PARCOR

Chapter 7 – Quiz

Direction:
Round off all answers to the nearest centavo.

PROBLEM 1
The following balances appear on the shareholder's equity section as of December 31, 2017:

Ordinary shares, P50 par P15,000,000

12% Preference shares, P100 par 10,000,000
Share premium-ordinary 8,291,000
Share premium-preference 4,742,000
Share premium-treasury 70,000
Retained earnings 9,000,000
Treasury shares-ordinary (cost: P75) 1,875,000

Transactions during 2018 are given below:

Jan. 5 Reissued 5,000 treasury shares for P60 each.
Mar. 23 Reacquired 20,000 preference shares for P115 each.
Acquired an equipment in exchange for 7,500 ordinary shares. On this date, the
May. 9 shares are selling at P95 while the equipment was appraised at P800,000.
Declared a 20% share dividend on ordinary shares. Fair value of the shares have not
Jun. 11 changed since May. The shares were issued on the same day.
Aug. 15 Declared and paid the annual dividend on outstanding preference shares.
Sept. 2 Issued new ordinary shares as a result of a 4 for 1 share split.
Declared a property dividend on ordinary shares in the form of equity investments
with carrying amount and fair value measured at P500,000 and P650,000,
Oct. 8 respectively.
Equity investments were distributed to ordinary shares. On this date, the fair value
Nov. 24 increased by P25,000.
Dec. 14 Reissued 3,000 of the treasury preference shares at par.
Dec. 31 Net income for the year 2018 - P6,500,000.

Determine the following:

1. Required appropriated retained earnings as of the following dates:

December 31, 2017 _________________________
December 31, 2018 _________________________
2. Par value of ordinary shares as of December 31, 2018 _________________________
3. New cost per share of ordinary treasury shares _________________________
4. Total shareholders' equity as of the following dates:
December 31, 2017 _________________________
December 31, 2018 _________________________
5. Balances of the following accounts as of December 31, 2018:
Ordinary shares _________________________
Preference shares _________________________
Share premium-ordinary _________________________
Share premium-preference _________________________
Share premium-treasury _________________________
Retained earnings _________________________
Treasury shares (total of ordinary and preference) _________________________

6. Number of ordinary shares as of the following dates:

DATE ISSUED OUTSTANDING TREASURY

12/31/2017
1/5/2018
5/9/2018
6/11/2018
12/31/2018

7. Number of preference shares as of the following dates:

DATE ISSUED OUTSTANDING TREASURY

12/31/2017
3/23/2018
12/31/2018

8. Effect on assets, liabilities and equity of transactions on the following dates:

(Write increase, decrease or no effect)

DATE ASSETS LIABILITIES EQUITY

Mar. 23
May. 9
Jun. 11
Aug. 15
Sept. 2
Oct. 8
Dec. 31

9. Prepare the necessary journal entries. (use worksheet for this requirement)
PROBLEM 2
Write your answers on the worksheet together with the supporting computations.

Given the following information:

Ordinary shares, P100 par P10,000,000

9% Preference shares, P150 par 6,000,000
Total share premium 3,316,000
Retained earnings 6,000,000
Treasury shares-ordinary (cost: P120) 1,200,000

Answer the following independent assumptions:

1. Suppose the corporation declares P4,200,000 worth of dividends. If dividends are in
arrears for two years, how much will be the dividend per share if the preference shares
are:
a. cumulative and participating
b. cumulative
c. participating
d. silent as to cumulative and participating features

2. Assume the preference shares have a liquidation value of P200 and three years dividends
are in arrears, compute for the book value per preference and ordinary share if:
a. the preference shares are cumulative
b. the preference shares are noncumulative