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Accounting For Retained Earnings Problems

The document contains 8 accounting problems related to retained earnings, dividends, and earnings per share calculations. The problems involve calculating dividend amounts for preference and ordinary shares of different classes and participating levels. They also involve calculating book value and earnings per share under various capital structures and dividend declarations.

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Camille Bacares
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230 views3 pages

Accounting For Retained Earnings Problems

The document contains 8 accounting problems related to retained earnings, dividends, and earnings per share calculations. The problems involve calculating dividend amounts for preference and ordinary shares of different classes and participating levels. They also involve calculating book value and earnings per share under various capital structures and dividend declarations.

Uploaded by

Camille Bacares
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACCOUNTING FOR RETAINED EARNINGS- PROBLEMS

1. UBERITA PG. 580 26-3


Black Label Co. paid dividends of P200,000 and P300,000 at the end of 2014 and 2015,
respectively. The corporation has not paid any other dividends since its organization on Jan. 2,
2014. The outstanding shares are 20,000, 12% preference shares, par P100 and 30,000 ordinary
shares, par P100.
If preference share is non-cumulative and nonparticipating, how much would be received in 2014
by the preference and ordinary shareholders, respectively?
a. 100,000 and 100,000 c. 160,000 and 40,000
b. 150,000 and 50,000 d. 200,000 and 0
2. If preference shares were cumulative and nonparticipating, how much would the preference
and ordinary shareholders, respectively, receive in 2015?
a. 150,000 and 150,000 c. 280,000 and 20,000
b. 240,000 and 60,000 d. 300,000 and 0
3. UBERITA PG. 579 26-2
Sky Castle Co. had the ff. classes of shares outstanding as of Dec. 31, 2014:
Ordinary shares, P20 par value, 20,000 outstanding; Preference shares, 6%, P100 par value,
cumulative and fully participating, 1,000 shares were outstanding.
The last payment of preference dividend was on Dec. 31, 2011. On Dec. 31, 2014, a total cash
dividend of P90,000 was declared.
What are the amounts of dividends payable on both the ordinary and preference shares,
respectively?
a. P57,600 and P32,400 c. P67,200 and P22,000
b. P62,400 and P27,600 d. P72,000 and P18,000
4. UBERITA PG. 589, 26-21
The following information pertains to Martial Corporation:
 Dividends on its 1,000 shares of 6%, P10 par value cumulative preference shares have
not been declared or paid for 3 years.
 Treasury shares that cost P15,000 were reissued for P8,000.
What amount of accumulated profits should be appropriated as a result of these items?
a. None c. 7,000
b. 1,800 d. 8,800
5. UBERITA PG. 597 27-6
Lover Co. had 5,000 shares of P500 par value ordinary shares outstanding and 500 shares of
P1,000 par preference shares outstanding. The current market price of the ordinary share is
P1,200 per share and total shareholders’ equity amounts to P3,600,000. The preference
shareholders have a liquidation preference of P1,400 per share and no dividends are in arrears.
The book value per share of ordinary share is-
a. P510 c. P580
b. P520 d. P818

6. UBERITA PG. 599 27-9


1989 Co. has an authorized capital of 10,000 shares of P100 par, 8% cumulative preference share
and 20,000 shares of P100 par ordinary share. The equity account balances at Dec. 31, 2014
totaled P1,910,000 broken down as follows:
Cumulative preference share capital, P500,000; ordinary share capital, P1,100,000; Share
premium, P200,000; Accumulated profits, P260,000; and Treasury share, ordinary (1,000 shares
at cost), (P150,000).
Dividends on preference share are in arrears for 2013 and 2014.
How much would be the book value per share of ordinary share at Dec. 31, 2014?
a. P125 c. P141
b. P133 d. P191

7. UBERITA PG. 601 27-14


Red Company’s capital structure at Dec. 31, 2013 is shown below:
Shares issued and outstanding:
Ordinary share 200,000
Nonconvertible preference share 50,000
On Oct. 1, 2014. Red issued a 10% share dividend on its ordinary shares, and paid
P200,000 cash dividends on the preference shares. Net income for the year ended Dec. 31,
2014 was P1,920,000.
How much should be the 2014 earnings per share of Red Company?
a. P7.82 c. P8.72
b. P8.20 d. P9.36
8. UBERITA PG. 603, 27-18
Fearless Co. had 200,000 shares of P20 par ordinary shares and 20,000 shares of P100 par, 6%
cumulative, convertible preference shares outstanding for the entire year ended Dec. 31, 2014.
Each preference share is convertible into 5 shares of ordinary shares. The company reported net
income of P840,000 during the year.
How much is the diluted earnings per share for the year ended Dec. 31, 2014?
a. P2.40 c. P3.60
b. P2.80 d. P4.20

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