BM2403

MULTIPLE CHOICE – COMPUTATIONAL

Instruction: Encircle the letter of the correct answer.

For no.s 1 and 2, refer to this information:

Presented below are the shareholders’ equity components of Vale Corporation:
Ordinary Shares, P1 par P4,800,000
Share Premium – Ordinary 550,000
Preference Shares 8.5% - P50 par 2,000,000
Share Premium – Preference 400,000
Retained Earnings 1,500,000
Treasury Shares (at cost) 150,000

1. The total shareholders’ equity of Vale Corporation is

a. P9,100,000 c. P7,600,000
b. P9,250,000 d. P7,750,000

2. The total cash collected related to ordinary shares is

a. P4,800,000 c. P5,750,000
b. P5,350,000 d. P5,200,000

3. Manning Company issued 10,000 shares of its P5 par value ordinary shares with a fair value of P25
per share and 15,000 shares of its P15 par value preference shares with a fair value of P20 per share
for a lump sum of P520,000. How much of the proceeds would be allocated to the ordinary shares?
a. P54,167 c. P270,833
b. P236,364 d. P276,250

4. Norton Company issues 4,000 shares of its P5 par value ordinary shares with a fair value of P25 per
share and 6,000 shares of its P15 par value preference shares with a fair value of P20 per share for a
lump sum of P204,000. What amount of the proceeds should be allocated to the preference shares?
a. P182,750 c. P111,273
b. P127,500 d. P95,625

5. Berry Corporation has 50,000 shares of P10 par ordinary shares authorized. The following transactions
took place during 2012, the first year of the corporation’s existence:
• Sold 10,000 ordinary shares for P18 per share.
• Issued 10,000 ordinary shares in exchange for a patent valued at P200,000.

At the end of Berry’s first year, total paid-in capital amounted to

a. P80,000 c. P200,000
b. P180,000 d. P380,000

6. Glavine Company issues 6,000 shares of its P5 par value ordinary shares with a fair value of P25 per
share and 9,000 shares of its P15 par value preference shares with a fair value of P20 per share for a
lump sum of P312,000. The proceeds allocated to the ordinary shares is
a. P32,500 c. P162,500
b. P141,818 d. P170,182

7. Wheeler Company issued 5,000 shares of its P5 par value ordinary shares with a fair value of P25 per
share and 7,500 shares of its P15 par value preference shares with a fair value of P20 per share for a
lump sum of P260,000. The proceeds allocated to the preference shares are
a. P232,917 c. P141,818
b. P162,500 d. P118,182

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8. Gannon Company acquired 8,000 of its ordinary shares at P20 per share on February 5, 201A, and
sold 4,000 at P27 per share on August 9, 201B. The fair value of Gannon's ordinary shares was P24
per share on December 31, 201A, and P25 per share on December 31, 201B. The cost method is used
to record treasury share transactions. What account(s) should Gannon credit in 201B to record the sale
of 4,000 shares?
a. Treasury Shares for P108,000.
b. Treasury Shares for P80,000 and Paid-in Capital from Treasury Stock for P28,000.
c. Treasury Shares for P80,000 and Retained Earnings for P28,000.
d. Treasury Shares for P96,000 and Retained Earnings for P12,000.

9. Long Co. issued 100,000 shares of P10 par ordinary shares for P1,200,000. Long acquired 10,000
ordinary shares at P15 per share. Three (3) months later, Long sold 5,000 of these shares at P19 per
share. If the cost method is used to record treasury share transactions, to record the sale of the 5,000
treasury shares, Long should credit
a. Treasury Shares for P95,000
b. Treasury Shares for P50,000 and Paid-in Capital from Treasury Shares for P45,000
c. Treasury Shares for P75,000 and Paid-in Capital from Treasury Shares for P20,000
d. Treasury Shares for P75,000 and Share Premium-Treasury Shares P20,000

10. An analysis of stockholders' equity of Hahn Corporation as of January 1, 201A, is as follows:

Ordinary Shares, par value P20; authorized 100,000 shares; P1,800,000
issued and outstanding 90,000 shares
Share Premium – Ordinary 700,000
Retained earnings 760,000
Total P3,260,000

Hahn uses the cost method of accounting for treasury stock and, during 201A, entered into the following
transactions:
Acquired 2,500 shares of its stock for P75,000
Sold 2,000 treasury shares at P35 per share
Sold the remaining treasury shares at P20 per share
Assuming no other equity transactions occurred during 201A, what should Hahn report as the total
share premium on December 31, 201A?
a. P695,000 c. P705,000
b. P700,000 d. P715,000

11. Percy Corporation was organized on January 1, 201A, with an authorization of 1,200,000 ordinary
shares with a par value of P6 per share. During 201A, the corporation had the following capital
transactions:
January 5 issued 900,000 shares @ P10 per share
July 28 purchased 120,000 shares @ P11 per share
December 31 sold the 120,000 shares held in treasury @ P18 per share

Percy used the cost method to record the purchase and reissuance of the treasury shares. What is the
total amount of share premium as of December 31, 201A?
a. P0 c. P3,600,000
b. P2,760,000 d. P4,440,000

12. Presented below is the shareholders' equity section of Oaks Corporation on December 31, 201A:
Ordinary Shares, par value P20; authorized 75,000 shares; issued and P900,000
outstanding 45,000 shares
Share Premium - Ordinary 250,000
Retained earnings 300,000
P1,450,000

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During 201B, the following transactions occurred relating to shareholders' equity:

Three thousand shares were reacquired at P28 per share.
3,000 shares were reacquired at P35 per share
1,800 shares of treasury shares were sold at P30 per share

For the year ending December 31, 201B, Oaks reported a net income of P450,000. Assuming Oaks
accounts for treasury shares under the cost method, what should it report as total shareholders' equity
on its December 31, 201B, balance sheet?
a. P1,765,000 c. P1,757,800
b. P1,761,400 d. P1,315,000

13. On July 1, 201A, Nall Co. issued 2,500 shares of its P10 par ordinary shares and 5,000 shares of its
P10 par convertible preference shares for a lump sum of P140,000. At this date, Nall's ordinary shares
were selling for P24 per share and the convertible preference shares for P18 per share. The amount of
the proceeds allocated to Nall's preference shares should be
a. P70,000 c. P90,000
b. P84,000 d. P77,000

14. Horton Co. was organized on January 2, 201A, with 500,000 authorized shares of P10 par value
ordinary shares. During 201A, Horton had the following capital transactions:
January 5—issued 375,000 shares at P14 per share
July 27—purchased 25,000 shares at P11 per share
November 25—sold 20,000 shares of treasury stock at P13 per share

Horton used the cost method to record the purchase of the treasury shares. What would be the Share
Premium balance from the Treasury Shares account on December 31, 201A?
a. P0 c. P40,000
b. P20,000 d. P60,000

15. The accounts below appeared in the Dec. 31, 201A trial balance of the Godinez Corporation:
Ordinary Shares, P 15 par, 20, 000 shares
P 270, 000
authorized, 18, 000 shares issued
Subscriptions Receivable 17, 000
Subscribed Ordinary Shares 27, 000
Retained Earnings 200, 000
Share Premium 95, 000
Treasury Stock, 1, 000 shares, at cost 25, 000
What is the total number of unissued ordinary shares?
a. P300,000 c. P270,000
b. P30,000 d. P550,000

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