COLLEGE OF MANAGEMENT AND ACCOUNTANCY

ACC 109 INTERMEDIATE ACCOUNTING PART 4

SY 2022-2023 2nd SEMESTER
SET A 2ND PERIODICAL EXAM

GENERAL INSTRUCTIONS: No examinee shall copy or refer to any solution, answer or work of another or allow
anyone to copy or refer to his work, nor in any manner help or ask the help of any person or communicate with any person
by means of words, signs, gestures, codes, and other similar acts which may enable him to exchange, impart or acquire
relevant information while the examination is in progress. On the answer sheet provided, shade the letter of your choice.

1. Tahoma Company had P600,000 convertible 8% bonds payable outstanding on June 30, 2021. Each P1,000 bond was
convertible into 10 ordinary shares of P50 par value. Only July 1 2021, the interest was paid and the bonds were converted
into ordinary shares which had a fair value of P75 per share. The unamortized premium on these bonds was P12,000 at the
date of conversion. The equity component recognized when the bonds were originally issued was P50,000.

What amount should Tahoma credit to share premium as a result of the bond conversion?
a. 312,000
b. 306,000
c. 162,000
d. 362,000

2. At the beginning of the current year, Garamond Company was authorized to issue 100,000 shares with a P50 par value.
The entity had the following share capital transactions during the year:
January 1 Sold 80,000 shares at P60 per share
April 1 Reacquired 4,000 treasury shares at P75 per share
May 1 Approved a 5-for 1 share split
September 30 Issued a 10% share dividend when the market value of a share was P30
November 30 Reissued 4,000 treasury shares at P40 per share
December 31 Net income for the year was P4,000,000

What amount should Garamond Company report as additional paid in capital?

a. 1,560,000
b. 1,660,000
c. 1,420,000
d. 1,700,000

3. Helvetica Company issued 200,000 shares of P5 par value at P10 per share. At the beginning of current year, the
retained earnings amounted to P3,000,000. In March, the entity reacquired 50,000 treasury shares at P20 share. In June,
the entity sold 10,000 of these shares to corporate officers for P25 per share. The entity used the cost method to record
treasury shares. Net income for the current year was P600,000. What amount should be reported as unappropriated
retained earnings at year-end?
a. 3,600,000
b. 3,650,000
c. 3,750,000
d. 2,800,000

4. Arial Company declared a 5% share dividend on 100,000 issued and outstanding shares of P20 par value which had a
fair value of P50 per share before the share dividend was declared. The share dividend was distributed 60 days after the
declaration date. What amount should be reported as increase in current liabilities as a result of the share dividend
declaration?
a. 250,000
b. 100,000
c. 150,000
d. 0

5. On December 31, 2022, Lucida Company had outstanding 30,000 5% cumulative and fully participating preference
shares, P100 par and 200,000 ordinary shares, P10 par. No dividends were in arrears on December 31, 2021. On
December 31, 2022, the entity declared dividend of P1,000,000. What amount should be reported as dividend payable to
preference shareholders?
a. 600,000
b. 300,000
c. 150,000
d. 100,000

6. Calibri Company reported the following increases in account balances during the current year:

Assets 8,900,000
Liabilities 2,700,000
Share capital 6,000,000
Share premium 600,000

Except for a P1,300,000 dividend payment and the year’s earnings, there were no changes in retained
earnings for the year. What amount should be reported as net income for the current year?
a. 400,000
b. 900,000
c. 1,300,000
d. 1,700,000

7. On April 1, 2016, certain number of ordinary shares were sold on a subscription basis at a price in excess of par value,
and 25% of the subscription price was collected. On May 31, 2016, the remaining 75% of the subscription price was
collected. Additional paid-in capital in excess of par would be recognized on
April 1, 2016 May 31, 2016
A. Yes Yes
B. Yes No
C. No No
D. No Yes

8. On January 1, 2022, Harrington Company had 125,000 issued shares and 25,000 shares held as treasury. During the
year,
transactions involving share capital were as follows:
 January 1 through October 31 – 13,000 treasury shares were distributed to officers as part of a share compensation
plan.
 November 1 – A 3-for-1 share split took effect.
 December 1 – The entity purchased 5,000 of its own shares to discourage an unfriendly takeover. These shares
were not retired.

On December 31, 2022, how many shares were issued and outstanding?
A. Issued – 375,000; Outstanding – 334,000
B. Issued – 375,000; Outstanding – 324,000
C. Issued – 334,000; Outstanding – 334,000
D. Issued – 325,000; Outstanding – 324,000

For questions 9-11, please refer to the following information:

During 2022, Bauhaus Company reported the following cash dividends on the P10 par value share capital:

1st quarter P800,000

2nd quarter 900,000
3rd quarter 1,000,000
4th quarter 1,100,000

The 4th quarter cash dividend was declared on December 20, 2022 to shareholders of record December 31, 2022 payable
on January 31, 2023. In addition, the entity declared a 5% stock dividend on December 1, 2022 when there were 300,000
shares issued and outstanding and the market value was P20 per share on declaration date and P25 on distribution date.
The shares were issued on December 21, 2022.

9. What was the effect of the dividend transactions on share capital?

A. 0 C. 150,000 credit
B. 150,000 debit D. 300,000 credit

10. What was the effect of the dividend transactions on share premium?
A. 0 C. 150,000 credit
B. 225,000 credit D. 300,000 credit

11. What was the effect of the dividend transactions on retained earnings?
A. 3,800,000 debit C. 4,100,000 debit
B. 4,175,000 debit D. 3,800,000 debit

12. What effect does the issuance of a 2-for-l stock split have on each of the following?

Par Value per Share Retained Earnings

A. No effect No effect
B. Increase No effect
C. Decrease No effect
D. Decrease Decrease

13. How would the Share Dividends Distributable account balance be presented in the statement of financial position?
A. As deduction from retained earnings
B. As part of current liabilities
C. As addition to share capital
D. As addition to retained earnings

For questions 14 and 15, please refer to the following information:

Adverse financial and operating circumstances warrant that Leelawadee Company should undergo a quasi-
reorganization on December 31, 2022.

The following information may be relevant in accounting for quasi-reorganization:

 Inventory with a fair value of P2,000,000 is currently recorded in the accounts at cost of P2,500,000.
 Plant assets with a fair value of P7,000,000 are currently recorded at P8,500,000, net of accumulated depreciation.
 Individual shareholders contribute P4 million to create additional capital to facilitate the reorganization. No new
shares are issued.
 The par value of the share is reduced from P25 to P5.

Immediately before these events, the shareholders’ equity appears as follows:

Share capital, P25 par, 100,000 shares outstanding P2,500,000
Share premium 1,750,000
Deficit (3,000,000)

14. After the quasi-reorganization, what amount should be reported as share premium?
A. 1,750,000 C. 3,250,000
B. 2,750,000 D. 3,750,000
15. Subsequent to the quasi-reorganization, what amount of retained earnings shall be restricted and cannot be
declared as dividends according to the SEC?
A. Zero C. 3,500,000
B. 3,000,000 D. 5,000,000

16. Palatino Co reacquires 1,000 of its own shares for P25 per share and immediately retires them. The shares have a par
value of P10 per share and were originally issued at P30 per share. The journal entry to record the retirement of the shares
includes which of the following?
A. Debit to Retained Earnings for P5,000
B. Credit to Treasury Shares for P30,000
C. Credit to Share Capital for P10,000
D. Credit to Share Premium – retirement for P5,000

17. Entity A receives 20,000 shares with par value of P100 and fair value of P210 on November 2, 20x1. The shares
have fair value of P220 per share on December 31, 20x1. How much additional capital is recognized in Entity A’s
December 31, 20x1 balance sheet as having resulted from the receipt of the donated shares?
A. 2,000,000 C. 4,400,000
B. 4,200,000 D. 0

18. 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.

19. The issuer classifies redeemable preference shares as

A. financial liability C. A or B
B. own equity instrument D. contra equity

20. Treasury shares are accounted for at

A. cost C. market value
B. par value D. fair value

21. I. When shares are issued for noncash assets, the noncash asset is initially measured at its carrying amount.
II. To amend the articles of incorporation, a majority vote of the shareholders plus a vote by shareholders
representing at least two-thirds (2/3) of the outstanding share capital is needed.
A. both statements are true C. only statement I is true
B. both statements are false D. only statement I is false

22. A quasi- reorganization usually results in a net

A. write-down of assets and the elimination of a deficit.
B. write-down of assets and the continuation of a deficit.
C. write-up of assets and a net write-down of retained earnings.
D. write-down of assets and a net write-down of retained earnings.

23. Which of the following shares may not be entitled to any dividends?
A. subscribed shares C. preference shares
B. outstanding shares D. treasury shares

24. I. Preferred dividends in arrears should not be accrued as a liability.

II. Share dividends do not affect total shareholder’s equity.
A. both statements are true C. only statement I is true
B. both statements are false D. only statement I is false
25. Bookman Old Style Co. declared as property dividends inventories with carrying amount of P2,000,000. The
inventories have fair values of P2,200,000 on declaration date and P2,400,000 on distribution date. The fair values
approximate the net realizable values. How much is the gain (loss) recognized in profit or loss on distribution date?
A. 400,000 B. 200,000 C. (200,000) D. 0

26. The residual interest in a corporation belongs to the

A. management. B. creditors. C. common stockholders. D. preferred stockholders

27. The pre-emptive right of a common stockholder is the right to

A. share proportionately in corporate assets upon liquidation.
B. share proportionately in any new issues of stock of the same class.
C. receive cash dividends before they are distributed to preferred stockholders.
D. exclude preferred stockholders from voting rights

28. Stockholders of a business enterprise are said to be the residual owners. The term residual owner means that
shareholders
A. are entitled to a dividend every year in which the business earns a profit.
B. have the rights to specific assets of the business.
C. bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership.
D. can negotiate individual contracts on behalf of the enterprise

29. . A "secret reserve" will be created if

A. inadequate depreciation is charged to income.
B. a capital expenditure is charged to expense.
C. liabilities are understated.
D. stockholders' equity is overstated

30. Which of the following is not a legal restriction related to profit distributions by a corporation?

A. The amount distributed to owners must be in compliance with the state laws governing corporations.
B. The amount distributed in any one year can never exceed the net income reported for that year.
C. Profit distributions must be formally approved by the board of directors.
D. Dividends must be in full agreement with the capital stock contracts as to preferences and participation.

31. The cumulative feature of preferred stock

A. limits the amount of cumulative dividends to the par value of the preferred stock.
B. requires that dividends not paid in any year must be made up in a later year before dividends are distributed to
common shareholders.
C. means that the shareholder can accumulate preferred stock until it is equal to the par value of common stock at which
time it can be converted into common stock.
D. enables a preferred stockholder to accumulate dividends until they equal the par value of the stock and receive the
stock in place of the cash dividends

32. . Trouser Corporation owns 4,000,000 shares of stock in Baha Corporation. On December 31, 2012, Houser
distributed these shares of stock as a dividend to its stockholders. This is an example of a

A. property dividend. B. stock dividend.

C. liquidating dividend. D. cash dividend.

33. A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

A. Retained Earnings. B. a paid-in capital account.

C. Accumulated Depletion. D. Accumulated Depreciation.

34. Quicky Corporation issued a 100% stock dividend of its common stock which had a par value of P10 before and after
the dividend. At what amount should retained earnings be capitalized for the additional shares issued?
A. There should be no capitalization of retained earnings. B. Par value
C. Fair value on the declaration date D. Fair value on the payment date

35. What effect does the issuance of a 2-for-1 stock split have on each of the following?

Par Value per Share Retained Earnings

A. No effect No effect

B. Increase No effect

C. Decrease No effect

D. Decrease Decrease

USE THE FOLLOWING INFORMATION FOR QUESTIONS 36 TO 38

NAWAWALA, Inc. has outstanding 500,000 shares of P2 par common stock and 100,000 shares of no- par 8% preferred
stock with a stated value of $5. The preferred stock is cumulative and nonparticipating. Dividends have been paid in
every year except the past two years and the current year.

36. Assuming that P250,000 will be distributed as a dividend in the current year, how much will the common
stockholders receive?

A. Zero. B. 130,000.

C. 170,000. D. 210,000.

37. Assuming that P105,000 will be distributed as a dividend in the current year, how much will the preferred
stockholders receive?

A. 35,000. B. 40,000.

C. 80,000. D. 105,000.

38. Assuming that 305,000 will be distributed, and the preferred stock is also participating, how much will the common
stockholders receive?

A. 185,000. B. 150,000.

C. 155,000. D. 80,000.

39. MAKAKARETAIN AKO CO. issued 10,000 shares of its P5 par value common stock having a fair value of P25 per
share and 15,000 shares of its P15 par value preferred stock having a fair value of P20 per share for a lump sum of
P520,000. How much of the proceeds would be allocated to the common stock?

A. 54,167 B. 236,364
C. 270,833 D. 276,250
The following information pertains to Razon Co.:

Preferred stock, cumulative:

Par per share $100

Dividend rate 8%
Shares outstanding 10,000
Dividends in arrears none
Common stock:

Par per share 10

Shares issued 120,000
Dividends paid per share 2.70
Market price per share 48.00
Additional paid-in capital 400,000

Unappropriated retained earnings (after closing) 270,000

Retained earnings appropriated for contingencies 300,000

Common treasury stock:

Number of shares 10,000

Total cost 250,000
Net income 740,000

40. What is the total amount of stockholders’ equity in the balance sheet?
A. 2,920,000 B. 2,820,000
C. 2,500,000 D. 2,320,000

41. The stockholders' equity section of Van Pogi Corporation shows the following on December 31, 2023:

Preferred stock—6%, P100 par, 5,000 shares outstanding P 500,000

Common stock—P10 par, 60,000 shares outstanding 600,000
Paid-in capital in excess of par 200,000
Retained earnings 118,000
Total stockholders' equity 1,418,000

Assuming that all of the company's retained earnings are to be paid out in dividends on 12/31/13 and that preferred
dividends were last paid on 12/31/21, how much the preferred and common stockholders respectively should receive if the
preferred stock is cumulative and fully participating.
A. 90,000 & 48,000 B. 70,000 & 48,000
C. 48,000 & 70,000 D. 10,000 & 22,000

FOR QUESTIONS NO. 42 TO 45

BADAJOS Corporation was authorized at the beginning of 2024 with 540,000 authorized shares of P100, par value
common stock. At December 31, 2024, the stockholders’ equity section of Balamban was as follows:
Common stock, par value P100 per share; authorized 540,000 shares; issued 54,000 shares P5,400,000

Additional paid-in capital 540,000

Retained earnings 810,000
Total stockholders’ equity P6,750,000
On May 10, 2025, BADAJOS issued 90,000 shares of its common stock for P10,800,000. A 5% stock dividend was
declared on September 30, 2025 and issued on November 10, 2025 to stockholders of record on October 31, 2025. Market
value of common stock was P110 per share on declaration date. The net income of BADAJOS for the year ended
December 31, 2025 was P855,000.
During 2026, BADAJOS had the following transactions;
Feb. 1 BADAJOS reacquired 5,400 shares of its common stock for P95 per share.
5
May 1 BADAJOS sold 2,700 shares of its treasury stock for P120 per share.
5
Jun 30 Issued to stockholders one stock right for each share held to purchase two additional shares of common stock for P125 per share
. The rights expire on December 31, 2026.

Aug. 45,000 stock rights were exercised when the market value of common stock was P130 per share.
15
Sep. 3 72,000 stock rights were exercised when the market value of the common stock was P140 per share.
0
Dec. 0 BADAJOS declared a cash dividend of P2 per share payable on January 15, 2027 to stockholders of record on December 31, 20
1 26.

Dec. 1 BADAJOS retired 1,800 shares of its treasury stock and reverted them to an unused basis. On this date, the market value of the
5 common stock was P150 per share.

Dec. 3 Net income for 2026 was P900,000.

1

42. HOW MUCH IS THE BALANCE OF COMMON STOCK?

A. 38,520,000
B. 26,640,000
C. 38,340,000
D. 38,250,000

43. ADDITIONAL PAID-IN-CAPITAL

A. 8,329,000
B. 8,338,500
C. 5,413,500
D. 8,266,500

44. RETAINED EARNINGS

A. 1,080,000
B. 1,002,600
C. 1,017,000
D. 1,008,000

45. TREASURY STOCK

A. 85,500
B. 90,000
C. 80,000
D. 0
FOR QUESTIONS 46-50

The stockholders equity of AERIEL Corporation showed the following data on December 31, 2025:
12% preferred stock, P30 par, 135,000 shares issued and outstanding P4,050,000
Common stock, P50 par, 180,000 shares issued and outstanding 9,000,000
Premium on preferred stock 1,080,000
Premium on common stock 3,240,000
Retained earnings 1,395,000

The 2026 transactions of the company affecting its stockholders’ equity are summarized chronologically as follows:
1. Issued 27,000 shares of preferred stock at P40.
2. Issued 94,500 shares of common stock at P70.
3. Retired 5,400 shares of preferred stock at P45.
4. Purchased 13,500 shares of its common stock at P80.
5. Split common stock two for one (par value reduce to P25).
6. Reissued 13,500 shares of treasury stock – common at P50.
7. Stockholders donated to the company 9,000 shares of common stock when shares had a market price of P52. One
half of these shares were subsequently issued for P54.
8. Dividends were paid at the end of the calendar year on the common stock at P2 per share and on the preferred stock
at the preferred rate.
9. Net income for the year was P2,520,000.
Based on the above and the result of your audit, determine the following as of December 31, 2006:
46. PREFERRED STOCK
A. P4,617,000 C. P4,968,000
B. P4,698,000 D. P4,860,000

47. COMMON STOCK

A. P15,615,000 C. P13,968,000
B. P13,500,000 D. P13,725,000

48. ADDITIONAL PAID-IN CAPITAL

A. P6,777,000 C. P6,679,800
B. P6,858,000 D. P6,814,800

49. UNAPPROPRIATED RETAINED EARNINGS

A. P1,749,240 C. P1,711,440
B. P2,251,440 D. P1,684,440

50. TOTAL STOCKHOLDERS’ EQUITY

A. P26,949,240 C. P26,958,960
B. P26,922,240 D. P26,940,240