Quiz #6
Accounting for Corporation-Share Capital
Name: Score:
Course/Year/ Date:
Section:
Instructions: Erasures and alterations of answers are strictly not allowed. Do not use frixion
pen.
A. TRUE or FALSE
_______1. When no-par ordinary shares without a stated value is issued for cash, the Ordinary Shares
account is credited for an amount equal to the cash proceeds.
_______2. The sale of shares in a corporation by one shareholder to another affects the total capital of
the corporation.
_______3. When ordinary shares are sold for a price higher than par value, the ordinary shares account
is credited only for the par value of the shares sold.
_______4. In reference to the previous question, any amount received in excess of the par value of the
ordinary shares sold is recorded as a credit to the retained earnings account.
_______5. When ordinary shares with a par value are sold for a price that exceeds par value, the
Ordinary Shares account is credited only for the par value of the shares sold.
_______6. Treasury stock may be either ordinary or preference share.
_______7. The concept of legal capital exists to protect the corporation’s assets for the shareholders of
the corporation.
_______8. The board of directors carries out the day-to-day operations of the business.
_______9. The highest bidder in a delinquency sale is the person willing to pay the “offer price” that
includes the full amount of the subscription balance plus accrued interest, cost of advertisement and
expenses of auction sale in exchange for the highest number of shares.
_______10. If share capital is issued for an outstanding liability, the fair market value of the share
capital issued should be the measure of recording.
_______11. The reissuance of treasury stocks at a price above cost results in a gain to be reported in
the statement of recognized income and expense.
_______12. Fair market value is the estimated amount that a willing seller would receive from a
financially capable buyer for the sale or exchange of the asset in a free market.
_______13. The par value of shares refers to its value on the open market.
_______14. The entire consideration received by the corporation for its no-par value shares shall be
treated as capital and shall not be available for distribution as dividends.
_______15. When ordinary shares with a par value are sold, the proceeds should be credited to the
ordinary shares account to the extent of the par value of the shares.
B. Fill in the Blanks (2 points each)
The accounts below appear in the December 31, 2015 trial balance of Maine Company:
Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earnings unappropriated 600,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 300,000
On December 31, 2015, what amount should be reported as total shareholders’ equity?
Answer: (1) ________________
The shareholders’ equity of Goon Company revealed the following on December 31, 2015:
Preference share capital, P100 par 2,300,000
Share premium-PS 805,000
Ordinary share capital, P15 par 5,250,000
Share premium 2,750,000
Subscribed ordinary share capital 500,000
Retained earnings 1,900,000
Note payable 4,000,000
“Cast your cares on the LORD and He will sustain you; He will never let the righteous fall.”
>>Psalms 55:22
///BMS, CPA ///Page | 1
, Subscription receivable-ordinary 400,000
How much is the legal capital?
Answer: (2) ________________
Nerve Company was organized on January 1, 2012. On that date it issued 200,000 shares at P15
per share (400,000 shares were authorized). During the period January 1, 2012 through December
31, 2013, Nerve Company reported net income of P750,000 and paid cash dividends of P380,000.
On January 5, 2013, Nerve Company purchased 12,000 treasury shares at P12 per share. On
December 31, 2013, 8,000 treasury shares were sold at P8 per share and retired the remaining
4,000 shares. What is the total shareholders’ equity on December 31, 2013?
Answer: (3) ________________
Presented below is the shareholders’ equity of Caper Company on January 1, 2012.
Share capital, par value P20
authorized 50,000 shares; issued
and outstanding, 30,000 shares 600,000
Share premium 150,000
Retained earnings 230,000
During 2012, the following transactions occurred relating to shareholders’ equity:
1,000 shares were reacquired at P28 per share.
900 shares were reacquired at P30 per share.
1,500 shares of treasury were sold at P32 per share.
For the year ended December 31, 2012, Caper Company reported net income of P110,000.
What amount should be reported as total shareholders’ equity on December 31, 2012?
Answer: (4) ________________
In 2011, Rona Company issued 5,000 shares of P10 par value for P100 per share. In 2012, Rona
Company acquired 2,000 of its shares at P150 per share and immediately canceled these 2,000
shares. In connection with the retirement of the shares, what amount is debited respectively to
share premium and retained earnings?
Answer: (5) ________________ and (6) ________________
Berna Company’s equity accounts on January 1, 2012 were:
Share capital, P20 par 8,000,000
Share premium 2,550,000
Retained earnings 1,275,000
All shares outstanding on January 1, 2012 were issued in 2011 for P26 a share. On December 31,
2012, Berna Company reacquired 20,000 shares at P24 a share and retired them. Immediately
after the shares were retired, what is the balance in the “share premium”?
Answer: (7) ________________
On December 31, 2012, Pack Company’s board of directors canceled 5,000 shares of P25 par value
held in treasury at an average cost of P130 per share. Before recording the cancelation of the
treasury shares, Pack Company had the following shareholders’ equity:
Share capital 625,000
Share premium 750,000
Retained earnings 900,000
Treasury shares, at cost 650,000
On December 31, 2012, what amount should be reported as share capital outstanding?
Answer: (8) ________________
“Cast your cares on the LORD and He will sustain you; He will never let the righteous fall.”
>>Psalms 55:22
///BMS, CPA ///Page | 2
Accounting for Corporation-Share Capital
Name: Score:
Course/Year/ Date:
Section:
Instructions: Erasures and alterations of answers are strictly not allowed. Do not use frixion
pen.
A. TRUE or FALSE
_______1. When no-par ordinary shares without a stated value is issued for cash, the Ordinary Shares
account is credited for an amount equal to the cash proceeds.
_______2. The sale of shares in a corporation by one shareholder to another affects the total capital of
the corporation.
_______3. When ordinary shares are sold for a price higher than par value, the ordinary shares account
is credited only for the par value of the shares sold.
_______4. In reference to the previous question, any amount received in excess of the par value of the
ordinary shares sold is recorded as a credit to the retained earnings account.
_______5. When ordinary shares with a par value are sold for a price that exceeds par value, the
Ordinary Shares account is credited only for the par value of the shares sold.
_______6. Treasury stock may be either ordinary or preference share.
_______7. The concept of legal capital exists to protect the corporation’s assets for the shareholders of
the corporation.
_______8. The board of directors carries out the day-to-day operations of the business.
_______9. The highest bidder in a delinquency sale is the person willing to pay the “offer price” that
includes the full amount of the subscription balance plus accrued interest, cost of advertisement and
expenses of auction sale in exchange for the highest number of shares.
_______10. If share capital is issued for an outstanding liability, the fair market value of the share
capital issued should be the measure of recording.
_______11. The reissuance of treasury stocks at a price above cost results in a gain to be reported in
the statement of recognized income and expense.
_______12. Fair market value is the estimated amount that a willing seller would receive from a
financially capable buyer for the sale or exchange of the asset in a free market.
_______13. The par value of shares refers to its value on the open market.
_______14. The entire consideration received by the corporation for its no-par value shares shall be
treated as capital and shall not be available for distribution as dividends.
_______15. When ordinary shares with a par value are sold, the proceeds should be credited to the
ordinary shares account to the extent of the par value of the shares.
B. Fill in the Blanks (2 points each)
The accounts below appear in the December 31, 2015 trial balance of Maine Company:
Authorized share capital 5,000,000
Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earnings unappropriated 600,000
Retained earnings appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 300,000
On December 31, 2015, what amount should be reported as total shareholders’ equity?
Answer: (1) ________________
The shareholders’ equity of Goon Company revealed the following on December 31, 2015:
Preference share capital, P100 par 2,300,000
Share premium-PS 805,000
Ordinary share capital, P15 par 5,250,000
Share premium 2,750,000
Subscribed ordinary share capital 500,000
Retained earnings 1,900,000
Note payable 4,000,000
“Cast your cares on the LORD and He will sustain you; He will never let the righteous fall.”
>>Psalms 55:22
///BMS, CPA ///Page | 1
, Subscription receivable-ordinary 400,000
How much is the legal capital?
Answer: (2) ________________
Nerve Company was organized on January 1, 2012. On that date it issued 200,000 shares at P15
per share (400,000 shares were authorized). During the period January 1, 2012 through December
31, 2013, Nerve Company reported net income of P750,000 and paid cash dividends of P380,000.
On January 5, 2013, Nerve Company purchased 12,000 treasury shares at P12 per share. On
December 31, 2013, 8,000 treasury shares were sold at P8 per share and retired the remaining
4,000 shares. What is the total shareholders’ equity on December 31, 2013?
Answer: (3) ________________
Presented below is the shareholders’ equity of Caper Company on January 1, 2012.
Share capital, par value P20
authorized 50,000 shares; issued
and outstanding, 30,000 shares 600,000
Share premium 150,000
Retained earnings 230,000
During 2012, the following transactions occurred relating to shareholders’ equity:
1,000 shares were reacquired at P28 per share.
900 shares were reacquired at P30 per share.
1,500 shares of treasury were sold at P32 per share.
For the year ended December 31, 2012, Caper Company reported net income of P110,000.
What amount should be reported as total shareholders’ equity on December 31, 2012?
Answer: (4) ________________
In 2011, Rona Company issued 5,000 shares of P10 par value for P100 per share. In 2012, Rona
Company acquired 2,000 of its shares at P150 per share and immediately canceled these 2,000
shares. In connection with the retirement of the shares, what amount is debited respectively to
share premium and retained earnings?
Answer: (5) ________________ and (6) ________________
Berna Company’s equity accounts on January 1, 2012 were:
Share capital, P20 par 8,000,000
Share premium 2,550,000
Retained earnings 1,275,000
All shares outstanding on January 1, 2012 were issued in 2011 for P26 a share. On December 31,
2012, Berna Company reacquired 20,000 shares at P24 a share and retired them. Immediately
after the shares were retired, what is the balance in the “share premium”?
Answer: (7) ________________
On December 31, 2012, Pack Company’s board of directors canceled 5,000 shares of P25 par value
held in treasury at an average cost of P130 per share. Before recording the cancelation of the
treasury shares, Pack Company had the following shareholders’ equity:
Share capital 625,000
Share premium 750,000
Retained earnings 900,000
Treasury shares, at cost 650,000
On December 31, 2012, what amount should be reported as share capital outstanding?
Answer: (8) ________________
“Cast your cares on the LORD and He will sustain you; He will never let the righteous fall.”
>>Psalms 55:22
///BMS, CPA ///Page | 2
