Treasury Shares: Par) Is - To

Treasury Shares
1. Treasury shares are recorded at:
a. Fair Value
b. Book Value
c. Cost
d. All are possible answers.
Answer: C
2. If the treasury shares are reissued or sold at more than cost, the gain is _______ to
________.
a. credited; share premium
b. credited; retained earnings
c. debited; treasury shares
d. debited; income summary
Answer: A
3. If the treasury shares are sold at less than cost, the loss on sale is debited to the following:
a. to the retained earnings directly
b. share premium from treasury shares first, then to the retained earnings
c. share capital first, then to the share premium from treasury shares
d. share capital first, then to the retained earnings
Answer: B
4. If the treasury shares are not reissued but retired, any gain on retirement (cost less than
par) is ________ to ___________.
a. credited; share premium
b. credited; retained earnings
c. either a or b
d. no entry is required
Answer: A
5. If the treasury share are not reissued but retired, any loss on retirement (cost more than par)
is debited to the following:
a. Share premium from original issuance
b. Share premium from treasury shares
c. Retained earnings
d. All of the above.
Answer: D (in order of priority)
6. Which of the following will not affect the total Shareholders' equity?
I. Donated Capital
II. Share Dividend
III. Appropriation of Retained Earnings
IV. Share Split
- All of the above
PROBLEMS
1. Day Company held 10,000 shares of P10 par value as treasury reacquired for P120,000. At
year-end, the entity reissued all 10,000 shares for P190,000.
What is credited for the excess of the reissue price over the cost of treasury shares?
a. Share capital P100,000
b. Retained earnings P70,000
c. Gain on sale of investment P70,000
d. Share premium P70,000
Answer: D
2. At the beginning of current year, Hanna Company reported the following shareholders' equity:
Share capital, P10 par, outstanding 225,000 shares 2,250,000
Share premium 900,000
Retained earnings 2,190,000
During the current year, the entity had the following share transactions:
• Acquired 6,000 treasury shares for P270,000.
• Sold 3,600 treasury shares at P50 a share.
• Sold the remaining treasury shares at P41 per share.
What is the total amount of share premium at year-end?
a. 891,600
b. 870,000
c. 908,400
d. 927,600
Answer: C
3. At the beginning of current year, Gandaka Company issued 50,000 shares of P10 par value
for P100 per share.
During the year, the entity reacquired 2,000 shares at P150 per share and immediately canceled
these 2,000 shares.
In connection with the retirement of shares, what amount should be debited to share premium?
a. 20,000
b. 100,000
c. 180,000
d. 280,000
Answer: C
In connection with the retirement of shares, what amount should be debited to retained
earnings?
a. 280,000
b. 180,000
c. 100,000
d. 0
Answer: C
4. At the beginning of current year, Dayron Company had 80,000 ordinary shares outstanding.
The entity distributed a 15% share dividend in March and a 10% share dividend in June.
After acquiring 10,000 shares of treasury in July, the entity split the share 4 for 1 in December.
How manhy shares were issued before the share split?
a. 101,200
b. 100,000
c. 91,200
d. 90,000
Answer: A
How many ordinary shares are outstanding on December 31?
a. 364,800
b. 488,000
c. 498,000
d. 451,500
Answer: A
5. Walang Kalinga Company reported the following shareholders' equity at the beginning of
current year:
Preference share capital, 100,000 shares, P10 par 1,000,000
Ordinary share capital, 500,000 shares, P10 par 5,000,000
Share premium - Preference 50,000
Share premium - Ordinary 200,000
Retained Earnings 100,000
During the current year, the following transactions were completed:

Retirement of 5,000 preference shares at P11 per share.
Purchase of 5,000 ordinary shares of treasury at P12 per share.
Share split, ordinary share 2 for 1.
Reissue of 2,000 shares of treasury at P10 per share.
Net income for the year, P300,000.
What is the total shareholders' equity at year-end?
a. 6,255,000
b. 6,350,000
c. 6,555,000
d. 6,560,000
Answer: C
6. The shareholders of Juice Company approved a two-for-one share split and an increase in
authorized shares from 100,000 shares with a P20 par value to 200,000 sharers with P10 par
value.
The shareholders' equity accounts immediately before the split shares were share capital
P1,000,000, share premium P150,000 and retained earnings P1350,000.
What is the balance of the share premium after the share split is effected?
a. 1,150,000
b. 2,300,000
c. 150,000
d. 300,000
Answer: C
What is the balance of the retained earnings after the share split is effected?
a. 1,350,000
b. 2,700,000
c. 1,500,000
d. 2,350,000
Answer: A
7. Loki Company issued 100,000 ordinary shares. Of these, 5,000 shares were held as treasury
on January 1, 2017.
During the current year, the entity reported the following transactions:
May 1 1,000 shares uof treasury were sold.
Aug 1 10,000 unissued shares were sold.
Nov. 15 A 2 -for-1 share split took effect.
On December 31, 2017, how many shares were issued?
a. 220,000
b. 110,000
c. 222,000
d. 106,000
Answer: A
On December 31, 2017, how many shares were outstanding?
a. 212,000
b. 216,000
c. 214,000
d. 218,000
Answer: A

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Treasury Shares

1. Treasury shares are recorded at:

d. All are possible answers.

a. credited; share premium

b. credited; retained earnings

c. debited; treasury shares

d. debited; income summary

a. to the retained earnings directly

d. share capital first, then to the retained earnings

a. credited; share premium

b. credited; retained earnings

a. Share premium from original issuance

b. Share premium from treasury shares

d. All of the above.

Answer: D (in order of priority)

II. Share Dividend

III. Appropriation of Retained Earnings

IV. Share Split

- All of the above

a. Share capital P100,000

b. Retained earnings P70,000

c. Gain on sale of investment P70,000

d. Share premium P70,000

Share premium 900,000

Retained earnings 2,190,000

• Acquired 6,000 treasury shares for P270,000.

• Sold 3,600 treasury shares at P50 a share.

• Sold the remaining treasury shares at P41 per share.

What is the total amount of share premium at year-end?

How manhy shares were issued before the share split?

How many ordinary shares are outstanding on December 31?

Preference share capital, 100,000 shares, P10 par 1,000,000

Ordinary share capital, 500,000 shares, P10 par 5,000,000

Share premium - Preference 50,000

Share premium - Ordinary 200,000

Retained Earnings 100,000

During the current year, the following transactions were completed:

Purchase of 5,000 ordinary shares of treasury at P12 per share.

Share split, ordinary share 2 for 1.

Reissue of 2,000 shares of treasury at P10 per share.

Net income for the year, P300,000.

What is the total shareholders' equity at year-end?

May 1 1,000 shares uof treasury were sold.

Aug 1 10,000 unissued shares were sold.

Nov. 15 A 2 -for-1 share split took effect.

On December 31, 2017, how many shares were issued?

On December 31, 2017, how many shares were outstanding?

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