stockholders' equity by j. gonzales

7/25/2019 Stockholders' Equity by J. Gonzales

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Stockholders Equity J. Gonzales

1. Philip Corporation was organized in January 2012 with authorized capital of P10 par valuecommon stock. On February 1, 2015, shares were issued at par for cash. On March 1,2015, the corporation's attorney accepted 7,000 shares of common stock in settlement forlegal services with a fair value of P90,000. Additional paid-in capital would increase on

February 1, 2015 March 1, 2015a. Yes Nob. Yes Yesc. No Nod. No Yes

2. On July 1, 2015, Diamond Co. issued 2,500 shares of its P10 par common stock and5,000 shares of its P10 par convertible preferred stock for a lump sum of P140,000. At thisdate Diamond's common stock was selling for P24 per share and the convertible preferredstock for P18 per share. The amount of the proceeds allocated to Diamond's preferredstock should bea. P70,000.b. P84,000.c. P90,000.

d. P77,000.

3. Jumel Co. was organized on January 2, 2015, with 500,000 authorized shares of P10 parvalue common stock. During 2015, Horton had the following capital transactions:

January 5issued 375,000 shares at P14 per share.July 27purchased 25,000 shares at P11 per share.November 25sold 20,000 shares of treasury stock at P13 per share.

Jumel used the cost method to record the purchase of the treasury shares. What wouldbe the balance in the Paid-in Capital from Treasury Stock account at December 31, 2015?a. P0.b. P20,000.

c. P40,000.d. P60,000.

4. In 2015, Gerard Corp. acquired 9,000 shares of its own P1 par value common stock atP18 per share. In 2016, Gerard issued 6,000 of these shares at P25 per share. Gerarduses the cost method to account for its treasury stock transactions. What accounts andwhat amounts should Gerard credit in 2016 to record the issuance of the 6,000 shares?

Treasury Additional Retained CommonStock Paid-in Capital Earnings Stock

a. P108,000 P105,000b. P108,000 P42,000c. P144,000 P6,000d. P102,000 P42,000 P6,000

5. At its date of incorporation, Lee, Inc. issued 100,000 shares of its P10 par common stockat P11 per share. During the current year, Lee acquired 20,000 shares of its commonstock at a price of P16 per share and accounted for them by the cost method.Subsequently, these shares were reissued at a price of P12 per share. There have beenno other issuances or acquisitions of its own common stock. What effect does thereissuance of the stock have on the following accounts?


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Retained Earnings Additional Paid-in Capitala. Decrease Decreaseb. No effect Decreasec. Decrease No effectd. No effect No effect

6. KC Corp. owned 20,000 shares of Editha Corp. purchased in 2012 for P300,000. OnDecember 15, 2015, KC declared a property dividend of all of its Editha Corp. shares onthe basis of one share of Editha for every 10 shares of KC common stock held by itsstockholders. The property dividend was distributed on January 15, 2016. On thedeclaration date, the aggregate market price of the Editha shares held by KC wasP500,000. The entry to record the declaration of the dividend would include a debit toRetained Earnings ofa. P0.b. P200,000.c. P300,000.d. P500,000.

7. John Corporation declared a dividend, a portion of which was liquidating. How would thisdistribution affect each of the following?

AdditionalPaid-in Capital Retained Earnings

a. Decrease No effectb. Decrease Decreasec. No effect Decreased. No effect No effect

8. On May 1, 2015, Jean Corp. declared and issued a 10% common stock dividend. Prior tothis dividend, Jean had 100,000 shares of P1 par value common stock issued andoutstanding. The fair value of Jean 's common stock was P20 per share on May 1, 2015.

As a result of this stock dividend, Jean's total stockholders' equitya. increased by P200,000.b. decreased by P200,000.c. decreased by P10,000.d. did notchange.

9. How would the declaration and subsequent issuance of a 10% stock dividend by the issueraffect each of the following when the fair value of the shares exceeds the par value of thestock?

AdditionalCommon Stock Paid-in Capital

a. No effect No effectb. No effect Increasec. Increase No effectd. Increase Increase


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10. On December 31, 2015, the stockholders' equity section of Revin, Inc., was as follows:

Common stock, par value P10; authorized 30,000 shares;issued and outstanding 9,000 shares P 90,000

Additional paid-in capital 116,000Retained earnings 154,000

Total stockholders' equity P360,000On March 31, 2016, Revin declared a 10% stock dividend, and accordingly 900 additionalshares were issued, when the fair value of the stock was P18 per share. For the threemonths ended March 31, 2016, Revin sustained a net loss of P32,000. The balance ofRevins retained earnings as of March 31, 2016, should bea. P105,800.b. P113,000.c. P114,800.d. P122,000.

11. At December 31, 2015 and 2016, Samuel Corp. had outstanding 3,000 shares of P100par value 8% cumulative preferred stock and 15,000 shares of P10 par value common

stock. At December 31, 2015, dividends in arrears on the preferred stock were P12,000.Cash dividends declared in 2016 totaled P45,000. What amounts were payable on eachclass of stock?

Preferred Stock Common Stocka. P24,000 P21,000b. P33,000 P12,000c. P36,000 P9,000d. P45,000 P0

Alyssa, 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 P5. The preferred stock is cumulative andnonparticipating. Dividends have been paid in every year except the past two years and thecurrent year.

12. Assuming that P250,000 will be distributed as a dividend in the current year, how muchwill the common stockholders receive?a. Zero.b. P130,000.c. P170,000.d. P210,000.

13. Assuming that P105,000 will be distributed as a dividend in the current year, how muchwill the preferred stockholders receive?a. P35,000.b. P40,000.c. P80,000.d. P105,000.

14. Assuming that P305,000 will be distributed, and the preferred stock is alsoparticipating,how much will the common stockholders receive?a. P185,000.b. P150,000.


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c. P155,000.d. P80,000.

15. Jude, Inc. has 100,000 shares of P10 par value common stock and 50,000 shares of P10par value, 6%, cumulative, participating preferred stock outstanding. Dividends on thepreferred stock are one year in arrears. Assuming that Jude wishes to distribute P270,000

as dividends, the common stockholders will receivea. P60,000.b. P110,000.c. P160,000.d. P210,000.

16. Patricia Co. has outstanding 60,000 shares of 8% preferred stock with a P10 par valueand 150,000 shares of P3 par value common stock. Dividends have been paid every yearexcept last year and the current year. If the preferred stock is cumulative andnonparticipating and P300,000 is distributed, the common stockholders will receivea. P0.b. P204,000.

c. P252,000.d. P300,000.

17. At the beginning of 2015, Charie Company had retained earnings of P180,000. Duringthe year Charie reported net income of P75,000, sold treasury stock at a gain ofP27,000, declared a cash dividend of P45,000, and declared and issued a small stockdividend of 1,500 shares (P10 par value) when the fair value of the stock was P30 pershare. The amount of retained earnings available for dividends at the end of 2015 was:a. P214,500.b. P192,000.c. P187,500.d. P165,000.

18. Kim Company has 560,000 shares of P10 par value common stock outstanding. Duringthe year Kim declared a 10% stock dividend when the market price of the stock was P48per share. Two months later Kim declared a P.60 per share cash dividend. As a result ofthe dividends declared during the year, retained earnings decreased by:a. P352,000.b. P369,600.c. P2,688,000.d. P3,057,600.

19. Patricia, Inc. had net income for 2015 of P3,180,000 and earnings per share on commonstock of P5. Included in the net income was P450,000 of bond interest expense related to

its long-term debt. The income tax rate for 2015 was 30%. Dividends on preferred stockwere P600,000. The payout ratio on common stock was 25%. What were the dividendson common stock in 2015?a. P645,000.b. P795,000.c. P723,750.d. P967,500.


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20. The stockholders' equity section of Camille Corporation as of December 31, 2015, was asfollows:

Common stock, par value P2; authorized 20,000 shares;issued and outstanding 10,000 shares P 20,000

Paid-in capital in excess of par 30,000Retained earnings 95,000

P145,000

On March 1, 2016, the board of directors declared a 15% stock dividend, and accordingly1,500 additional shares were issued. On March 1, 2014, the fair value of the stock was P6per share. For the two months ended February 28, 2016, Camille sustained a net loss ofP10,000.

What amount should Camille report as retained earnings as of March 1, 2016?a. P76,000.b. P82,000.c. P86,000.d. P92,000.

21. The stockholders' equity of Glazel Company at July 31, 2015 is presented below:

Common stock, par value P20, authorized 400,000 shares;issued and outstanding 160,000 shares P3,200,000

Paid-in capital in excess of par 160,000Retained earnings 650,000

P4,010,000

On August 1, 2015, the board of directors of Glazel declared a 10% stock dividend oncommon stock, to be distributed on September 15th. The market price of Glazel's commonstock was P35 on August 1, 2015, and P38 on September 15, 2015. What is the amountof the debit to retained earnings as a result of the declaration and distribution of this stockdividend?

a. P320,000.b. P560,000.c. P608,000.d. P400,000.

22. On January 1, 2015, Rei Lene, Inc., declared a 15% stock dividend on its common stockwhen the fair value of the common stock was P20 per share. Stockholders' equity beforethe stock dividend was declared consisted of:

Common stock, P10 par value, authorized 200,000 shares;issued and outstanding 120,000 shares P1,200,000

Additional paid-in capital on common stock 150,000Retained earnings 700,000

Total stockholders' equity P2,050,000

What was the effect on Rei Lenes retained earnings as a result of the above transaction? a. P180,000 decreaseb. P360,000 decreasec. P600,000 decreased. P300,000 decrease


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23. Janellah Corporation owned 300,000 shares of Veronica Corporation stock. On December31, 2015, when Janellah's account "Equity Investment (Veronica Corporation") had acarrying value of P5 per share, Janellah distributed these shares to its stockholders as adividend. Janellah originally paid P8 for each share. Veronica has 1,000,000 sharesissued and outstanding, which are traded on a national stock exchange. The quotedmarket price for a Veronica share was P7 on the declaration date and P9 on the

distribution date.

What would be the reduction in Janellah's stockholders' equity as a result of the abovetransactions?a. P1,200,000.b. P1,500,000.c. P2,400,000.d. P2,700,000.

24. Marias Corporation has an investment in 10,000 shares of Denise Company commonstock with a cost of P436,000. These shares are used in a property dividend tostockholders of Marias. The property dividend is declared on May 25 and scheduled tobe distributed on July 31 to stockholders of record on June 15. The fair value per share ofDenise stock is P63 on May 25, P66 on June 15, and P68 on July 31. The net effect ofthis property dividend on retained earnings is a reduction ofa. P680,000.b. P660,000.c. P630,000.d. P436,000.

25. Donielle Corporation owned 30,000 shares of Baby Corporation. These shares werepurchased in 2011 for P270,000. On November 15, 2015, Donielle declared a propertydividend of one share of Baby for every ten shares of Donielle held by a stockholder. Onthat date, when the market price of Baby was P21 per share, there were 270,000 shares

of Donielle outstanding. What gain and net reduction in retained earnings would resultfrom this property dividend?

Gain Net Reduction inRetained Earnings

a. P0 P243,000b. P0 P567,000c. P324,000 P81,000d. P324,000 P243,000

26. Marex Company issues 4,000 shares of its P5 par value common stock having a fair valueof P25 per share and 6,000 shares of its P15 par value preferred stock having a fair value

of P20 per share for a lump sum of P204,000. What amount of the proceeds should beallocated to the preferred stock?a. P182,750b. P127,500c. P111,273d. P95,625

27. Zhaira Corporation has 50,000 shares of P10 par common stock authorized. The followingtransactions took place during 2015, the first year of the corporations existence:


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Sold 10,000 shares of common stock for P18 per share.Issued 10,000 shares of common stock in exchange for a patent valued at P200,000.

At the end of the Zhairas first year, total paid-in capital amounted toa. P80,000.b. P180,000.c. P200,000.d. P380,000.

28. Vincent Corporation started business in 2010 by issuing 200,000 shares of P20 parcommon stock for P36 each. In 2015, 30,000 of these shares were purchased for P52 pershare by Vincent Corporation and held as treasury stock. On June 15, 2016, these 30,000shares were exchanged for a piece of property that had an assessed value of P810,000.Vincents stock is actively traded and had a market price of P60 on June 15, 2016. Thecost method is used to account for treasury stock. The amount of paid-in capital fromtreasury stock transactions resulting from the above events would bea. P1,200,000.b. P720,000.c. P585,000.

d. P240,000.

29. On September 1, 2015, Joseph Company reacquired 16,000 shares of its P10 par valuecommon stock for P15 per share. Joseph uses the cost method to account for treasurystock. The journal entry to record the reacquisition of the stock should debita. Treasury Stock for P160,000.b. Common Stock for P160,000.c. Common Stock for P160,000 and Paid-in Capital in Excess of Par for P60,000.d. Treasury Stock for P240,000.

30. On December 1, 2015, Christine Corporation exchanged 30,000 shares of its P10 parvalue common stock held in treasury for a used machine. The treasury shares were

acquired by Christine at a cost of P40 per share, and are accounted for under the costmethod. On the date of the exchange, the common stock had a fair value of P55 per share(the shares were originally issued at P30 per share). As a result of this exchange,Christine's total stockholders' equity will increase bya. P300,000.b. P1,200,000.c. P1,650,000.d. P1,350,000.

31. Kayselle Inc., has 3,000 shares of 6%, P50 par value, cumulative preferred stock and100,000 shares of P1 par value common stock outstanding at December 31, 2015, andDecember 31, 2014. The board of directors declared and paid a P7,500 dividend in 2014.

In 2015, P36,000 of dividends are declared and paid. What are the dividends received bythe preferred stockholders in 2015?a. P25,500b. P18,000c. P 10,500d. P 9,000

stockholders' equity by j. gonzales

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