Cpa Review School of The Philippines Manila: Financial Accounting and Reporting Valix/Valix/Escala/Santos/Dela Cruz

CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ
BATCH 92 OCTOBER 2022 CPALE
RETAINED EARNINGS
1. On January 1, 2022, an entity reported the following shareholders’ equity:
Share capital, 100,000 shares authorized, 50,000 shares outstanding, P100 par 5,000,000
Share premium 4,000,000
Retained earnings 5,000,000
The board of directors declared a 10% share dividend on July 1, 2022 when the market value of the share
was P150. The share dividend was issued on October 1, 2022 when the market value of the share was
P200. The entity sustained a net loss of P2,000,000 for 2022.
What amount should be reported as retained earnings on December 31, 2022?
a. 2,250,000
b. 2,000,000
c. 2,500,000
d. 3,000,000
2. An entity reported the following shareholders’ equity on January 1, 2022:
Share capital, P50 par, 110,000 shares 5,500,000
Treasury shares at cost, 10,000 shares 1,500,000
On June 30, 2022, the entity declared and issued a 20% share dividend when the market value per share
was P150. On December 31, 2022, the entity paid a cash dividend of P20 per share. The net income for
2022 was P6,000,000.
What amount should be reported as unappropriated balance of retained earnings on December 31,
2022?
a. 7,600,000
b. 6,100,000
c. 7,100,000
d. 4,100,000
3. On January 1, 2022, an entity showed the following shareholders’ equity:
Share capital, P50 par, 30,000 shares outstanding 1,500,000
On July 1, 2022, the entity declared a property dividend of inventory payable on March 1, 2023. The
inventory had a P1,200,000 carrying amount and a fair value less cost to distribute of P1,500,000 on July
1, 2022, P1,800,000 on December 31, 2022 and P2,000,000 on March 1, 2023. The net income for 2022
was P6,000,000. On December 31, 2022 the entity paid cash dividend of P2,500,000.
1. What amount should be reported as retained earnings on December 31, 2022?
a. 7,000,000
b. 6,700,000
c. 6,500,000
d. 8,500,000
2. On December 31, 2022, the inventory should be reported at what amount?
a. 1,200,000
b. 1,500,000
c. 1,800,000
d. 2,000,000
3. What amount should be recognized as gain distribution of property dividend in 2023?
a. 300,000
b. 600,000
c. 800,000
d. 0
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4. On January 1, 2022, an entity had ordinary and preference shares outstanding. The incorporators own ten
ordinary shares but no preference shares. On December 31, 2022, the entity declared dividends on the
ordinary shares payable on December 31, 2023. The entity decided to give the ordinary shareholders a
choice between receiving a cash dividend of P500,000 per share or in the form of a noncash asset. The
noncash asset is standard model from the entity’s car fleet. Each car has a fair value of P600,000 and
carrying amount of P450,000 on December 31, 2022. The fair value of the car is P700,000 on December
31, 2023. The entity estimated that 80% of the ordinary shareholders will take the option of the cash
dividend and 20% will elect for the noncash asset.
1. What amount should be recognized as dividend payable on December 31, 2022?
a. 5,500,000
b. 5,200,000
c. 4,000,000
d. 6,000,000
2. What amount should be recognized as gain on distribution of property dividend in 2023 if the ordinary
shareholders elected to receive the noncash asset?
a. 2,000,000
b. 2,500,000
c. 1,500,000
d. 1,800,000
3. Which is incorrect in the journal entry on December 31, 2023 if the shareholders elected to receive
the cash?
a. Debit dividend payable P5,200,000
b. Credit cash P5,000,000
c. Credit retained earnings P200,000
d. Credit gain on distribution of property dividend P200,000
5. An entity had retained earnings of P3,500,000 at the beginning of 2022. Throughout 2022, the entity had
40,000 ordinary shares of P100 par value that are issued and outstanding. During 2022, the entity
reported net income of P5,500,000, purchased 5,000 treasury shares for P600,000, declared cash
dividends of P2,000,000, reissued all treasury shares at a gain of P200,000, and declared and issued a
10% ordinary share bonus issue when the market value was P150 per share.
What amount should be reported as retained earnings on December 31, 2022?
a. 7,200,000
b. 6,800,000
c. 6,600,000
d. 6,400,000
6. During the first three years of operations, an entity reported total net income of P7,000,000 and cash
dividends of P2,000,000. The entity provided the following data for the current year.
Income before income tax 5,000,000
Prior period error – understatement of prior year depreciation before tax 500,000
Cumulative decrease in income from change in inventory method before tax 1,000,000
Dividend declared to be paid next year 2,000,000
Income tax rate 25%
What amount should be reported as retained earnings at year-end?
a. 5,625,000
b. 5,250,000
c. 6,500,000
d. 6,150,000
End
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