1. Cerritos Corporation began operations on January 1, 2007.

During its first three years of operations, Cerritos reported net

income and declared dividends as follows:

As at December 31, 2010, the retained earnings of Cerritos Corporation is

2. On December 31, 2010, the balance sheet of Legend Corporation shows a total equity of P1,260,000. During 2010, the
shareholders’ equity was affected by:

The share capital of P1,000,000 remained unchanged

during the year.

What is the balance of retained earnings on January 1,

2010?

3. At December 31, 2010, the equity accounts of Batch Corporation were as follows:

4. East Corp., a calendar-year company, had sufficient retained earnings in 2010 as a basis for dividends, but was temporarily
short of cash. East declared a dividend of P100,000 on April 1, 2010, and issued promissory notes to its shareholders in lieu
of cash. The notes, which were dated April 1, 2010, had a maturity date of March 31, 2011, and a 10% interest rate. What is
the entry to account for the scrip dividend and related interest? 26 M13 pp. 532 Wiley07-08

5. On May 1, 2010 Lett Corp. declared and issued a 15% share dividend. Prior to this dividend, Lett had 100,000, P1 par value,
ordinary shares issued and outstanding. The fair value of Lett's ordinary share was P20 per share on May 1, 2010. As a
result of this share dividend, Lett's retained earnings
 6. The directors of Reno Corp., whose P50 par value ordinary share is currently selling at P70 per share, have decided to issue
a share dividend. Reno has an authorization for 250,000 ordinary shares, has issued 100,000 shares of which 10,000 shares
are now held in treasury, and desires to capitalize P630,000 of the Retained Earnings balance. To accomplish this, the
percentage of share dividend that the directors should declare is

7. On June 27, 2010, Allentown Company distributed to its ordinary shareholders 100,000 outstanding ordinary shares of its
investment in Ocean, Inc., an unrelated party. The carrying amount in Allentown’s books of Ocean’s P2 par ordinary share
was P4 per share. Immediately after the distribution, the market price of Ocean’s share was P5 per share.

In its income statement for the year ended June 30, 2010, what amount should Allentown report as gain before income taxes
on disposal of the shares?
RPCPA 1096

8. In September 2008, West Corp. made a dividend distribution of one right for each of its 120,000 ordinary shares outstanding.
Each right was exercisable for the purchase of 1/100 of a share of West's P50 variable rate preference shares at an exercise
price of P80 per share. On March 20, 2010, none of the rights had been exercised, and West redeemed them by paying each
shareholder P0.10 per right. As a result of this redemption, West's shareholders' equity was reduced by

P79 M13 pp. 538 Wiley07-08

9. On January 2, 2010, Simpson Co.'s board of directors declared a cash dividend of P400,000 to shareholders of record on
January 18, 2010, payable on February 10, 2010. Selected data from Simpson's December 31, 2009 balance sheet are as
follows:

Accumulated depletion P100,000

Share capital 500,000
Share premium 150,000
Retained earnings 300,000

The P400,000 dividend includes a liquidating dividend of

AICPA 0594 F-32

10. The following information pertains to Imperial Corp.

 No dividends declaration or payment for 3 years on its 2,000 shares of 6%, P30 par value cumulative preference shares.
 Gain on disposal of Imperial’s Cebu Division of P90,000.
 Treasury shares costing P100,000 reissued for P30,000.

What amount of retained earnings should be restricted as a result of these items?

11. At December 31, 2009, Afro Corp. reported P1,750,000 of appropriated retained earnings for the construction of a new office
building, which was completed in 2010 at a total cost of P1,500,000. In 2010, Afro appropriated P1,200,000 of retained
earnings for the construction of a new plant. Also, P2,000,000 of cash was restricted for the retirement of bonds due in 2011.
In its 2010 balance sheet, Afro should report what amount of appropriated retained earnings?

12. Selected information for the accounts of Bibbo Co. at December 31, 2010 follows:
 Total income since incorporation P420,000

Total cash dividends paid 130,000

Total value of property dividends

distributed 30,000

Excess of proceeds over cost of treasury

stock sold 110,000

In its December 31, 2010, financial statements, what amount should Bibbo report as retained earnings?
AICPA R96 #1

13. On December 31, 2009, the shareholders' equity section of Bulilit, Inc. was as follows:

Share capital, par value of P10;

authorized 30,000 shares; issued and P 900,000
outstanding 90,000 shares

Share premium 1,160,000

Retained earnings 1,460,000

Total shareholders’ equity P3,520,000

On March 31, 2010, Bulilit declared a 10% share dividend and accordingly 9,000 additional shares were issued, when the fair
market value of the share was P16 per share. For the three months ended March 31, 2010, Bulilit sustained a net loss of
P320,000. The balance of Bulilit's retained earnings as of March 31, 2010 should be
aicpa 5/85 (P545 Kimwell)

14. Quadrant Corporation paid dividends of P2,000,000 and P3,000,000 at the end of 2009 and 2010, respectively. The corporation
has not paid any other dividends since its organization on January 1, 2009. The outstanding shares are 200,000, 12%
preference shares, par P100 and 300,000 ordinary shares, par P100. If the preference shares are cumulative but
nonparticipating, ordinary shareholders will receive in 2010

- rpcpa 10/82 (P533 Kimwell)

15. At December 31, 2009 and 2010, Sloan Corp. had outstanding 9,000 shares of P100 par value 8% cumulative preference
shares and 30,000, P10 par value, ordinary shares. At December 31, 2009, dividends in arrears on the preference shares were
P36,000. Cash dividends declared in 2010 totaled P135,000. What amounts were payable on each class of share?

16. The following share dividends were declared and distributed by Sol Corp.:
 Percentage of ordinary
share outstanding
atdeclaration date
Fair value Par value

10 P15,000 P10,000

28 40,000 30,800

What aggregate amount should be debited to retained earnings for these share dividends?