Valix SHE – Part 1

1. When shares with par value are sold, the excess of the proceeds over the par value is credited to
a. Share Capital c. Retained Earnings
b. Share Premium d. Gain on issuance of share capital
2. When shares without par value are sold, the proceeds share shall be credited to
a. Share capital
b. Shareholders' equity
c. Share capital to the extent of the stated value and any excess is credited to share premium
d. Share premium
3. If shares are issued for noncash consideration, the proceeds shall be measured by the
a. Fair value of the shares issued
b. Fair value of the noncash consideration received
c. Par value of the shares issued
d. Cost of the noncash consideration received
4. If shares are issued to extinguish a financial liability, what is the initial measurement of the shares
issued?
a. Par value of the shares issued
b. Fair value of the shares issued
c. Fair value of liability extinguished
d. Book value of the shares issued
5. When shares are issued for services received, the least appropriate measure is equal to
a. Fair value of such services
b. Par value of the shares issued
c. Book value of the shares issued
d. Fair value of the shares issued
6. What is the meaning of net assets of a corporation?
a. Contributed capital c. Shareholders' equity
b. Retained earnings d. Legal capital
7. The two primary account classifications within shareholders' equity are
a. Preference shares and retained earnings
 b. Par value of ordinary shares and retained earnings
c. Contributed capital and retained earnings
d. Preference shares and ordinary shares
8. Details of each class of share capital should be reported
a. On the face of the statement of financial position only.
b. In disclosure notes only.
c. On the face of the statement of financial position or in disclosure notes.
d. On the face of the statement of comprehensive income and in disclosure notes.
9. The corporate charter is known as
a. Articles of incorporation
b. Statement of organization
c. By-laws
d. Registration statement
10. Characteristics of the corporate form that have led to form of business ownership include the growth
of this all of the following, except
a. Ease of raising capital
b. Low government regulation
c. Limited liability transfer
d. Ease of ownership
11. Outstanding ordinary shares are
a. Shares that are performing well on the Philippine Stock Exchange
b. Shares that have been authorized by the state for Issue
c. Shares held in the corporate treasury
d. Shares in the hands of shareholders
12. Issued shares refer to the number of shares
a. Outstanding plus treasury shares
b. Shares issued for cash
c. In the hands of shareholders
d. That may be issued under state law
13. Authorized share capital refers to the total number of shares
a. Outstanding b. Issued
c. Issued and outstanding d. That can be issued
14. The share capital account is measured as
a. The number of shares outstanding multiplied by the par value.
b. The number of shares outstanding multiplied by the market value
c. The number of shares issued multiplied by the par value
d. The number of shares issued multiplied by book value
15. The par value of shares issued is normally recorded in
a. Additional paid in capital
b. Share capital account
c. Retained earnings account
d. Appropriated retained earnings account
16. Total shareholders' equity represents
a. A claim against specific
b. The maximum amount that can be borrowed
c. A claim against the total assets of an entity.
d. Only the amount of retained earnings.
17. In accounting for shareholders' equity, the accountant is primarily concerned with which of the
following?
a. Determining the total amount of shareholders' equity
b. Distinguishing between realized and unrealized revenue
c. Recording the source of each of the various elements of shareholders' equity
d. Making sure that the directors do not declare dividends in excess of retained earnings
18. The term residual owner means that ordinary shareholders
a. Are entitled to a dividend every year in which the entity earns an income.
b. Have the rights to specific assets of the entity.
c. Bear the ultimate risks and uncertainties and receive the benefits of ownership.
d. Can negotiate individual contracts for the entity.
19. Shares that have a fixed per-share amount printed on the share certificate are called
a. Stated value shares c. Uniform value shares
b. Fixed value shares d. Par value shares
20. The par value of an ordinary share represents
a. The liquidation value of the share.
b. The book value of the share.
c. The legal nominal the share.
d. The amount received by the corporation when the sued share is originally issued.
21. Contributed capital does not include
a. Share premium on ordinary and preference shares
b. Preference share capital
c. Capital resulting from reissuance of treasury shares at a price in excess of acquisition cost
d. Capital accumulated by retention of earnings
22. Discount on share capital
a. May be recorded as either an asset or an expense
b. Should be closed to income summary account
c. May be offset against share premium on the same class of share capital
d. None of the above may be done
23. Which of the following is not one of the basic shareholders' rights?
a. The right to participate in earnings.
b. The right to maintain one's proportional interest.
c. The right to participate in the proceeds of the sale of corporate assets upon liquidation of the
corporation.
d. The right to inspect the accounting records.
24. An ordinary shareholder does not possess which of the following?
a. The right to share in the earnings of the corporation.
b. The right to vote in the election of the board of directors.
c. The right to direct ownership of the corporate assets.
d. The right to share proportionately in corporate assets in case of liquidation.
25. The preemptive right of an ordinary shareholder is the right to
a. Share proportionately in corporate assets.
b. Share proportionately in any new issue of shares of the same class.
c. Receive cash dividends before they are distributed to preference shareholders.
d. Exclude preference shareholders from voting rights.
26. Share premium is reported
a. As a reduction of shareholders'
b. As a noncurrent asset
c. As a noncurrent liability
d. As an increase in shareholders' equity
27. Share issue costs are
a. Not recorded separately
b. Recorded as an asset
c. Recorded as a liability
d. Amortized over time
28. When more than one security is sold for a single price and the total selling price is not equal to the
sum of the market prices, the cash received is allocated between the securities based on
a. Relative book value
b. Par value
c. Relative market value
d. The earnings per share
29. When shares traded on an active exchange are issued for an asset
a. No entry is recorded until restrictions are lifted.
b. An asset is recorded at the fair value of the shares.
c. An asset is recorded at the appraised value.
d. Share capital is increased by the appraised value of the asset.
30. When shares are issued in exchange for property, the best evidence of fair value might be any of the
following, except
a. The fair value of the property received.
b. The selling price of the shares in a recent transaction.
c. The price of the shares quoted on the stock exchange.
 d. The average book value of outstanding shares.
31. In terms of business volume, the dominant form of business organization is
a. Partnership b. Corporation
c. Limited liability company d. Proprietorship
32. Ordinary shareholders usually have all of the following rights, except
a. To share in the net income
b. To share in the assets upon liquidation
c. To elect the board of directors
d. To participate in the day-to-day operations
33. When preference shares are retired by the issuer at a price below the original issue price, the
transaction
a. Increases net income for the year
b. Increases retained earnings
c. Increases revenue for the year
d. Increases contributed capital of ordinary shareholders
34. When preference shares carry a redemption privilege, the shareholders may
a. Purchase new shares when available.
b. Exchange their preference shares for ordinary shares.
c. Surrender the preference shares for a specified amount of cash.
d. Purchase treasury shares ahead of ordinary shareholders.
35. An entity that issued shares of Class B should report the share capital
a. Among liabilities under all circumstances.
b. As equity unless the shares are mandatorily redeemable.
c. As equity unless the shares are redeemable at the option of the issuer.
d. Among liabilities unless the shares are mandatorily redeemable.
36. The issuance of preference shares
a. Increases preference shares outstanding
b. Has no effect on preference shares outstanding
c. Increases authorized preference share capital
d. Decreases authorized preference share capital
37. When an entity calls in all of the preference shares for more than the original issue price, the excess
over the original issue price should be
a. Accounted for as loss on exchange
b. Charged against share premium of ordinary shares
c. Charged to a discount on preference shares
d. Charged against retained earnings
38. When preference shares are called in by the issuing entity for less than original issue price, proper
accounting for the redemption
a. Increases the amount of dividends available to ordinary shareholders
b. Increases the contributed capital of the ordinary shareholders
c. Increases reported income for the period
d. Increases the treasury shares held by the entity
39. Convertible preference shares
a. Are compound financial instrument.
b. Include an option for the holder to convert preference shares into a fixed number ordinary
shares.
c. Are accounted for as financial liability
d. All of the choices are correct
40. Dividend paid on accounted for as retained earnings
a. Direct deduction from retained earnings
b. Interest expense as component of finance cost
c. Component of other comprehensive income
d. Deduction from reserves

Millan SHE – Part 1

1. Entity A received a subscription for 2,000 shares at P18. per share on March 31, 20x1. Entity A's shares
have a par value P5, per share. Entity A collected the subscription receivable on May 15, 20x1. Which of
the following statements is correct?
a. Entity A should credit share premium for P13,000 on March 31, 20x1
b. Entity A should credit share premium for P26,000 on March 31, 20x1.
c. Entity A should credit share premium for P13,000 on May
d. Entity A should credit share premium for P26,000 on May 15, 20x1. 15, 20x1.
2. Treasury shares are accounted for at
a. cost b. par value
c. market value d. fair value
3. The entry to record the reissuance of treasury shares at a price that exceeds the previous reacquisition
cost includes a
a. credit to share premium. c. debit to retained earnings,
b. debit to share premium. d. b and c.
4. Car Co. reacquires for P15 per share, 1,000 of its P5 par value ordinary shares previously issued at P12
per share. Subsequently, Car Co. reissued half of the reacquired shares at P18 per share. What is the effect
of the reacquisition of the treasury shares on the following accounts?
Share premium Retained earnings Share premium Retained earnings
a. Decrease Decrease c. No effect Decrease
b. Decrease No effect d. No effect No effect
5. Share premium may be debited in all of the following transactions except
a. recall of stock rights in exchange for cash.
b. incurrence of stock issuance costs.
c. retirement of shares below original issuance price.
d. reissuance of treasury shares above cost.
6. The issuer classifies redeemable preference shares as
a. financial liability. c. a or b
b. own equity instrument. d. contra equity
7. Which of the following statements is least likely to be c when shares are subscribed but not yet paid?
a. Current assets are increased.
b. Total shareholders' equity may not be affected.
c. Subscribed share capital is increased.
d. Share premium may be increased.
8. The conversion of preference shares into ordinary shares
a. results to gain or loss.
b. may result to an increase in retained earnings.
c. is accounted fora s a derecognition of the preference shares and the recognition of ordinary
shares.
 d. may decrease or increase the entity's total equity
9. Share premium may be increased in all of the following transactions except
a. retirement of shares below the original issuance price.
b. reissuance of treasury shares for more than the cost.
c. issuance of preference shares with detachable warrants.
d. issuance of stock rights to existing shareholders.
10. Retained earnings may be increased in which of the following transactions?
a. Sale of shares above par or stated value.
b. Receipt of donation from a shareholder.
c. Exercise of share warrants by the holder.
d. none of these
Valix SHE – Part 2
1. The cost of treasury shares acquired for noncash consideration is usually measured by
a. Carrying amount of the noncash asset surrendered
b. Fair value of the
c. Fair value of t noncash asset surrendered he treasury shares
d. Book value of the treasury shares
2. The total cost of treasury shares shall be reported as
a. Deduction from shareholders' equity
b. Financial asset
c. Deduction from retained earnings
d. Deduction from share premium
3. If treasury shares are reissued for noncash consideration, the proceeds shall be measured by
a. Fair value of the treasury shares
b. Fair value of the noncash consideration received
c. Carrying amount of the noncash consideration received
d. Carrying amount of the treasury shares
4. Which is not a method to account for treasury shares?
a. Cost method
b. Par value method
 c. Retained earnings method
d. Constructive retirement method

5. “Loss” from sale of treasury shares shall be charged to

a. Loss on sale of treasury shares
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance and then retained earnings
6. Loss on retirement of treasury shares is debited to
a. Retained earnings
b. Share premium from treasury shares and then retained earnings
c. Share premium from treasury shares, share premium from original issuance and then retained
earnings
d. Share premium from original issuance, share premium treasury shares and then retained
earnings.
7. Gain on retirement of treasury shares shall credited to
a. Share premium
b. Retained earnings
c. Share capital
d. Income
8. Shares issued would exceed shares outstanding as a result of
a. Declaration of share split
b. Declaration of share dividend.
c. Purchase of treasury shares
d. Payment in full of subscribed shares
9. When treasury shares are sold at a price above cost
a. A gain account is credited
b. A loss is reported
c. A revenue account is credited
d. Contributed capital is increased
10. Which statement is incorrect in relation to treasury shares?
 a. Treasury shares shall be recorded at cost irrespective of whether acquired below or above par
value
b. The total cost of treasury shares shall be deducted from shareholders' equity.
c. Treasury shares may be recognized as financial asset
d. Gain or loss on sale of treasury shares shall not be credited or charged to income
11. An entity makes only memorandum entry when
a. Entities give warrants to executives compensation.
b. Entities include attractive, warrants to make a security more
c. Entities issue rights to existing shareholders.
d. All of the choices are correct.
12. Which of the following is issued to shareholders of a corporation to acquire unissued shares within a
specified time at a specified price?
a. Share option
b. Share warrant
c. Share subscription
d. Share appreciation right
13. An entity issued rights to the existing shareholders to purchase unissued ordinary shares at more than
par value. Share premium would be recorded when the rights
a. Expire
b. Are exercised
c. Become exercisable
d. Are issued
14. Share warrants outstanding account shall be reported as
a. Liability
b. Reduction of share premium
c. Share capital
d. Share premium
15. Share split is issued primarily to
a. Increase the number of outstanding shares
b. Increase the number of authorized shares
c.. Increase legal capital
 d. Induce a decline in market value per share

16. When collectibility is reasonably assured, the excess of the subscription price over the stated value of
no par ordinary share subscribed shall be recorded as
a. No par ordinary share capital
b. Share premium when the subscription is recorded
c. Share premium when the ordinary share is collected
d. Share premium when ordinary shares is issued
17. The purchase of treasury ordinary shares
a. Decreases authorized ordinary share capital
b. Decreases issued ordinary shares
c. Decreases outstanding ordinary shares
d. Has no effect on ordinary shares outstanding
18. When treasury accounts are purchased for more than par value, what account or accounts shall be
debited?
a. Treasury shares for the par value and share premium for the excess of purchase price over the
par value.
b. Share premium for the purchase price.
c. Treasury shares for the purchase price.
d. Treasury shares for the par value and retained earnings for excess of the purchase price over the
par value.
19. Which statement best describes the net effect on retained earnings of the purchase and subsequent sale
of treasury shares?
a. Retained earnings may never be increased but sometimes decreased
b. Retained earnings sometimes m never be increased or decreased
c. Retained earnings sometimes may be increased but never decreased
d. Retained earnings account is always affected unless the sale price exactly equal to cost
20. Treasury shares were acquired for cash at a price in excess of par value. The treasury shares were
subsequently sold for cash at a price in excess of acquisition cost. What is the effect on total shareholders’
equity?
Purchase of Treasury Sale of Treasury
a. Increase Decrease
b. Decrease No effect
c. Decrease Increase
d. No effect No effect
21. Treasury shares were acquired for cash at more than par value, and then subsequently sold for cash at
more than acquisition price. What is the effect on share premium from treasury shares?
Purchase of treasury shares Sale of treasury shares
a. Increase Increase
b. Decrease No effect
c. No effect Increase
d. No effect No effect
22. How would a share split in which the par value per share decreases in proportion to the number of
additional shares issued affect share premium and retained earnings, respectively?
a. Increase and No effect
b. No effect and No effect
c. No effect and Decrease
d. Increase and Decrease
23. How would a share split affect asset equity, respectively?
a. Increase and Increase
b. No effect and No effect
c. No effect and Increase
d. Increase and No effect

Millan SHE – Part 2