Sol. Man. - Chapter 16 - Accounting For Dividends
Sol. Man. - Chapter 16 - Accounting For Dividends
Sol. Man. - Chapter 16 - Accounting For Dividends
Chapter 16
Accounting for Dividends
PROBLEM 1: TRUE OR FALSE
1. TRUE
2. FALSE – date of declaration
3. FALSE
4. FALSE
5. FALSE
100,00
Shares issued (₱1M ÷ ₱10 par)
0
Shares subscribed (₱200,000 ÷ ₱10 par) 20,000
Treasury shares (₱150,000 ÷ ₱15 cost) (10,000)
110,00
Outstanding shares
0
2. Solution:
1/20 = 5%. Therefore, the share dividends declared as
considered “small.”
The stock dividends payable is computed as follows:
3. Solution:
1/4 = 25%. Therefore, the share dividends declared as
considered “large.”
The stock dividends payable is computed as follows:
4. Solution:
5. Solution:
Total dividends declared 600,000
Allocation:
① Allocation to preference shares (₱.5M par x 10% x 1 yr.) 50,000
② Excess allocated to ordinary shares (₱.6M - ₱50K) 550,000
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As allocated -
6. Solution:
Total dividends declared 600,000
Allocation:
150,00
① Allocation to preference shares (₱.5M par x 10% x 3 yrs.) 0
② Excess allocated to ordinary shares (₱.6M - ₱150K) 450,000
As allocated -
7. Solution:
Total dividends declared
600,000
Allocation:
① Basic allocation to preference sh. (₱.5M par x 10% x 1 yr.) 50,000
100,00
② Basic allocation to ordinary sh. (₱1M par x 10%) 0
Excess subject to participation 450,000
③ Participation of preference sh. (₱450K x .5M par ÷ 1.5M par) 150,000
③ Participation of ordinary sh. (₱450K x 1M par ÷ 1.5M par) 300,000
As allocated -
8. Solution:
Total dividends declared 600,000
Allocation:
① Basic allocation to preference sh. (₱.5M par x 10% x 3
yrs.) 150,000
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9. Solution:
Total dividends declared 600,000
Allocation:
① Basic allocation to preference sh. (₱.5M par x 10% x 3
yrs.) 150,000
② Basic allocation to ordinary sh. (₱1M par x 10%) 100,000
Excess subject to participation 350,000
③ Participation of preference sh. [(18% - 10%) x ₱.5M par] 40,000
③ Excess allocated to ordinary sh. (₱350K - ₱40K) 310,000
As allocated -
10. Solution:
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11. Solution:
Dec. 31, 20x1 Capital liquidated (.5M x 75%) 375,000
Retained earnings (.5M x 25%) 125,000
Cash dividends payable 500,000
PROBLEM 3: COMPUTATIONS
1. Solution:
The outstanding shares are computed as follows:
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140,00
Shares issued (₱2.8M ÷ ₱20 par)
0
Shares subscribed (₱400,000 ÷ ₱20 par) 20,000
Treasury shares (₱350,000 ÷ ₱25 cost) (14,000)
146,00
Outstanding shares
0
2. Solution:
1/10 = 10%. Therefore, the share dividends declared as
considered “small.”
The stock dividends payable is computed as follows:
3. Solution:
1/5 = 20%. Therefore, the share dividends declared as
considered “large.”
The stock dividends payable is computed as follows:
4. Solution:
5. Solution:
Total dividends declared 1,200,000
Allocation:
100,00
① Allocation to preference shares (₱1M par x 10% x 1 yr.) 0
1,100,00
② Excess allocated to ordinary shares (₱1.2M - ₱100K) 0
As allocated -
6. Solution:
Total dividends declared 1,200,000
Allocation:
300,00
① Allocation to preference shares (₱1M par x 10% x 3 yrs.) 0
② Excess allocated to ordinary shares (₱1.2M - ₱300K) 900,000
As allocated -
7. Solution:
Total dividends declared
1,200,000
Allocation:
100,00
① Basic allocation to preference sh. (₱1M par x 10% x 1 yr.) 0
P a g e | 10
200,00
② Basic allocation to ordinary sh. (₱2M par x 10%) 0
Excess subject to participation 900,000
③ Participation of preference sh. (₱900K x 1M par ÷ 3M par) 300,000
③ Participation of ordinary sh. (₱900K x 2M par ÷ 3M par) 600,000
As allocated -
8. Solution:
Total dividends declared 1,200,000
Allocation:
① Basic allocation to preference sh. (₱1M par x 10% x 3 yrs.) 300,000
② Basic allocation to ordinary sh. (₱2M par x 10%) 200,000
Excess subject to participation 700,000
③ Participation of preference sh. (₱700K x 1M par ÷ 3M par) 233,333
③ Participation of ordinary sh. (₱700K x 2M par ÷ 3M par) 466,667
As allocated -
9. Solution:
Total dividends declared 1,200,000
Allocation:
① Basic allocation to preference sh. (₱1M par x 10% x 3 yrs.) 300,000
② Basic allocation to ordinary sh. (₱2M par x 10%) 200,000
Excess subject to participation 700,000
③ Participation of preference sh. [(15% - 10%) x ₱1M par] 50,000
③ Excess allocated to ordinary sh. (₱700K - ₱50K) 650,000
As allocated -
10. Solution:
11. Solution:
Dec. 31, 20x1 Capital liquidated (100K – 90K) 10,000
Retained earnings 90,000
Cash dividends payable 100,000
10. D
Solution:
Outstanding shares: (10,000 x 25%) + 1,000 = 3,500;
P a g e | 13
1. A
Solution:
- Outstanding shares: (80,000 – 10,000 + 1,000) = 71,000;
- 15,000 ÷ 71,000 = 21.13% ….. large
- Cash dividends payable: 15,000 x 10 par value = 150,000
2. B
Solution:
- Outstanding shares: (80,000 – 10,000 + 1,000) = 71,000;
- 1 ÷ 10 = 10% ….. small
- Cash dividends payable: 71,000 x 10% x 650 fair value =
4,615,000
3. A
Solution:
10,000 sh. x ½ x ₱120 cost = 600,000
4. A
Solution:
Total dividends declared 12,000,000
Allocation:
① Allocation to preference shares (₱1M par x 10% x 1 yr.) 100,000
11,900,00
② Excess allocated to ordinary shares (₱1.2M - ₱100K) 0
As allocated -
Outstanding shares:
10% PS: 1M ÷ 200 = 5,000 shares
OS: 2M ÷ 1 = 2,000,000 shares
5. B
Solution:
Total dividends declared 12,000,000
Allocation:
① Allocation to preference shares (₱1M par x 10% x 5 yrs.) 500,000
11,500,00
② Excess allocated to ordinary shares (₱12M - ₱300K) 0
As allocated -
6. D
Solution:
Total dividends declared
12,000,000
Allocation:
① Basic allocation to preference sh. (₱1M par x 10% x 1
yr.) 100,000
② Basic allocation to ordinary sh. (₱2M par x 10%) 200,000
Excess subject to participation 11,700,000
③ Participation of preference sh. (₱11.7K x 1M par ÷ 3M par) 3,900,000
③ Participation of ordinary sh. (₱11.7M x 2M par ÷ 3M par) 7,800,000
As allocated -
7. B
Solution:
Total dividends declared 12,000,000
Allocation:
① Basic allocation to preference sh. (₱1M par x 10% x 5 yrs.) 500,000
② Basic allocation to ordinary sh. (₱2M par x 10%) 200,000
Excess subject to participation 11,300,000
③ Participation of preference sh. (₱11.3M x 1M par ÷ 3M par) 3,766,667
③ Participation of ordinary sh. (₱11.3M x 2M par ÷ 3M par) 7,533,333
As allocated -
8. B
Solution:
Total dividends declared 6,000,000
Allocation:
① Basic allocation to 10% PS (₱2M par x 10% x 4 yrs.) 800,00
P a g e | 16
0
480,00
① Basic allocation to 12% PS (₱4M par x 12% x 1 yr.) 0
② Basic allocation to ordinary sh. (₱6M par x 10%) 600,000
Excess subject to participation 4,120,000
③ Participation of 10% PS (₱4.120M x 2M par ÷ 8M par) 1,030,000
③ Participation of ordinary sh. (₱4.120M x 6M par ÷ 8M par) 3,090,000
As allocated -
Outstanding shares:
10% PS: 2M ÷ 100 = 20,000 shares
12% PS: 4M ÷ 200 = 20,000 shares
OS: 6M ÷ 10 = 600,000 shares
9. A
Outstanding shares: 75,000 – 5,000 + (20,000 ÷ 10) = 72,000
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