b. Premium on Capital Stock
c. Gain from Sale of Treasury Stock
d. Share premium from Sale of Treasury Stock

8. The entry to record the issuance of common stock at a price above par would include a credit to:
a. Donated Capital
b. Retained Earnings
c. Treasury Stock
d. Paid-In Capital in Excess of Par-Common Stock (Share premium)

9. Treasury shares are always accounted at:

a. par value
b. fair value
c. cost
d. none of these

10. Portion of retained earnings that is not available for distribution unless the restriction is
subsequently reversed:
a. unrestricted retained earnings
b. appropriated retained earnings
c. legal retained earnings
d. none of these

11. Portion of the contributed capital that cannot be distributed to the owners during the lifetime of
the corporation unless the corporation is dissolved and all of its liabilities are settled first:
a. share Capital
b. subscribed share capital
c. legal capital
d. subscription receivable

12. If the subscription receivable is currently collectible, where is it reported?

a. shareholder’s equity
b. liabilities
c. current assets
d. noncurrent assets

13. If the subscription receivable is not currently collectible, where is it reported?

a. shareholder’s equity
b. liabilities
c. current assets
 d. noncurrent assets

14. Which of the following is true about corporation?

a. an artificial being created by operation of law, having the right of succession and the powers,
attributes and properties impliedly authorized by law or incident to its existence.
b. a natural being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.
c. a natural being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.
d. an artificial being created by operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incident to its existence.

15. Which of the following is true about corporation?

a. is formed by any person, partnership, association, or corporation, singly but not jointly with
others but not more than 15 in number.
b. is formed by any person, partnership, association, or corporation, singly or jointly with others
but not more than 15 in number.
c. is formed by any person, partnership, association, or corporation, jointly but not singly with
others but not more than 15 in number.
d. is formed by any person, partnership, association, or corporation, singly or jointly with others
more than 15 in number.

16. Which of the following is true about memo entry?

a. Only memorandum entry is made for the authorized capitalization and subsequent issuances
of shares.
b. Only memorandum entry is made for the authorized capitalization. Subsequent issuances of
shares are credited to the share capital account.
c. The authorized share capitalization is recorded by crediting authorized share capital.
d. none of these

17. It represents the portion of the authorized share capital that is subscribed but not yet issued.
a. installment capital
b. ordinary share capital
c. subscribed share capital
d. preference share capital

18. Which of the following is true:

a. Shares are issued even if the subscription price is not yet fully paid.
b. Unissued share capital is a document that evidences ownership
c. Subscription is a contract between the purchaser of shares and the issuer.
d. all of the above

19. The transaction costs of an equity transaction are accounted for as:
a. expense and reported in the
 b. a deduction from equity to the extent they are incremental costs directly attributable to the
equity transaction that otherwise would have been avoided.
c. an addition to equity to the extent they are incremental costs directly attributable to the equity
transaction that otherwise would have been avoided.
d. a deduction from equity to the extent they are incremental costs indirectly attributable to the
equity transaction that otherwise would have been avoided.

20. Under the Corporation Code, an entity may reacquire its previously issued shares only if:
a. it has sufficient restricted retained earnings.
b. it has insufficient restricted retained earnings.
c. it has sufficient unrestricted retained earnings.
d. it has insufficient unrestricted retained earnings.

21. A corporation reissues 10,000 treasury shares for ₱35 per share. The treasury shares have a par value
per share of ₱20 and have been reacquired in the previous period for ₱25 per share. The reacquisition
has been accounted for using the cost method. What will be the effect of the reissuance on the total
stockholders’ equity?
a. increase, ₱200,000
b. increase, ₱350,000
c. increase, ₱100,000
d. decrease, ₱50,000

22. On July 1, 2020, 10,000 shares of P10 par value ordinary shares of the Tanggol Company were sold
on subscription at P15 per share to Lena. 1/3 of the total subscription was paid on subscription
date and the balance were due on August 15, 2020. The entry on July 1, 2020 would be:

a. Cash 50,000
Subscriptions Receivable 100,000
Subscribed Ordinary Shares 150,000

b. Cash 100,000
Subscriptions Receivable 50,000
Subscribed Ordinary Shares 150,000

c. Cash 33,000
Subscriptions Receivable 117,000
Subscribed Ordinary Shares 73,000
Share Premium 77,000

d. Cash 50,000
Subscriptions Receivable 100,000
Subscribed Ordinary Shares 100,000
Share Premium 50,000
23. On July 1, 2020, 10,000 shares of P10 par value ordinary shares of the Tanggol Company were sold
on subscription at P15 per share to Lena. 1/3 of the total subscription was paid on subscription
date and the balance were due on August 15, 2020. The entry on August 15, 2020 would be:

a. Cash 100,000
Subscriptions Receivable 100,000

Subscribed Ordinary Shares 150,000

Ordinary Share Capital 150,000

b. Cash 50,000
Subscriptions Receivable 50,000

Subscribed Ordinary Shares 150,000

Ordinary Share Capital 150,000

c. Cash 117,000
Subscriptions Receivable 117,000

Subscribed Ordinary Shares 73,000

Ordinary Share Capital 73,000

d. Cash 100,000
Subscriptions Receivable 100,000

Subscribed Ordinary Shares 100,000

Ordinary Share Capital 100,000

24. On September 1, 2024, Kim Soo-hyun Corporation issued 10,000 no par ordinary shares to Jiwon
for P120 per share. The journal entry would be:
a. Cash 1,200,000
Ordinary Share Capital 1,000,000
Share Premium 200,000

b. Cash 1,200,000
Ordinary Share Capital 1,200,000

c. Cash 1,000,000
Share Premium 200,000
Ordinary Share Capital 1,200,000

d. None of these. Ordinary Shares cannot be issued with no par.

25. On September 1, 2024, Kim Soo-hyun Corporation issued 10,000 no par preference shares to
Jiwon for P120 per share. The journal entry would be:
a. Cash 1,200,000
Preference Share Capital 1,000,000
Share Premium 200,000

b. Cash 1,200,000
Preference Share Capital 1,200,000

c. Cash 1,000,000
Share Premium 200,000
Preference Share Capital 1,200,000

d. None of these. Preference Shares cannot be issued with no par.

26. On September 1, 2024, Seung-hyo Corporation issued 10,000 ordinary shares with P100 par
value to Seuk-ryo for P120 per share. The journal entry would be:

a. Cash 1,200,000
Ordinary Share Capital 1,000,000
Share Premium 200,000

b. Cash 1,200,000
Ordinary Share Capital 1,200,000

c. Cash 1,000,000
Share Premium 200,000
Ordinary Share Capital 1,200,000

d. None of these

27. On September 1, 2024, Seung-hyo Corporation issued 10,000 ordinary shares with P100 par value
to Seuk-ryo for P120 per share. On October 1, 2024, Seung-hyo reacquired 1,000 shares at P110.
The journal entry on October 1 would be:

a. Cash P1,200,000
Treasury Shares 1,100,000
Share Premium 100,000

Retained Earnings-unrestricted 1,200,000

Retained Earnings-appropriated 1,200,000

b. Cash P1,200,000
Treasury Shares 1,200,000
 Retained Earnings-unrestricted 1,100,000
Retained Earnings-appropriated 1,100,000

c. Treasury Shares P1,100,000

Cash 1,100,000

Retained Earnings-unrestricted 1,100,000

Retained Earnings-appropriated 1,100,000

d. Treasury Shares P1,200,000

Cash 1,200,000

Retained Earnings-appropriated 1,200,000

Retained Earnings-unrestricted 1,200,000

28. On September 1, 2024, Seung-hyo Corporation issued 10,000 ordinary shares with P100 par value
to Seuk-ryo for P120 per share. On October 1, 2024, Seung-hyo reacquired 1,000 shares at P110. On
October 10, 2024, Seung-hyo reissued 1000 treasury shares at P115. The journal entry on October
10 would be:

a. Cash P1,150,000
Treasury Shares 1,100,000
Share Premium-TS 50,000

Retained Earnings-unrestricted 1,200,000

Retained Earnings-appropriated 1,200,000

b. Cash P1,150,000
Treasury Shares 1,150,000

Retained Earnings-unrestricted 1,150,000

Retained Earnings-appropriated 1,150,000

c. Treasury Shares P1,100,000

Cash 1,100,000

Retained Earnings-unrestricted 1,100,000

Retained Earnings-appropriated 1,100,000

d. Cash P1,150,000
Treasury Shares 1,100,000
Share Premium-TS 50,000

Retained Earnings-appropriated 1,100,000

 Retained Earnings-unrestricted 1,100,000

29. On September 1, 2024, Seung-hyo Corporation issued 10,000 ordinary shares with P100 par value
to Seuk-ryo for P120 per share. On October 1, 2024, Seung-hyo reacquired 1,000 shares at P110. On
October 10, 2024, Seung-hyo reissued 1000 treasury shares at P110. The journal entry on October
10 would be:

a. Cash P1,100,000
Treasury Shares 1,000,000
Share Premium-TS 100,000

Retained Earnings-unrestricted 1,100,000

Retained Earnings-appropriated 1,100,000

b. Cash P1,100,000
Treasury Shares 1,100,000

Retained Earnings-unrestricted 1,150,000

Retained Earnings-appropriated 1,150,000

c. Treasury Shares P1,100,000

Cash 1,100,000

Retained Earnings-appropriated 1,100,000

Retained Earnings-unrestricted 1,100,000

d. Cash P1,150,000
Treasury Shares 1,100,000
Share Premium-TS 50,000

Retained Earnings-appropriated 1,100,000

Retained Earnings-unrestricted 1,100,000

30. On September 1, 2024, Seung-hyo Corporation issued 10,000 ordinary shares with P100 par value
to Seuk-ryo for P120 per share. On October 1, 2024, Seung-hyo reacquired 1,000 shares at P110. On
October 10, 2024, Seung-hyo reissued 1000 treasury shares at P100. The journal entry on October
10 would be:

a. Cash P1,000,000
Retained Earnings 100,000
Treasury Shares 1,100,000

Retained Earnings-appropriated 1,100,000

Retained Earnings-unrestricted 1,100,000
 b. Cash P1,000,000
Retained Earnings 100,000
Treasury Shares 1,100,000

Retained Earnings-unrestricted 1,100,000

Retained Earnings-appropriated 1,100,000

c. Treasury Shares P1,100,000

Cash 1,100,000

Retained Earnings-appropriated 1,100,000

Retained Earnings-unrestricted 1,100,000

d. Cash P1,150,000
Treasury Shares 1,100,000
Share Premium-TS 50,000

Retained Earnings-appropriated 1,100,000

Retained Earnings-unrestricted 1,100,000

31. On September 1, 2024, Seung-hyo Corporation received a donation of equipment with a fair
value of 700,000 from Jiwon, not a shareholder. The historical cost of the equipment is 500,000.
The journal entry on September 1, 2024 would be:

a. Equipment 700,000
Share Premium-Donated Capital 700,000

b. Equipment 500,000
Donation Income 500,000

c. Equipment 700,000
Share Premium-Donated Capital 700,000

d. Equipment 700,000
Donation Income 700,000

32. On September 1, 2024, Seung-hyo Corporation received a donation of equipment with a fair
value of 700,000 from Jiwon, a shareholder. The historical cost of the equipment is 500,000. The
journal entry on September 1, 2024 would be:

a. Equipment 700,000
Share Premium-Donated Capital 700,000
 b. Equipment 500,000
Donation Income 500,000

c. Equipment 700,000
Share Premium-Donated Capital 700,000

d. Equipment 700,000
Donation Income 700,000

33. On January 1, 2024, Queen Corporation received authorization from the SEC to issue share
capital of P50,000,000 divided into 500,000 shares with par value of P100 per share. The entry on
January 1, 2024 if memorandum method is used:

a. Authorized Share Capital 50,000,000

Unissued share Capital 50,000,000

b. “The authorized capitalization is P50,000,000 divided into 500,000 shares with P100 par value
per share.”

c. Unissued Share Capital 50,000,000

Authorized Share Capital 50,000,000

d. either a or c

34. On January 1, 2024, Queen Corporation received authorization from the SEC to issue share
capital of P50,000,000 divided into 500,000 shares with par value of P100 per share. The entry on
January 1, 2024 if journal entry method is used:

a. Authorized Share Capital 50,000,000

Unissued share Capital 50,000,000

b. “The authorized capitalization is P50,000,000 divided into 500,000 shares with P100 par value
per share.”

c. Unissued Share Capital 50,000,000

Authorized Share Capital 50,000,000
d. either a or c

35. On January 1, 2024, Queen Corporation received authorization from the SEC to issue share
capital of P50,000,000 divided into 500,000 shares with par value of P100 per share. On January 2,
2024, Queen Corp issued 10,000 shares at par. The entry on January 1, 2024 if memorandum
method is used:
 a. Authorized Share Capital 1,000,000
Unissued share Capital 1,000,000

b. “Issued 10,000 shares with P100 par value per share.”

c. Cash 1,000,000
Unissued Share Capital 1,000,000

d. Cash 1,000,000
Share Capital 1,000,000

36. The normal balance of Retained Earnings is

a. debit.
b. credit.
c. negative.
d. zero.

37. The charter of a corporation (articles of incorporation) provides for the issuance of 100,000 shares
of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the number of shares outstanding?
a. 5,000
b. 55,000
c. 60,000
d. 100,000

38. What is a dividend?

a. A company's earnings distributed to shareholders
b. A company's debts paid to creditors
c. A company's profits reinvested into operations
d. A company's taxes paid to the government

39. When a company declares a dividend, which account is debited?

a. Cash
b. Dividends Payable
c. Retained Earnings
d. Accounts Receivable

40. What type of dividend is paid in the form of additional shares of stock?
a. Cash dividend
b. Stock dividend
c. Property dividend
d. Scrip dividends
41. Which financial statement is affected when cash dividends are paid?
a. Income Statement
b. Statement of Cash Flows
c. Balance Sheet
d. Statement of Changes in Equity.

42. How is the dividend per share is calculated?

a. Total dividends paid ÷ total number of shares outstanding
b. Total earnings ÷ total number of shares outstanding
c. Net income ÷ total dividends paid
d. Retained earnings ÷ total dividends paid

43. What is a declaration date in terms of dividends?

a. The date when dividends are paid to shareholders
b. The date when dividends are declared by the board
c. The date when the stock price is adjusted for dividends
d. The date when dividends are recorded in the company's books

44. 8. How do stock dividends affect the total equity of a company?

a. Increase total equity
b. Decrease total equity
c. No effect on total equity
d. Depends on the company's valuation

45. How does declaring a dividend impact retained earnings?

a. Increases retained earnings
b. Decreases retained earnings
c. No impact on retained earnings
d. Converts retained earnings to revenue

46. Which account is credited when a stock dividend is declared?

a. Cash
b. Stock Dividends Distributable
c. Common Stock
d. Retained Earnings

47. What is a scrip dividend?

a. A dividend paid in cash
b. A dividend paid in the form of additional shares
c. A dividend paid as a promissory note
d. A dividend paid in the form of property
48. A stock dividend is measured at par value in which of the following instances:
a. Declared a 1 for 10 shares of stock dividends.
b. Declared a 1 for 6 shares of stock dividends.
c. Declared a 2 for 11 shares of stock dividends.
d. Declared a 3 for 14 shares of stock dividends.

49. A stock dividend is measured at fair value in which of the following instances:
a. Declared a 1 for 5 shares of stock dividends.
b. Declared a 2 for 6 shares of stock dividends.
c. Declared a 2 for 11 shares of stock dividends.
d. Declared a 3 for 14 shares of stock dividends.

50. I. Split up occurs when old shares are cancelled and replaced by a larger number of new shares
but with a reduced par value (stated value) per share.
II. Split down is the opposite of split up whereby old shares are cancelled and replaced by a
smaller number of new shares but with an increased par value (stated value) per share.
a. Only I statement is true.
b. Only II statement is true.
c. Both statements are correct.
d. Both statements are incorrect.

51. The journal entry in declaring treasury shares as dividends includes a

a. Debit to Treasury Shares
b. Debit to Dividends Payables
c. Credit to Treasury Shares
d. Credit to Cash

52. Declaring treasury shares as dividends is similar to declaring what type of dividends:
a. Cash Dividends
b. Script Dividends.
c. Stock Dividends.
d. Property Dividends.

53. Which of the following is a characteristic of preference share dividends?

a. They fluctuate with company profits
b. They are fixed and paid before common share dividends
c. They are always tax-free
d. They are paid only if the company has surplus profits

54. How is the dividend rate of preference shares typically expressed?

a. As a percentage of the company's profits
b. As a fixed monetary value
c. As a percentage of the par value of the share
d. As a percentage increases each year
55. In terms of voting rights, how do preference shareholders compare to common shareholders?
a. Preference shareholders always have more voting rights
b. Preference shareholders typically do not have voting rights
c. Preference shareholders have equal voting rights as common shareholders
d. There is no difference in voting rights

56. What is a cumulative preference share?

a. A share where unpaid dividends accumulate and are paid later
b. A share that pays dividends only if profits are sufficient
c. A share that always pays higher dividends than bonds
d. A share that cannot be converted or redeemed

57. Malupiton Co. issued 100,000 shares of common stock (i.e., ordinary shares). Of these, 5,000 were
held as treasury stock at December 31, 20x1. During 20x2, transactions involving Malupiton Co.’s
common stock were as follows:
 May 3 - 1,000 shares of treasury stock were reissued.
 August 6 - 10,000 shares of previously unissued stock were issued.
 November 18 - a 2-for-1 stock split took effect.
At December 31, 20x2, how many shares of Malupiton Co.s common stock were issued and
outstanding?
Shares Issued Outstanding
a. 220,000 212,000
b. 220,000 216,000
c. 222,000 214,000
d. 222,000 218,000

The following share 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
28% 40,000 30,800
58. What aggregate amount should be debited to retained earnings for these share dividends?

a. 40,800
b. 45,800
c. 50,000
d. 55,000
59. What aggregate amount should be credited to share dividends payable for these share dividends?

a. 40,800
b. 45,800
c. 50,000
d. 55,000
60. What aggregate amount should be credited to share premium for these share dividends?

a. 14,200
b. 5,000
c. 9,200
d. 0

On April 1, 20x1, the board of directors of Harry Guo Co. declared ₱50 dividends per share to
shareholders of record as of April 15, 20x1 for distribution on May 1, 20x1. The shareholders’
equity of Harry Guo Co. as of April 1, 20x1 is as follows:

Share capital, authorized capital 20,000 shares, ₱100 par 1,600,000

Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity 140,000
Total shareholders’ equity 3,000,000

61. On April 15, 20x1, the journal entry would include

a. Cr. to Retained Earnings
b. Cr. to Dividends Payable
c. Cr. to Cash
d. No entry

62. How much dividends are declared?

a. 1,020,000
b. 800,000
c. 900,000
d. 680,000

63. On May 1, 20x1, the journal entry would include

a. Cr. to Retained Earnings, 1,020,000
b. Cr. to Cash, 900,000
c. Cr. to Dividends Payable, 900,000
d. Cr. to Dividends Payable, 1,020,000

64. On May 1, 20x1, the journal entry would include

a. Dr. to Retained Earnings, 1,020,000
b. Dr. to Cash, 900,000
c. Dr. to Dividends Payable, 900,000
d. Dr. to Dividends Payable, 1,020,000
 On May 3, 20x1, Thank You Beyonce Co. declared share dividends on a “1 share dividend for
every 10 shares held” basis to shareholders of record as of May 15, 20x1 for distribution on May
30, 20x1. The market price per share on declaration date is ₱120. Thank You Beyonce Co’s
shareholders’ equity immediately before dividend declaration is shown below:

Share capital, authorized capital 20,000 shares, ₱100 par 1,600,000

Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity 140,000
Total shareholders’ equity 3,000,000

65. On May 3, 20x1, the journal entry would include

a. No Entry
b. Yes Entry
c. Dr. to Retained Earnings
d. Dr. to Retainer Earrings

66. The share dividends declared is?

a. Small
b. Medium
c. Large
d. Extra-Large

67. The share dividends distributed includes an entry to

a. Dr. Retained Earnings, 180,000
b. Dr. Retained Earnings, 36,000
c. Cr. Share Dividends Payable, 180,000
d. Cr. Share Dividends Payable, 180,000

On May 3, 20x1, Labubu Co. declared share dividends on a “3 share dividend for every 10 shares
held” basis to shareholders of record as of May 15, 20x1 for distribution on May 30, 20x1. The
market price per share on declaration date is ₱110. Labubu Co’s shareholders’ equity immediately
before dividend declaration is shown below:

Share capital, authorized capital 20,000 shares, ₱100 par 1,600,000

Subscribed share capital 440,000
Share premium 200,000
Retained earnings 908,000
Treasury shares (at cost of ₱120 per share) (288,000)
Other components of equity 140,000
Total shareholders’ equity 3,000,000
68. On May 3, 20x1, the journal entry would include
a. Dr. Retained Earnings, 594,000
b. Dr. Retained Earnings, 540,000
c. Cr. Share Premium, 54,000
d. Cr. Share Premium, 540,000

69. On May 15, 20x1, the journal entry would include

a. Dr. Retained Earnings, 594,000
b. Dr. Retained Earnings, 540,000
c. No Entry
d. Cr. Share Premium, 540,000

70. On May 30, 20x1, the journal entry would include

a. Cr. Retained Earnings, 594,000
b. Cr. Retained Earnings, 540,000
c. Dr. Share Dividends Payable, 540,000
d. Dr. Share Dividends Payable, 594,000