1. Which of the following is not true of a corporation?

A. It may enter into binding legal contracts in its own name.

B. It may sue and be sued.
C. The acts of its owners bind the corporation.
D. It may buy, own, and sell property.

2. The ability of a corporation to obtain capital is

A. less than a partnership.
B. about the same as a partnership.
C. restricted because of the limited life of the corporation.
D. enhanced because of limited liability and ease of share transferability.

3. The term deficit is used to refer to a debit balance in which of the following accounts of a
corporation?
A. Retained Earnings
B. Treasury Stock
C. Organizational Expenses
D. Common Stock

4. Which of the following is not a right possessed by common stockholders of a corporation?

A. the right to vote in the election of the board of directors
B. the right to receive a minimum amount of dividends
C. the right to sell their stock to anyone they choose
D. the right to share in assets upon liquidation

5. The charter of a corporation provides for the issuance of 100,000 shares of common stock.
Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired.
What is the number of shares outstanding?
A. 10,000
B. 40,000
C. 30,000
D. 50,000

6. Villarica corporation issues 2,500 shares of common stock for Php 45,000. The stock has a
stated value of Php 10 per share. The journal entry to record the stock issuance would include
a credit to Common Stock for
A. Php 25,000
B. Php 45,000
C. Php 20,000
D. Php 5,000

7. When Kimetsu Corporation was formed on January 1, 20xx, the corporate charter provided for
100,000 share of Php 10 par value common stock. The following transaction was among those
engaged in by the corporation during its first month of operation: The corporation issued 9,000
shares of stock at a price of Php 23 per share. The entry to record the above transaction would
include a
A. debit to Cash for Php 90,000
 B. credit to Common Stock for Php 207,000
C. credit to Paid in Capital in Excess of Par for Php 117,000
D. debit to Common Stock for Php 90,000

8. On January 1, 20xx, Papasa Ako Corporation had 40,000 shares of Php 10 par value common
stock issued and outstanding. All 40,000 shares had been issued in a prior period at Php 20.00
per share. On February 1, 20xx, Papasa Ako purchased 4,000 shares of treasury stock for Php
24 per share and later sold the treasury shares for Php 21 per share on March 1, 20xx. The
journal entry to record the purchase of the treasury shares on February 1, 20xx, would include
a
A. credit to Treasury Stock for Php 96,000.
B. debit to Treasury Stock for Php 96,000.
C. debit to a loss account for Php 120,000
D. credit to a gain account for Php 120,000

9. The charter of a corporation provides for the issuance of 100,000 shares of common stock.
Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired.
What is the amount of cash dividends to be paid if a Php 2 per share dividend is declared?
A. Php 60,000
B. Php 20,000
C. Php 120,000
D. Php 100,000

10. The excess of sales price of treasury stock over its cost should be credited to
A. Treasury Stock Receivable
B. Premium on Capital Stock
C. Paid-In Capital from Sale of Treasury Stock
D. Income from Sale of Treasury Stock

11. What is the total stockholders' equity based on the following account balances?
Common Stock Php 375,000
Paid-In Capital in Excess of Par 90,000
Retained Earnings 190,000
Treasury Stock 15,000
A. Php 670,000
B. Php 655,000
C. Php 640,000
D. Php 565,000

12. Treasury stock which was purchased for Php 3,000 is sold for Php 3,500. As a result of these
two transactions combined
A. income will be increased by Php 500
B. stockholders' equity will be increased by Php 3,500
C. stockholders' equity will be increased by Php 500
D. stockholders' equity will not change
13. Treasury stock that had been purchased for Php 5,600 last month was reissued this month for
Php 8,500. The journal entry to record the reissuance would include a credit to
A. Treasury Stock for Php 8,500
B. Paid-In Capital from Treasury Stock for Php 8,500
C. Paid-In Capital in Excess of Par/Common for Php 2,900
D. Paid-In Capital from Treasury Stock for Php 2,900

14. Significant changes in stockholders' equity are reported in

A. income statement
B. retained earnings statement
C. statement of stockholders' equity
D. statement of cash flows

15. The primary purpose of a stock split up is to

A. increase paid-in capital
B. reduce the market price of the stock per share
C. increase the market price of the stock per share
D. increase retained earnings

16. CPA company with 100,000 authorized shares of Php 4 par common stock issued 40,000
shares at Php 8. Subsequently, the company declared a 2% stock dividend on a date when the
market price was Php 11 a share. What is the amount transferred from the retained earnings
account to paid-in capital accounts as a result of the stock dividend?
A. Php 3,200
B. Php 6,400
C. Php 4,800
D. Php 8,800

17. Maganda Corporation has 60,000 shares of Php 25 par value stock outstanding that has a
current market value of Php 120. If the corporation issues a 5-for-1 stock split, the number of
shares outstanding will be:
A. 60,000
B. 10,000
C. 300,000
D. 30,000

18. On the Wings of Love Corporation has 50,000 shares of Php 25 par value stock outstanding
that has a current market value of Php 120. If the corporation issues a 5-for-1 stock split, the
par value of the stock after the split will be:
A. Php 5
B. Php 60
C. Php 25
D. Php 24

19. Power of Love Company with 100,000 authorized shares of Php 4 par common stock issued
50,000 shares at Php 9. Subsequently, the company declared a 2% stock dividend on a date
 when the market price was Php 10 a share. The effect of the declaration and issuance of the
stock dividend is to
A. decrease retained earnings, increase common stock, and increase paid-in capital
B. increase retained earnings, decrease common stock, and decrease paid-in capital
C. increase retained earnings, decrease common stock, and increase paid-in capital
D. decrease retained earnings, increase common stock, and decrease paid-in capital

20. A restriction/appropriation of retained earnings

A. decreases total assets
B. increases total retained earnings
C. decreases total retained earnings
D. has no effect on total retained earnings

Chapter 22-31

1. Retained earnings represents

A. Earned Capital
B. Cash
C. Assets
D. Net Assets
2. Retained earnings represents
A. Undistributed net income
B. Undistributed net Assets
C. Extra Contributed Capital
D. Undistributed Cash
3. The total retained earnings balance typically is not affected by
A. Net income
B. A prior period error
C. Dividends paid
D. Restriction
4. When property dividend is declared the dividend payable should be measured based on the
fair value of property on
A. Record date
B. Distribution Date’
C. Declaration Date
D. Reporting Date
5. The declaration and issuance of a share dividend on ordinary shares
A. Has no effect on asset liabilities and total shareholders’ equity

Chapter 22-32

1. Non-stock dividends shall be recognized as liabilities on the

A. Date of Declaration
B. Date of record
C. Date of Payment
D. Date of issuing check
 2. When shareholders may elect receive cash in lieu of share dividend the amount to be charged
to retained earnings is equal to the
A. Optional cash dividend
B. Fair value of shares
C. Par value of shares
D. Book value of the shares
3. Treasury shares may be reissued as dividends, in which case what amout shall be charged to
retained earnings
A. Cost of the treasury share
B. ‘Par Value of the treasury share
C. Fair value of the treasury shares on the date of declaration
D. Fair value of treasury share on the date of issuance
4. If the share dividend is less than 20% how much of the retained earnings shall be capitalized?
A. Par value of the shares
B. Fair value of the share on the date of declaration
C. Fair value of the share in the date of record
D. Fair value of the share on the date of issuance
5. At what amount should retained earnings be reduced if the shares dividend is 20% or more?
A. Zero
B. Par value
C. Market value at the date of declaration
D. Market value at the date of issuance

Chapter 23-21

1. A retained earning appropriation is used to

 Restrict earnings available for dividends
2. An appropriation of retained earnings for future plant expansion will result in
 The disclosure that management does not intend to distribute in the form of dividends
assets equal to the amount of appropriation
3. The retained earnings appropriated account is credited for the period of
 Protecting the working capital composition
4. A restriction of retained earnings is most likely to be required by
 Purchasing a treasury shares
5. Which of the following is most likely to be found in corporate laws regarding payments of
dividendsl
 Retained Earnings are available for dividends unless restricted by contract or by statute
6. For which of the following purpose should an appropriation for possible loss contingencies be
established
 To inform shareholders that a portion of retained earnings should be set aside from
amounts available for dividends because of such contingencies
7. Which statement is incorrect concerning appropriation of retained earnings?
 Appropriation of retained earnings reflect funds set aside for a designated purpose,
such as plant expansion
8. Which statement is incorrect concerning appropriation of retained earnings?
  When treasury shared are purchased , retained earning must be appropriated equal to
the par or stated value of the treasury shares
9. Which of the following is not a legal restriction related to profit distribution
 The amount distributed can never exceeds the net income for the current year
10. The use of equity reserves under international accounting standard?
 Is based on whether reserve is a part of distributable or non-distributable

Chapter 24-31

1. These are transaction in which the entity receives goods or services as consideration for
equity instruments
 Equity settled share based payment transaction
2. The total compensation expense in a s hare option plan normally is measured at
 Fair value of share option on date of grant
3. It is is the difference between the fair value of thye shares to be subscribes and the price
required to be paid for those shares
 Intrinsic Value
4. The date on which total compensation expense is computed in a share option plan is
 Date of Grant
5. When issuing share option, which of the following factors is most relevant in determining the
accounting treatment
 Whether the share option are issued in lieu of salary
6. For transaction with employees, the fair value of the equity instrument granted is measured on
 Grant date
7. It is a contract that gives the holder the right but not the obligation to subscribe to the entity’s
share at a fixed or determinable price for a specified period of time
 Share Option
8. In what circumstances is compensation expenses immediately recognized under a share
option plan?
 In circumstances when the option are immediately exercisable
9. Compensation expense from a share option is generally
 Allocated to the periods benefited by the employee’s required service
10. If there is an acceleration of vesting, any payment made to the employee on the settlement of
the grant shall be
 Accounted for as repurchase of equity interest and any excess payment over the fair
value of shares options shall be recognize as expense

Chapter 25-19

1. The payment for service in cash and based on the price of the entity’s ordinary share is what
type of share-based payment transaction?
 Cash-settled share based payment transaction
2. A cash settled share based payment transaction increase
 A liability
3. Compensation cost for a share-based payment to employee that is classified as liability is
measured at
  The change in fair value for each reporting period
4. What us the measurement date for share-based payment to employee that is classified as
liability?
 The settlement date
5. For share-appreciation rights, the measurement date for computing compensation is the
 Date of Exercise
6. In accounting for share appreciation right, compensation expense is generally
 Allocated over the service period of employees
7. Which statement is true regarding share appreciation right?
 The total amount of compensation is not known until the date the share appreciation
right is exercised
8. For cash settled share based payment transactions, any change in fair value of liability is
 Included in profit or loss
9. If share based payment transaction provides that the employee have the right to choose the
settlement whether in cash or shares the entity is deemed to have issued
 A compound financial instruments
10. If the entity has the choice of settlement in cash and share alternative, the entity shall amount
for the instrument initially as
 Either equity or liability but not both

Chapter 20
1. Concepts about a Corporation (page 165)
- is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence. It
may enter into binding legal contracts, it may be sue and be sued, buy, own, sell property
EXCEPT the acts of its owners bind the corporation.
2. What is Trust fund doctrine? (page 689)
- Holds that the share capital of a corporation is considered as trust fund for the protection of
creditors. Illegal to return legal capital to shareholders during lifetime of corporation. ILLEGAL
to pay dividends if entity has DEFICIT. Corporation can pay dividends but limited to retained
earnings balance.
3. Usual costs associated in the listing of shares for publicly listed companies.

4. Review the two (2) methods of accounting for share capital (page 689)
a.) Memorandum method – No entry is made to record authorized share capital. Only a memorandum
is made for the total authorized share capital. When share capital is issued, it is credited to the share
capital account.
b.) Journal entry method – the authorization to issue share capital is recorded by debiting unissued
share capital and crediting authorized share capital. When share capital is issued, it is credited to the
share capital account.
5. Know how to determine for the highest bidder. (page 700)
 HIGHEST BIDDER – a person who is willing to pay the offer price of delinquent shares
from SMALLEST NUMBER of shares. The offer price normally includes the ff:
 a. Balance due on subscription
b. Interest accrued on the subscription date
c. Expenses of advertising and other costs of sale

Chapter 21
1. Computation of shares outstanding assuming Treasury shares are also issued. (example prelims
#15)
2. Rules in retiring Treasury shares resulting in loss, what’s the order of priority in charging for such
loss? (page 736)
 RETIREMENT OF LOSS - cost of treasury share exceeds par value such loss debited in ff:
a. Share premium from ORIGINAL ISSUANCE
b. Share premium from TREASURY SHARES
c. Retained Earnings
3. Familiarize on the different types of recapitalization. Know how to identify a non-recapitalization
case among given recapitalization examples. (page 740)
 RECAPITALIZATION – when there is a change in the capital structure of entity. The old shares are
cancelled and new shares are issued.
a. Change from par-to-no-par
b. Change from no-par-to-par
c. Reduction of par value
d. Reduction of stated value
e. Split up
f. Split down
4. Computation of par value after a share split. (page 743) (prelims #27-28)
5. Definition and characteristics of a rights issue. (page 745)
- RIGHTS ISSUE – granted to existing shareholders to enable them to acquire new shares at
a specified time during specified period. PHILIPPINE TERM FOR RIGHTS ISSUE IS A
STOCK RIGHT.
- SHARE WARRANTS – represent the certificate or instrument evidencing ownership over the
rights issued.
- NEW ISSUE MUST BE OFFERED FIRST TO EXISISTING SHAREHOLDRS OF
CORPORATION
- RIGHT OF PRE-EMPTION – LEGAL RIGHT OF SHAREHOLDERS; IN ACCOUNTING
PARLANCE STOCK RIGHT OR RIGHT ISSUE
- EXCISE PRICE IS LESS THAN THE CURRENT MARKET VALUE OF SUCH SHARES
- NO ENTRY- SHARE WARRANTS ISSUED WITHOUT CONSIDERATION
- THE ENTITY ONLY NEED TO MAKE MEMORANDUM ENTRY TO INDICATE NUMBER OF
RIGHTS ISSUED TO SHAREOLDERS AND NUMBER OF SHARES PURCHASED
- IF RIGHTS ARE EXERCISED – MEMORANDUM MADE FPR DECREASE IN NUMBER OF
SHARES CLAIMABLE THROUGH EXERCISE OF RIGHTS

Chapter 22
1. Determination of dividends payable: (page 775)
a. Certain amount of pesos per share
b. Certain percent of the par or stated value
2. What does Retained Earnings represent? (earned capital, undistributed net income page 811)
3. Reasons for appropriating retained earnings. How to compute for appropriated retained earnings.
(page 772)
4. Important dates to remember in a dividend declaration and payment process. (page 773)
5. How are property dividends measured? (page 776)
- Measurement of the property dividend payable
- Measurement of noncash asset to be distributed as property dividend
6. Study fractional share dividends and its workable options. (page 787)
7. Dividend payable computations if there is choice or alternative given of either non-cash or cash.
(page 781)
8. Valuation of cash receipt in lieu of share dividends. ?
9. Effects of declaration and issuance of share dividends.

Chapter 23
1. Examples of contractual appropriation of Retained Earnings. (page 891)
2. Examples of non-distributable equity reserves. (page 822-823) (share premium reserve,
appropriation etc)
3. Circumstances when a Quasi-Reorganization is permitted. (page 825)
4. Disclosure requirements for an entity that have undergone quasi-reorganization. How many years
shall it mention in the entity’s notes to financial statements?
Chapter 24
1. Share options topic: Computation of compensation under fair value method of measurement
(page 855)
2. Recognizing and computation of compensations for share options under the conditions of
a. No vesting periods (856)
b. With vesting period (857)
Chapter 25
1. Liability basis for share-based payment (cash settled transaction) in exchange for the services
received. (902?)
2. Share appreciation right – what’s the measurement date for computing for compensation? (900)
3. What is the compensation associated with share option plan? (900)
4. Valuation for share options reported as expense.
5. Definition of a compound financial instrument. (911)