1

Practical accounting 1
SHAREHOLDER'S EQUITY - Set C

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. The accounts shown below appear in the December 31, 2023 trial balance of Angel Corporation:

Preference share, authorized, P50 par P10,000,000

Unissued preference share 3,600,000
Ordinary share, authorized, P20 par 4,000,000
Unissued ordinary share 2,000,000
Subscription receivable, preference share 380,000
Subscription receivable, ordinary share 360,000
Subscribed preference share 600,000
Subscribed ordinary share 440,000
Treasury share, preference at cost 1,360,000
Share premium 1,700,000
Accumulated profits and losses 2,000,000

All subscription receivables are due in year 2024.

How much is the total shareholder’s equity of Angel Corporation?

a. 11,040,000
b. 11,780,000
c. 12,400,000
d. 13,760,000

Preference share (10M - 3.6M) 6,400,000

Ordinary share (4M - 2M) 2,000,000
Subscribed preference share 600,000
Subscribed ordinary share 440,000
Share premium 1,700,000
Accumulated profits and losses - RE 2,000,000
Treasury share, preference at cost -1,360,000
Total Shareholder's equity 11,780,000

2. Presented below is information related to Catherine Corporation:

Share Capital—Ordinary, 1 par 4,300,000
Share premium—Ordinary 550,000
Share Capital—Preference 8 1/2%, 50 par 2,000,000
Share premium—Preference 400,000
Retained Earnings 1,500,000
Treasury Shares—Ordinary (at cost) 150,000

1. The total equity of Catherine Corporation is

a. 8,600,000.
b. 8,750,000.
c. 7,100,000.
d. 7,250,000.

2. The total contributed capital related to the ordinary shares is

a. 4,300,000.
b. 4,850,000.
c. 5,250,000.
d. 4,700,000.
2

Share capital, preference share 2,000,000

Share premium - preference 400,000 2,400,000
Share capital, ordinary 4,300,000
Share premium - ordinary 550,000 4,850,000 #2
Total contributed capital 7,250,000
Retained earnings 1,500,000
Treasury shares - ordinary -150,000
Total SHE 8,600,000 #1

3. The stockholders’ equity section of JP Company revealed the following information on December 31,
2024.
Preference shares, P100 par 2,300,000
Share premium – preference share 805,000
Ordinary share, P10 par 5,250,000
Share premium – ordinary share 2,750,000
Subscribed ordinary share 50,000
Retained earnings 1,900,000
Note payable 4,000,000
Subscription receivable – ordinary share 400,000

How much is the legal capital?

a 7,600,000 c 7,550,000
. .
b 13,055,000 d 11,150,000
. .

Preference share 2,300,000

Ordinary share 5,250,000
Subscribed ordinary share 50,000
Legal capital 7,600,000

4. Of the 125,000 shares of ordinary share issued by Tina Company, 25,000 shares were held as treasury
stock at December 31, 2023. During 2024, transactions involving Tina’s ordinary share were as follows:
January 1 through October 31 – 13,000 treasury shares were distributed to officers as part of a stock
compensation plan.
November 1 – A 3 – for – 1 stock split took effect.
December 1 – Tina purchased 5,000 of its own shares to discourage an unfriendly takeover. These
shares were not retired.

At December 31, 2024, how many shares of Tina’s ordinary share were issued and outstanding?
Issued Outstanding
a. 375,000 334,000
b. 375,000 324,000
c. 334,000 334,000
d. 324,000 324,000

Issued Oustanding (iss. - TS)

Jan.1 balance 125,000 100,000 (125,000 - 25,000)
Jan. - Oct. 13,000
Balance 125,000 113,000
Nov. 3-1 split x 3 'x 3
Balance 375,000 339,000
3

Dec. 1 acquisition -5,000

Balance - 12/31/2024375,000 334,000

5. Edna Company was incorporated on January 1, 2024, with the following authorized capitalization:
200,000 shares of ordinary share, no par, stated value P100 per share
200,000 shares of 10% cumulative Preference shares, par value P50 per share.

During 2024 Edna issued 150,000 shares of ordinary share for total of 18,000,000 and 50,000 shares of
Preference share at P60 per share. In addition, on December 15, 2024, subscriptions for 20,000 shares
of Preference share were taken at a purchase price of P100. These subscribed shares were paid for on
January 15, 2025. Net income for 2024 was 5,000,000.

What should Negro report as total contributed capital on its December 31, 2024 balance sheet?
a. 28,000,000
b. 21,000,000
c. 23,000,000
d. 26,000,000

Issue price 18,000,000 Cash 18,000,000

Par value(150,000 x 100) -15,000,000 Ordinary share 15,000,000
Share premium - 0rdinary 3,000,000 Share premium - OS 3,000,000

Issue price (50,000 x 60) 3,000,000 Cash 3,000,000

Par value(50,000 x 50) -2,500,000 Preference share 2,500,000
Share premium - preference 500,000 Share premium - PS 500,000

Subscription price(20,000 x 100)2,000,000 Subscription receivable 2,000,000

Par value(20,000 x 50) -1,000,000 Subscribe PS 1,000,000
Share premium - preference 1,000,000 Share premium- PS 1,000,000

Net income Income summary 5,000,000

Retained earnings 5,000,000

Share capital, preference share 2,500,000

Share premium - preference 1,500,000 4,000,000
Share capital, ordinary 15,000,000
Share premium - ordinary 3,000,000 18,000,000
Subscribe - PS 1,000,000
Total contributed capital 23,000,000

6. Amara Corp. issues 1,000 - 5 par value ordinary shares and 1,000 - 20 par value preference shares for
a lump sum of 60,000. At the issue date, the ordinary shares were selling for 36 and the preference
shares were selling for 28. The Share Premium—Ordinary account will be credited for
a. 31,000
b. 36,000
c. 26,250
d. 28,750
Fair
Value Allocation
Preference share(1,000 x 28) 28,000 /64,000 x 60,000= 26,250
Ordinary share(1,000 x 36) 36,000 /64,000 x 60,000 = 33,750
Total 64,000 60,000

Allocated to ordinary share 33,750

Par value(1,000 x 5) -5,000
Share Premium- OS 28,750

7. On September 1, 2024, Kaila Company reacquired 12,000 shares of its 10par value ordinary shares for
15 per share. Kaila uses the cost method to account for treasury shares. The journal entry to record the
reacquisition of the shares should debit
4

a. Treasury Shares for 120,000.

b. Share Capital—Ordinary for 120,000.
c. Share Capital—Ordinary for 120,000 and Share Premium—Ordinary for 60,000.
d. Treasury Shares for 180,000.
Acquisition Price(12,000 x 15) 180,000

Acquisition: Cost
TS 180,000
Cash 180,000

8. Five years ago, Tricia Trading Co. issued 2,500 ordinary shares. The shares have a 2par value and sold
at that time for 12 per share. On January 1, 2024, Tricia Trading Co. Purchased 1,000 of these shares
for 24 per share. On September 30, 2024, Tricia reissued 500 of the shares for 28 per share. The
journal entry to record the reissuance will include
a. A debit to Treasury Shares 12,000.
b. A credit to Share Premium—Treasury 2,000.
c. A credit to Treasury Shares 14,000.
d. A credit to cash 14,000.
Issue Price(500 x 28) 14,000 Cash 14,000
Cost (500 x 24) -12,000 Treasury share 12,000
Share premium - TS 2,000 Share premium - TS 2,000

9. At its date of incorporation, Olivia, Inc. issued 100,000 shares of its 10 par ordinary shares at 11 per
share. During the current year, Olivia acquired 20,000 ordinary shares at a price of 16 per share and
accounted for them by the cost method. Subsequently, these shares were reissued at a price of 12 per
share. There have been no other issuances or acquisitions of its own ordinary shares. What effect does
the reissuance of the shares have on the following accounts?
Retained Earnings Share Premium
a. Decrease Decrease
b. No effect Decrease
c. Decrease No effect
d. No effect No effect
Issue price (20,000 x 12) 240,000 Cash 240,000
Cost (20,000 x 16) -320,000 RE 80,000
SP-TS/RE -80,000 TS 320,000
10. Oz Company issued 1,000,000 shares of 38 par value for 50 per share in year 2023. In 2024, the entity
reacquired 200,000 shares at 67 per share. Immediately, all of these reacquired shares were retired.

What amount should be debited to retained earnings and share premium, respectively in connection of
the retirement of the shares?
a. 11,000,000 2,400,000
b. 5,800,000 2,400,000
c. 3,400,000 2,400,000
d. 13,400,000 2,400,000
Par value (200,000 x 38) 7,600,000 Ordinary share 7,600,000
Share premium from orig. issuance(200,000 x 12) 2,400,000. Share premium 2,400,000
CA of Share (200,000 x 50) 10,000,000 RE 3,400,000
Retirement price(200,000 x 67) -13,400,000 Cash/TS 13,400,000
SP-TS / RE -3,400,000
11. Jerome Company issued 13% bonds with a maturity value of 19,000,000, together with 21,500 ordinary
shares of 68 par value for a combined cash amount of 21,000,000. If the bonds were issued separately,
they would have sold for 15,610,000 on a 15% yield to maturity basis.

What amount for share premium should be reported on the issuance of ordinary shares?
a. 19,538,000
b. 14,148,000
c. 5,390,000
5

d. 3,928,000
Issuance of bonds with equity component:
Issue price 21,000,000
Bonds (FV/PV) -15,610,000
Allocated to Ordinary share 5,390,000
Par value (21,500 x 68) -1,462,000
Share premium - OS 3,928,000

12. Jerome Corporation has 50,000 shares of 10 par ordinary shares authorized. The following transactions
took place during 2022, the first year of the corporation’s existence:
Sold 5,000 ordinary shares for 18 per share.
Issued 5,000 ordinary shares in exchange for a patent valued at 100,000.
At the end of the Jerome’s first year, total contributed capital amounted to
a. 40,000
b. 90,000
c. 100,000
d. 190,000
Issue price (5,000 x 18) 90,000 Cash 90,000
Par value (5,000 x 10) -50,000 OS 50,000
Share premium 40,000 SP 40,000

FV of Patent 100,000Patent100,000
Par value of shares(5,000 x 10) -50,000 OS 50,000
Share premium 50,000 SP 50,000

Ordinary share 100,000

Share premium 90,000
Contributed capital 190,000

13. Joshtin Corporation was organized on January 1, 2024, with an authorization of 1,200,000 ordinary
shares with a par value of 6 per share. During 2024, the corporation had the following capital
transactions:
January 5 issued 675,000 shares @ 10 per share
July 28 purchased 90,000 shares @ 11 per share
December 31 sold the 90,000 shares held in treasury @ 18 per share
Joshtin used the cost method to record the purchase and reissuance of the treasury shares. What is the
total amount of share premium as of December 31, 2024?
a. -0-.
b. 2,070,000.
c. 2,700,000.
d. 3,330,000.
Share premium:
Original issuance(10 x 675,000)
Par value (6 x 675,000)
SP (4 x 675,000) 2,700,000

From Treasury share:

Issue price (18 x 90,000)
Cost (11 x 90,000)
SP-TS (7 x 90,000) 630,000

SP from original issuance 2,700,000

SP from treasury shares 630,000
Total share premium 3,330,000

14. Connie Co. issued 1,000 shares of its 5 par common stock to Howe as compensation for 1,000 hours of
legal services performed. Howe usually bills 160 per hour for legal services. On the date of issuance, the
stock was trading on a public exchange at 140 per share. By what amount should the additional paid-in
capital account increase as a result of this transaction?
a. 135,000
6

b. 140,000
c. 155,000
d. 160,000
FV of shares (1,000 x 140) 140,000 legal 140,000
Par value (1,000 x 5) -5,000 OS 5,000
Share premium 135,000 SP 135,000

15. On December 1, 2024, Joshtin Company received a donation of 2,000 shares of its P50 par value
ordinary share from a stockholder. On that date, the stock’s market value was P350 per share. The
stock was originally issued for P250 per share.

By what amount would this donation cause total stockholders’ equity to decrease?
a 700,000 c 200,000
. .
b 500,000 d 0
. .

16. Effective December 31, 2024, the stockholders of Joshtin Company approved a two-for-one split of the
company’s ordinary share, and an increase in authorized ordinary share shares from 100,000 shares
(par value P20 per share) to 200,000 shares (par value P10). Joshtin’s stockholders’ equity accounts
immediately before issuance of the stock split shares were as follows:

Ordinary share, par value P20; 100,000 shares authorized; 50,000

shares outstanding 1,000,000
Share premium 150,000
Retained earnings 1,350,000

What should be the balances in Joshtin’s share premium and retained earnings accounts immediately
after the stock split is effected?
Share Premium Retained earnings
a. 0 500,000
b. 150,000 350,000
c. 150,000 1,350,000
d. 1,150,000 350,000

17. On July 1, 2024, Kristine Company issued rights to stockholders to subscribe to additional shares of its
ordinary share. One right was issued for each share owned. A stockholder could purchase one
additional share for 10 rights plus P30 cash. The rights expired on December 31, 2024. On July 1,
2024, the market price of a share with the right attached was P40 while the market price of one right
alone was P2. All stock rights were exercised on December 31, 2024. Kristine’s stockholders’ equity on
June 30, 2024 comprised the following:

Ordinary share, P25 par value, 40,000 shares issued and

outstanding 1,000,000
Share premium 600,000
Retained earnings 800,000

What is the contributed capital on December 31, 2024?

a. 2,400,000
b. 1,600,000
c. 1,100,000
d. 1,720,000
Issuance: Memo - issued 40,000 rights to acquire a share at 30 plus 10 rights

Exercise (40,000 / 10 = 4,000 x 30) 120,000 Cash 120,000

Par value (4,000 x 25) -100,000 OS 100,000
Share premium 20,000 SP 20,000

Ordinary share (1M + 100k) 1,100,000

7

Share premium(600,000 + 20,000) 620,000

Contributed capital 1,720,000

18. During 2024, Josh Company issued 50,000 shares of P100 par value convertible preference share
capital for P120 per share. One preference share can be converted into three ordinary shares with P10
par value at the option of the preference shareholder. On December 31, 2024, when the market value of
the ordinary share was P50 per share, all of the preference share capital was converted. What amount
should Josh credit to ordinary share capital and share premium as a result of conversion?
Ordinary share capital Share premium
a. 1,500,000 3,500,000
b. 1,500,000 6,000,000
c. 1,500,000 4,500,000
d. 1,500,000 0
Par value - PS 100x 50000= 5,000,000 PS 5,000,000
Share premium - PS 20x 50000 = 1,000,000 SP-PS 1,000,000
CA of preference share120 6,000,000 OS 1,500,000
Par value - OS(50,000 x 3 x 10) -1,500,000 SP 4,500,000
Share premium - OS 4,500,000
19. Kelly Co. issues 10,000 shares of 10 par value convertible preference shares for 12 cash per share.
Each share is convertible into 4 ordinary shares. On this date the 1 par value ordinary shares are selling
for 3 per share. Approximately 2 years later, Kelly’s shareholders convert their preference shares into
ordinary shares. On the date of conversion the preference shares are selling for 16 and the ordinary
shares are selling for 5 per share. The journal entry on the date of conversion will include which of the
following?
a. Credit Share Capital—Preference 20,000.
b. Credit Share Premium—Ordinary 80,000.
c. Credit Share Capital—Ordinary 100,000.
d. Credit Share Premium—Ordinary 160,000.
Par value - PS (10,000 x 10) 100,000 PS 100,000
Share premium - PS(10,000 x 2) 20,000 SP-PS 20,000
CA of preference share12 x 10000 120,000 OS 40,000
Par value - OS(10,000 x 4 x 1) -40,000 SP - OS 80,000
Share premium - OS 80,000
20. Kimberlie Co. had 100,000 shares of common stock issued and outstanding at January 1, year 1. During
year 1, Kimberlie took the following actions:
March 15 — declared a 2-for-1 stock split, when the fair value of the stock was 80 per share. December
15 — declared a .50 per share cash dividend. In Kimberlie’s statement of stockholders’ equity for year 1,
what amount should Kimberlie report as dividends?
a. 50,000
b. 100,000
c. 850,000
d. 950,000
Jan 1 - bal. 100,000
Mar-15 2-1 split x 2
Balance 200,000
Dividend per share x .50
Dividend payable 100,000 RE 100,000
Div. pay 100,000

21. Maple Tree Mall, Inc., has 2,500 shares of 2%, P25 par cumulative preferred stock and 125,000 shares
of P2 par common stock outstanding. At the beginning of the current year, preferred dividends were four
years in arrears. Maple Trees board of directors wants to pay a P2.50 cash dividend on each share of
outstanding common stock in the current year. To accomplish this, what total amount of dividends must
Maple Tree declare?
a. 250,000
b. 255,000
c. 256,250
d. 318,750
PS: cumulative
PS dividends:(2,500 x 25 x 2% x 5 yrs.) 6,250
OS dividends: (125,000 x 2.50) 312,500
8

Total 318,750

22. Jay Company, a real estate developer, is owned by five founding shareholders.

On December 1, 2023, the entity declared a property dividend of a one-bedroom-flat for each
shareholder. The property dividend is payable on January 31, 2024.

On December 1, 2023, the carrying amount of a one-bedroom flat is 1,000,000 and the fair value is
1,500,000.

However, the fair value is 1,800,000 on December 31, 2023 and 1,900,000 on January 31, 2024.

1. What is the dividend payable on December 1, 2023?

a. 5,000,000
b. 7,500,000
c. 9,000,000
d. 0

2. What is the dividend payable on December 31, 2023?

a. 5,000,000
b. 7,500,000
c. 9,000,000
d. 0

3. What amount of gain is included in profit or loss as a result of the settlement of the property dividend
on January 31, 2024?
a. 2,500,000
b. 4,000,000
c. 4,500,000
d. 0

1. Fair value on declaration date - 12/1/2023(1.5M x 5) 7,500,000 RE 7,500,000

PD pay 7,500,000
2. Fair value - 12/31/2023 (1.8M x 5) 9,000,000 RE 1,500,000
3. FV on distribution date (1.9M x 5) 9,500,000 PD pay. 1,500,000
Carrying amount (1M x 5) -5,000,000
Gain on distribution 4,500,000 RE 500,000
PD pay 500,000

PD Pay. 9,500,000
Inventory 5,000,000
Gain 4,500,000

23. On December 1, year 1, Joseph Corp. declared a property dividend of marketable securities to be
distributed on December 31, year 1, to stockholders of record on December 15, year 1. On December 1,
year 1, the trading securities had a carrying amount of 60,000 and a fair value of 78,000. What is the
effect of this property dividend on Joseph’s year 1 retained earnings, after all nominal accounts are
closed?
a. 0.
b. 18,000 increase.
c. 60,000 decrease.
d. 78,000 decrease.
Declaration: RE 78,000
Property dividends payable 780,000

Distribution: Prop. Div. pay 78,000

Trading 60,000
Gain 18,000

Closing entries: Gain on distribution 18,000

Income summary 18,000
9

Income summary 18,000

Retained earnings 18,000
24. John Paul Corp. declared a 5% stock dividend on its 10,000 issued and outstanding shares of 2 par
value common stock, which had a fair value of 5 per share before the stock dividend was declared. This
stock dividend was distributed sixty days after the declaration date. By what amount did John Paul’s
current liabilities increase as a result of the stock dividend declaration?
a. 0
b. 500
c. 1,000
d. 2,500
Outstanding shares 10,000
Percent x 5%
Share dividend 500
Multiply by the FV X 5
Retained earnings 2,500 RE 2,500
Par value (500 x 2) -1,000 OS 1,000
Share premium 1,500 SP 1,500
25. Tricia Company reported the following shareholders' equity at the current year end:

Share Capital, par 25, 150,000 authorized shares

55,000 shares issued of which 5,000 shares are in treasury 1,375,000
Retained earnings 2,000,000
Treasury shares, at cost 150,000

A 95% share dividend was declared and all the treasury shares were issued as a share dividend and the
balance from the unissued shares. The share has a market value of 40.

1. What is the number of outstanding shares?

a. 40,000
b. 50,000
c. 60,000
d. 70,000

2. What amount should be reported as share dividend shares?

a. 17,600
b. 25,400
c. 36,100
d. 47,500

3. What amount should be capitalized as retained earnings?

a. 1,250,000
b. 1,800,000
c. 1,275,000
d. 1,212,500
Shares issued 55,000
Less treasury shares -5,000
Outstanding shares 50,000
Percent x 95%
Share dividends 47,500

Treasury stocks - at cost 5,000 150,000

Unissued shares at par value (42,500 x 25) 1,062,500
Charges to RE 1,212,500 RE 1212500
TS 150,000
OS 1,062,500

26. At December 31, year 1, Alex Corp. had 20,000 shares of 1 par value treasury stock that had been
acquired in year 1 at 12 per share. In May year 2, Alex issued 15,000 of these treasury shares at 10 per
share. The cost method is used to record treasury stock transactions. Alex is located in a state where
laws relating to acquisition of treasury stock restrict the availability of retained earnings for declaration of
dividends. At December 31, year 2, what amount should Alex show in notes to financial statements as a
restriction of retained earnings as a result of its treasury stock transactions?
10

a. 5,000
b. 10,000
c. 60,000
d. 90,000

Treasury shares - 12/31/1 20,000 x 12 240,000

TS issued - May yr2 -15,000 x 12 -180,000
Balance 5,000 x 12 60,000 RE 60,000
RE appro. For TSfor TS 60,000
27. The following information pertains to Ivan Corp.:

Dividends on its 1,000 shares of 6%, 10 par value cumulative preferred stock
have not been declared or paid for three years.
Treasury stock that cost 15,000 was reissued for 8,000.

What amount of retained earnings should be appropriated as a result of these items?

a. 0
b. 1,800
c. 7,000
d. 8,800

28. Omar Company reported the following adjusted account balances at year-end:

Share Capital 15,000,000

Share premium 5,000,000
Treasury shares, at cost 2,000,000
Actuarial loss on defined benefit plan 1,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment – credit 1,500,000

What amount should be reported as shareholders’ equity at year-end?

a. 31,500,000
b. 32,500,000
c. 28,500,000
d. 25,500,000
Share capital 15,000,000
Share premium 5,000,000 20,000,000
Retained earnings unappropriated 6,000,000
Retained earnings appropriated 3,000,000 9,000,000
OCI:
Acturial loss -1,000,000
Revaluation surplus 4,000,000
Cumulative translation adjustment - credit. 1,500,000 4,500,000
Treasury shares, at cost -2,000,000
Total shareholders' equity 31,500,000

29. Alfie Corp. has incurred losses from operations for several years. At the recommendation of the new
president, the board of directors voted to implement a quasi-reorganization, subject to stockholder
approval. Immediately prior to the restatement, on June 30, Alfie's balance sheet was as follows:

Current assets ....................................... 550,000

Property, plant and equipment (net)................... 1,350,000
Other assets ......................................... 200,000
2,100,000
Total liabilities .................................... 600,000
Common stock ......................................... 1,600,000
Additional paid-in capital ........................... 300,000
Retained earnings (deficit)***...................... (400,000)
2,100,000
11

The stockholders approved the quasi-reorganization effective July 1, to be accomplished by a reduction

in other assets of 150,000, a reduction in property, plant and equipment (net) of 350,000, and
appropriate adjustment to the capital structure. To implement the quasi-reorganization, Alfie should
reduce the common stock account in the amount of
a 0.
.
b 100,000.
.
c 400,000.
.
d 600,000.
.
1. Adjust the assets to FV Retained earnings
Retained earnings 500,000 Dr. Cr.
Other assets 150,000 400,000 900,000 #3
PPE 350,000 #1 500,000

2. Reduction in par value to create share premium

Ordinary share 600,000 Share premium
Share premium 600,000 Dr. Cr.
#3 900,000 300,000 beg.
3. Ellination of deficit 600,000 #2
SP 900,000
RE 900,000
Ordinary share
Dr. Cr.
1,600,000 beg.

30. The board of directors of Emerson Co. decided that the company should undergo a quasi-reorganization
effective on December 31, 2024. On that date, the company determined the following asset values.

Book Value Market Value

Inventory ..................... 100,000 110,000
Building ...................... 800,000 400,000
Equipment ..................... 180,000 140,000
1,080,000 650,000
The stockholders' equity section at December 31, 2024, is presented below.
Common stock, 20 par, 80,000 shares issued and
outstanding ......................................... 1,600,000
Additional paid-in capital ............................ 800,000
Retained earnings (deficit) ........................... (700,000)
Total ................................................. 1,700,000
The quasi-reorganization is to be accomplished by reducing the par value of the stock to 15 per share.
Immediately after the quasi-reorganization, the common stock amount would be
a 1,600,000.
.
b 1,200,000.
.
c 800,000.
.
d 400,000.
.

Retained earnings
RE 430,000 Dr. Cr.
Inventory 10,000 700,000 1,130,000 #3
Building 400,000 #1 430,000
Equipment 40,000

Ordinary share 400,000 Share premium

Share premium 400,000 Dr. Cr.
(5 x 80,000) #3 1,130,000 800,000
12

400,000 #2
SP 1,130,000
RE 1,130,000
Ordinary share
Dr. Cr.
#2 400,000 1,600,000 beg
-400,000
1,200,000

31. Mhel Company's balance sheet at December 31, 2024, contained the following accounts:

Common stock, 20 par, 100,000 authorized, 60,000

outstanding ......................................... 1,200,000
Paid-In capital in excess of par ...................... 150,000
Retained earnings (deficit) ........................... (540,000)

Mhel's new management suggested, and received approval for a quasi- reorganization. The new par
value is to be 10 a share, Equipment is to be written down by152,000, and Inventory is to be increased
8,000. How much Additional Paid-In Capital from Reorganization will initially be recorded with the entry
to reduce the par value of the common stock?
a 540,000
.
b 600,000
.
c 690,100
.
d 1,000,000
.

Retained earnings
RE 144,000 Dr. Cr.
Inventory 8,000 540,000
Equipment 152,000 #1 144,000

Ordinary share 600,000

Share premium 600,000 Share premium
(10 x 60,000) Dr. Cr.
150,000
SP
RE
Ordinary share
Dr. Cr.
1,200,000

32. Adverse financial and operating circumstances warrant that Ghette Company undergoes quasi-
reorganization at December 31, 2023. The following information may be relevant in accounting for the
quasi-reorganization.

1. Inventory with a cost of P215, 000 is currently recorded at cost of P215, 000. Your review
indicates that net realizable value is P190, 000.
13

2. Plant assets with fair value less cost to sell of P700, 000 and value in use of P720, 000 are
carried in the books at P875, 000.

3. A creditor agrees to extend the maturity date of a loan for five years, although interest as
originally stated must continue to be paid.

4. Shareholders agreed to contribute a total of P600, 000 cash to create additional paid in capital to
facilitate the reorganization.

5. The par value of the ordinary share is reduced from P25 to P15.

6. Immediately before the events described above, the shareholders’ equity section appears as
follows:
Ordinary Share Capital P 2,500,000
Share Premium 1,750,000
Retained Earnings (deficit) (750,000)
Total Shareholders’ Equity P 3,500,000

What is the total shareholders’ equity immediately after the quasi-reorganization?

a. 3,500,000
b. 3,920,000
c. 3,680,000
d. 3,770,000

RE 180,000 Retained earnings

Inventory 25,000 Dr. Cr.
PPE 155,000 750,000 930,000 #3
(215,000 - 190,000) #1 180,000
(875,000 - 720,000)

Cash 600,000 Share premium

Share premium 600,000 Dr. Cr.
#3 930,000 1,750,000
Ordinary share 1,000,000 600,000 #2
Share premium 1,000,000 1,000,000 #2
(10 x 100,000) 3,350,000
-930,000
Share premium 930,000 2,420,000
RE 930,000
Ordinary share
Dr. Cr.
Ordinary share 1,500,000 1,000,000 2,500,000
Share premium 2,420,000 -1,000,000
Total shareholders' equity 3,920,000 1,500,000

33. The Retained Earnings account of Lovely Company follows:

Date Item Debit Credit

01-01-2023 Balance 485,000
03-31-2023 Dividends declared 200,000
12-31-2023 Profit for the year 324,000
04-01-2024 Share Premium 150,000
06-30-2024 Gain on sale of treasury shares 100,000
09-30-2024 Dividends declared 300,000
12-31-2024 Profit for the year 451,000
12-31-2024 Appraisal increase of land 300,000
12-31-2024 Balance 1,310,000
1,810,000 1,810,000
14

The only other shareholder's equity account in the books of the company as of December 31, 2024 is
ordinary share capital, which has a balance of 2,000,000. This is composed of 20,000 issued shares
with par value of P100. All of these shares are outstanding as of December 31, 2024.

1. The correct balance of Retained Earnings as of December 31, 2024 is

a. 760,000
b. 860,000
c. 1,060,000
d. 1,310,000

2. Additional Paid in Capital is

a. 100,000
b. 150,000
c. 250,000
d. 550,000

3. Total shareholder's Equity is

a. 2,710,000
b. 2,760,000
c. 3,010,000
d. 3,310,000