Chapter 7 - Assignment 2

MULTIPLE CHOICE
2. NMB Corporation has 5,000,000 ordinary shares and 1,000,000 shares of 6% P100 par value cumula
NMB suspended all dividend payments. This year NMB returned to profitability, and the board of direc
the end of the year. How much would NMB have to pay in dividends this year?
D. ₱23,000,000
Solution:
Dividends on Ordinary Shares 5,000,000
Dividends on Preference Shares 18,000,000
Total Dividends paid for the year 23,000,000
4. An investor owns 1,000 shares of GDM Corporation when the corporation announces a 1-for-4 revers
trading at P1.50 per share. After the share split, what ownership position will the investor have?
D. 250 shares at P6.00 per share
Solution:
No. of shares held before split 1,000
Divided by: Stock split of 4 4
New shares after the split 250
Share price before the split 1.50

Multiplied by: Stock split of 4 4
New share price after the split 6
9. A corporation has 800,000 ordinary shares outstanding. Recently, the corporation bought 100,000 sha
P320,000 available to distribute to ordinary shareholders. What are the dividends paid per share?
B. ₱0.46
Solution:
Issued Shares 800,000
Treasury Shares 100,000
No. of Shares Outstanding 700,000
Income available for distribution 320,000

Shares Outstanding 700,000
0.46
6% P100 par value cumulative preference shares. During the recession of the past two years,
lity, and the board of directors declared a P1 per share ordinary shares dividend to be paid at
announces a 1-for-4 reverse share split. Before the share split, GDM's stock was
the investor have?
oration bought 100,000 shares of its own stock. At the end of the year, the corporation has
ends paid per share?
MULTIPLE CHOICE
1. Cebedo Corp. issued 100,000 ordinary shares. Of these, 5,000 were held as treasury stock at Dec. 31,
shares were as follows:
May 3 1,000 shares of treasury stock were sold.

Aug. 6 10,000 shares of previously unissued share were sold.
Nov. 18 A 2-for-1 share split took effect.
At Dec. 31, 2023, how many ordinary shares are issued and outstanding:
Shares Issued Shares Outstanding

A. 220,000 212,000
Solution:
Issued Treasury Stock Outstanding
100,000 5,000 95,000
(1,000) 1,000
10,000 10,000
110,000 106,000
220,000 212,000
2. How would total shareholders' equity be affected by the declaration of each of the following?
Share dividends Share split

D. No effect No effect
4. Villanueva Corp.'s statement of financial position reported the following shareholders' equity:
5% Cumulative Preference Shares, P100 par,

2.500 shares issued and outstanding
Ordinary Shares, P3.50 par, 100,000
shares issued and outstanding
Share Premium-Ordinary
Retained Earnings
Dividends in arrears on the preference shares amounted to P25,000. If Villanueva were to be liquidated,
premium of P50,000. The book value per share of ordinary shares is
D. ₱7.00
Solution:
Cumulative Preference Shares 250,000
Ordinary Share 350,000
Share Premium- Ordinary 125,000
Retained Earnings 300,000
Total Book Value of Shareholders Equity 1,025,000
Cumulative Preference Shares 250,000

Liquidation Premium 50,000
Dividend in Arrear on Preference Share 25,000
Total Book Value of Preference Share Equity 325,000
5. Coronado Corp. has 700,000 ordinary shares authorized and 300,000 shares outstanding at Dec. 31, 2
Jan. 31 Declared 10% share dividend.

Jun. 30 Purchased 100,000 shares.
Aug. 1 Reissued 50,000 shares.
Nov. 30 Declared 2-for-1 share split.
At Dec. 31, 2023, how many outstanding shares did Coronado have?
A. 560,000
Solution:
2022
Dec. 31 Outstanding Shares 300,000
2023
Jan. 31 10% Stock Dividend 30,000
Jun. 30 Treasury Shares Purchased (100,000)
Aug. 1 Treasure Shares Reissued 50,000
Outstanding Shares 280,000
Nov. 30 Stock Split 2
Dec. 31 Outstanding Shares 560,000
6. Briones Corp.'s outstanding shares at Dec. 31, 2023, consisted of the following:
30,000 shares of 5% Cumulative Preference Shares, P10 par value, fully participating
200,000 Ordinary Shares, P1 par value.
On Dec. 15, 2023, Brines declared dividends of P100,000. What was the amount of dividends payable t
C. ₱40,000
Solution:
Normal Dividend 15,000
Comparable Dividend 10,000
Excess subject to participation 75,000
Preferred Shareholders 45,000

Common Shareholders 30,000
Total Dividends to Ordinary Shareholders 40,000
treasury stock at Dec. 31, 2022. During 2023, transactions involving Cebedo's ordinary
e were sold.
of the following?
areholders' equity:
250,000
350,000
125,000
300,000
eva were to be liquidated, the preference shareholders would receive par value plus a
Total Book Value of Shareholders Equity 1,025,000
Total Book Value of Preference Share Equity 325,000
700,000
Divided by: No. of Ordinary Shares 100,000
Book Value per Share of the Ordinary Shares 7.00
outstanding at Dec. 31, 2022. The following events occurred during 2023:
value, fully participating as to dividends. No dividends were in arrears.
unt of dividends payable to Brines' ordinary shareholders?

PROBLEM #12
Changes in Retained Earnings
Required:
1. How many shares were outstanding on each of the cash dividend dates?
Solution:
Shares issued 23,700
Less: Treasury Shares 1,500
Shares Outstanding 22,200
Jan. 5 22,200
Apr. 5 22,200
July. 5 22,200
July. 31 26,940 (20% of 23,700=4,740+23,700-1,500)
Aug. 14 28,440 (23,700+4,740)
Oct. 5 28,440
2. How much was the total of each of the four cash dividends?
Solution:
Per share 0.50
Multiply by: Shares Outstanding 22,200
Each of the four Cash Dividends 11,100
Jan. 5 11,100
Apr. 5 11,100
July. 5 11,100
Oct. 5 14,220 (0.50×28,440)
3. How much retained earnings was capitalized for the share dividends ?
Solution:
Shares issued 23,700
Multiply by: Share dividend percentage 20%
Shares 4,740
Multiply by: Per Share 12
Retained Earnings Capitalized 56,880
4. What was the price per share paid for the treasury stock
Solution:
Cost of treasury stock 15,000
Divided by: Treasury stock purchased 1,500
Per share 10
5. How much profit did the corporation earn during 2023?
Solution:
Retained Earnings as of 2022 160,000
Retained Earnings as of 2023 200,000
Change in Retained Earnings 160,000
40,000
Unrestricted Retained Earnings Change 15,000
Profit 25,000

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MULTIPLE CHOICE

D. 250 shares at P6.00 per share

Share price before the split 1.50

Income available for distribution 320,000

May 3 1,000 shares of treasury stock were sold.

Shares Issued Shares Outstanding

Share dividends Share split

5% Cumulative Preference Shares, P100 par,

Cumulative Preference Shares 250,000

Jan. 31 Declared 10% share dividend.

200,000 Ordinary Shares, P1 par value.

Preferred Shareholders 45,000

value, fully participating as to dividends. No dividends were in arrears.

unt of dividends payable to Brines' ordinary shareholders?

5. How much profit did the corporation earn during 2023?

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