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NAME: Date:
Professor: Section: Score:

INTERMEDIATE ACCOUNTING 2
FINAL GRADING EXAMINATION

1. Kemp Company must determine the December 31, 20x1, year-end accruals for
advertising and rent expense. A ₱50,000 advertising bill was received on January 7,
20x2, comprising ₱35,000 for advertisements in December 20x1 issues of a
newspaper and ₱15,000 for advertisements in January 20x2. A store lease, effective
October 16, 20x1, calls for fixed rent of ₱120,000 per month, payable one month
from the effective date and monthly thereafter. In addition, rent equal to 5% of net
sales over ₱6,000,000 per calendar year is payable on January 31 of the following
year. Net sales for 20x1 were ₱9,000,000. How much are the accrued liabilities in
the December 31, 20x1 statement of financial position?
a. 95,000 c. 245,000
b. 155,000 d. 305,000

2. On January 1, 20x1, an entity issues a 4-year, noninterest-bearing note payable of

₱4,800,000 in exchange for a piece of equipment. The note is due in annual
installments of ₱1,200,000 every December 31. The effective interest rate is 14%.
How much is the carrying amount of the note on December 31, 20x1, net of the
current portion?
a. 710,497 c. 2,785,955
b. 809,966 d. 1,975,989

3. Interest payment dates of a bond issue are March 1 and September 1, 20x1. The
bond was issued on June 1, 20x1. Interest expense for the year ended December 31,
20x1 would be for:
a. four (4) months c. seven (7) months
b. six (6) months d. ten (10) months

4. The board of directors of Alaala-Pi Co. decided on December 15, 20x1 to wind up
international operations in Country B and move them to Country C. The decision
was based on a detailed formal plan of restructuring, which was conveyed to all
workers and management personnel at the headquarters in Country A. The cost of
restructuring the operations in Country B as per this detailed plan was ₱10M.
Should Alaala-Pi recognize a provision on December 31, 20x1?
a. Yes, because all the recognition criteria are met.
b. No, because the obligation has an improbable outflow.
c. No, because there is no present obligation as of December 31, 20x1.
d. No, because the outflow cannot be reliably estimated.

5. Employee benefits given by an employer to an employee may be recognized by the

employer as
I. Asset
II. Liability
III. Equity
IV. Income
V. Expense

a. II, V c. I, II, III, V

b. I, II, V d. I, II, III, IV, V
6. Under PAS 19, past service cost if not yet vested
a. is recognized immediately in profit or loss.
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b. is recognized as a prior period adjustment.

c. is amortized over the vesting period which is at least 10 million years.
d. is recognized as expense in the current and future periods until the end of the
world or until the moon turns blue, whichever comes earlier.

7. VENERABLE RESPECTED Co.’s defined benefit plan provides a lump sum

retirement benefit of ₱8,000,000 to all employees
 who are still employed at the age of 55 after twenty years of service, or
 who are still employed at the age of 65, regardless of their length of service.

Ms. Jane is hired at the age of 45. What is the attribution period for Ms. Jane’s benefit
and how much benefit is attributed each year?
Attribution period Benefit attributed each year
a. age 33 to 55 400,000
b. age 33 to 55 347,826
c. age 35 to 55 400,000
d. age 45 to 65 400,000

8. The actuarial valuation report of Entity A’s post-employment benefit plan shows the
following information:

Service cost 300,000

Net interest on the net defined benefit
liability (asset) 90,000
Remeasurements of the net defined benefit
liability (20,000)

Total defined benefit cost 370,000

How much will be shown in profit or loss and in other comprehensive income?
Profit or loss Other comprehensive income
a. 370,000 0
b. 300,000 70,000
c. 390,000 (20,000)
d. 0 370,000

9. Customer X enters into a five-year contract with Supplier Y for the right to
transport oil from Country A to Country B through Supplier Y’s pipeline. The
contract provides that Customer X will have the right to use 60% of the pipeline’s
capacity throughout the term of the arrangement. Is the portion of the pipeline
specified in the contract qualifies as an identified asset for purposes of lease
accounting?
a. Yes, because it is physically distinct.
b. Yes, because it represents substantially all of the capacity of the entire pipeline.
c. No, because it is not physically distinct and it does not represent substantially
all of the capacity of the entire pipeline.
d. No, but I don’t know why. ☹

10. Which of the following statements is correct regarding the accounting for leases?
a. The lessor depreciates the leased asset under a finance lease.
b. The lessee depreciates the leased asset under a “short-term” or a “low-valued
asset” lease.
c. When discounting lease payments both the lessor and the lessee use the interest
rate implicit in the lease, unless the lessee cannot determine this rate.
d. An entity can never be both a lessor and a lessee of a same leased asset.
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Fact pattern:
On January 1, 20x1, Entity X (Customer) enters into a 4-year lease of equipment with
Entity Y (Supplier). The annual rent is ₱220,000, payable at the end of each year. The
equipment has a remaining useful life of 10 years. The interest rate implicit in the
lease is 10% while the lessee’s incremental borrowing rate is 12%. Entity X uses the
straight-line method of depreciation. The relevant present value factors are as follows:
- PV of an ordinary annuity of ₱1 @10%, n=4………… 3.16987
- PV of an ordinary annuity of ₱1 @12%, n=4………… 3.03735

11. How much is the lease liability to be recognized by Entity X on initial recognition?
a. 702,345 c. 668,217
b. 697,371 d. 0

12. How much is the annual depreciation on the right-of-use asset?

a. 174,343 c. 167,054
b. 175,586 d. 0

13. Assume the lease qualifies for accounting as a lease of “low-value asset.” How
much is the lease liability to be recognized by Entity X on initial recognition?
a. 702,345 c. 668,217
b. 697,371 d. 0

14. Assume the lease qualifies for accounting as a lease of “low-value asset.” How
much is the lease (rent) expense in 20x1?
a. 220,000 c. 167,054
b. 174,343 d. 0

15. Assume the lease is a finance lease. How much is the net investment in the lease to
be recognized by Entity Y on initial recognition?
a. 702,345 c. 668,217
b. 697,371 d. 0

16. Assume the lease is an operating lease. How much is the lease (rent) income in
20x1?
a. 220,000 c. 167,054
b. 174,343 d. 0

17. Trade receivables have a carrying amount of P4,000. The related revenue has
already been included in taxable profit (tax loss). How much is the tax base of the
asset?
a. 4,000 b. 2,400 c. 1,600 d. 0

18. Dividends receivable from a subsidiary have a carrying amount of P4,000. The
dividends are not taxable. How much is the tax base of the asset?
a. 4,000 b. 2,400 c. 1,600 d. 0

19. Current liabilities include accrued fines and penalties with a carrying amount of
P4,000. Fines and penalties are not deductible for tax purposes. How much is the
tax base of the liability?
a. 4,000 b. 2,400 c. 1,600 d. 0

20. A loan payable has a carrying amount of P4,000. The repayment of the loan will
have no tax consequences. How much is the tax base of the liability?
a. 4,000 b. 2,400 c. 1,600 d. 0
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Use the following information for the next four questions:

Taken from the records of ABC Co. as of December 31, 20x1 is the following
information:
Carrying
amount Tax base Difference
Computer software cost 500,000 - 500,000
Machinery 1,000,000 600,000 400,000
Accrued liability - health care 200,000 - 200,000

Additional information:
 Software development costs after technological feasibility was established were
capitalized for financial reporting. The costs were recognized as outright deductions
for tax purposes.
 Straight line method is used in depreciating the machinery while sum-of-the-years’
digits method is used for tax purposes.
 Health care benefits are accrued as incurred but are tax deductible only when cash
is actually paid.
 Pretax profit for 20x1 is ₱1,000,000. Income tax rate is 30%.
 There were no temporary differences as of January 1, 20x1.

21. How much is the deferred tax liability on December 31, 20x1?
a. 400,000 c. 320,000
b. 900,000 d. 270,000

22. How much is the deferred tax asset on December 31, 20x1?
a. 270,000 c. 90,000
b. 120,000 d. 60,000

23. How much is the deferred tax expense/benefit in 20x1?

a. 210,000 expense c. 270,000 expense
b. 210,000 benefit d. 270,000 benefit

24. How much is the current tax expense in 20x1?

a. 300,000 c. 90,000
b. 160,000 d. 64,000

25. As a result of differences between depreciation for financial reporting purposes and
tax purposes, the financial reporting basis of Noor Co.'s sole depreciable asset,
acquired in 20x1, exceeded its tax basis by ₱250,000 at December 31, 20x1. This
difference will reverse in future years. The enacted tax rate is 30% for 20x1, and
40% for future years. Noor has no other temporary differences. In its December 31,
2001, balance sheet, how should Noor report the deferred tax effect of this
difference - Asset (Liability)?
a. ₱75,000 c. (₱75,000)
b. ₱100,000 d. (₱100,000)

26. ABC Co. has the following information relating to its income tax on December 31,
20x1:
 Provision for probable loss on litigation of ₱300,000 is recognized for financial
reporting. This amount is tax deductible only when actually paid. ABC expects to pay
for the accrued loss in 20x2.
 Revenue for financial reporting is recognized based on percentage of completion
while revenue for taxation purposes is recognized based on collections on progress
billings. Total revenue recognized for financial reporting is ₱1,000,000 while
revenue recognized for taxation purposes is ₱800,000.
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 Pretax income for the year is ₱1,000,000. Income tax rate for 20x1 is 30%. However,
an enacted tax law that will take effect starting January 1, 20x2 requires a tax rate
of 32%.
 There are no temporary differences on January 1, 20x1.

How much is the income tax expense?

a. 320,000 c. 298,000
b. 300,000 d. 289,000

27. You and I are the accountants of A Corporation. Our company’s authorized
capitalization is ₱100M divided into 100M shares with par value per share of ₱1.
Which of the following statements is correct?
a. If our company issues 10,000 shares for ₱5 each, we will recognize a share
premium of ₱50,000.
b. Our company can issue shares at a subscription price that is below ₱1.
c. Our company can issue more than 100M shares without amending its articles of
incorporation.
d. If our company receives share subscription for 20,000 shares at ₱15 per share,
we will most likely recognize the related share premium on subscription date
rather than on the collection date.

28. Treasury stock was acquired for cash at a price in excess of its par value. The
treasury stock was subsequently reissued for cash at a price in excess of its
acquisition price. Assuming that the cost method of accounting for treasury stock
transactions is used, what is the effect on retained earnings?
Acquisition of Treasury Stock Reissuance of Treasury Stock
a. No effect Increase
b. Increase No effect
c. No effect No effect
d. Increase Decrease

29. The entry to record the retirement of shares at a price that exceeds the original
issuance price includes
a. a debit to share capital and share premium arising from the original issuance.
b. a debit to any share premium arising from treasury shares.
c. a debit to retained earnings, if (b) is insufficient.
d. a, b and c.

30. Entity A has the following share capital transactions during the year:
 Issued 10,000 shares with par value of ₱10 per share for a total consideration of
₱160,000.
 Received share subscriptions for 20,000 shares at a subscription price of ₱22
per share. Only half of the subscriptions were collected by the end of the year.

How much is the total share premium arising from the share transactions above?
a. 60,000 b. 180,000 c. 300,000 d. 320,000

31. On February 26, 20x1, Entity A acquires 10,000 of its own shares for ₱3 per share.
The shares have a par value of ₱1 and were selling in the stock market at ₱4 per
share on this date. To record the reacquisition, Entity A should
a. debit Treasury shares account for ₱30,000.
b. credit Treasury shares account for ₱30,000.
c. debit Share premium account for ₱10,000.
d. credit Treasury shares account for ₱40,000.
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32. In 20x0, Newt Corp. acquired 6,000 shares of its own ₱1 par value ordinary share
at ₱18 per share. In 20x1, Newt issued 3,000 of these shares at ₱25 per share.
Newt uses the cost method to account for its treasury stock transactions. What
accounts and amounts should Newt credit in 20x1 to record the issuance of the
3,000 shares?
Treasury sh. Sh. premium Retained earnings Ordinary sh.
a. ₱54,000 ₱21,000
b. ₱54,000 ₱21,000
c. ₱72,000 ₱3,000
d. ₱51,000 ₱21,000 ₱3,000

33. At the date of the financial statements, ordinary shares issued would exceed
ordinary shares outstanding as a result of the
a. declaration of a stock split. c. purchase of treasury stock.
b. declaration of a stock dividend. d. payment in full of subscribed stock.

34. On July 31, 2001, Lakers Corporation purchased 500,000 shares of Celtic
Corporation. On December 31, 2002, Lakers distributed 250,000 shares of Celtic
stock as a dividend to Lakers' stockholders. This is an example of a
a. liquidating dividend. c. property dividend.
b. investment dividend. d. stock dividend.

35. When a portion of stockholders' original investment is returned in the form of a

dividend, it is called a
a. compensating dividend. c. property dividend.
b. liquidating dividend. d. equity dividend.

36. Which of the following actions or events does not result in an addition to retained
earnings?
a. A quasi-reorganization
b. Earning of net income for the period
c. Correction of an error in which ending inventory was understated in a previous
year
d. Issuance of a 3-for-1 stock split

37. Cyan Corp. issued 20,000 shares of ₱5 par ordinary share at ₱10 per share. On
December 31, 20x1, Cyan's retained earnings were ₱300,000. In March 20x2, Cyan
reacquired 5,000 shares of its common stock at ₱20 per share. In June 20x2, Cyan
sold 1,000 of these shares to its corporate officers for ₱25 per share. Cyan uses the
cost method to record treasury stock. Profit for the year ended December 31, 20x2,
was ₱60,000. At December 31, 20x2, what amount should Cyan report as retained
earnings?
a. 360,000 c. 375,000
b. 365,000 d. 380,000

38. On July 1, 20x1, COLTISH UNDISCIPLINED Co. declared as property dividends

10,000 shares held as investment in associate with carrying amount of ₱4,000,000.
Information on fair values is shown below:
Date Fair value*
July 1, 20x1 3,200,000
Dec. 31, 20x1 4,400,000
Feb. 1, 20x2 3,800,000

*Assume costs to distribute are immaterial.

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The property dividends are distributed on Feb. 1, 20x2. The entries on February 1,
20x1 include all of the following except
a. a debit to loss for ₱200,000
b. a debit to property dividends payable for ₱600,000
c. a debit to retained earnings for ₱200,000
d. a credit to non-current asset held for distribution to owners for ₱4,000,000

39. On April 1, 20x1, the board of directors of LEEWAY TOLERANCE Co. declared 50%
scrip dividends to shareholders of record as of April 15, 20x1 for distribution on
September 30, 20x1. The scrip dividends bear 10% interest per annum. The
shareholders’ equity of LEEWAY as of April 1, 20x1 is as follows:
Share capital, authorized capital 10,000 shares, ₱400 par 3,200,000
Subscribed share capital 880,000
Share premium 400,000
Retained earnings 1,816,000
Treasury shares (at cost of ₱480 per share) (576,000)
Other components of equity 280,000
Total shareholders’ equity 6,000,000

How much is the scrip dividends payable?

a. 1,800,000 c. 2,200,000
b. 1,360,000 d. 1,760,000

40. Bennett Company paid cash dividends totaling ₱150,000 in 2000 and ₱75,000 in
2001. In 2002, Bennett intends to pay cash dividends of ₱800,000. Bennett
Company has 25,000 shares of common; 70,000 shares of 6 percent, ₱100 par
cumulative preferred. What total amount of dividends will the common
stockholders expect to receive in 2002?
a. 650,000 c. 280,000
b. 125,000 d. 0

41. On January 2, 2000, the board of directors of Gimli Mining Corporation declared a
cash dividend of ₱1,200,000 to stockholders of record on January 18, 2000, and
payable on February 10, 2000. The dividend is permissible by law in Gimli's state of
incorporation. Selected data from Gimli's December 31, 1999 balance sheet follows:

Accumulated ₱ 200,000
depletion
Capital stock 1,100,000
Additional paid-in 800,000
capital
Retained earnings 500,000

The ₱1,200,000 dividend includes a liquidating dividend of

a. 800,000. c. 600,000.
b. 700,000. d. 200,000.

42. The board of directors of Logan Piano Co. decided that the company should
undergo a quasi-reorganization effective on December 31, 2002. On that date, the
company determined the following asset values.
Carrying Fair Value
amount
Machinery ₱ 40,000 ₱ 40,000
Building 300,000 175,000
Equipment 95,000 80,000
₱435,000 ₱295,000
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The stockholders' equity section at December 31, 2002, is presented below.

Common stock, ₱25 par, 25,000 shares issued and ₱625,000

outstanding
Additional paid-in capital 250,000
Retained earnings (deficit) (225,000)
Total ₱650,000

The quasi-reorganization is to be accomplished by reducing the par value of the stock

to ₱20 per share. How much is the balance of the retained earnings account after
effecting the quasi-reorganization?
a. 52,000 c. (16,000)
b. 16,000 d. 0

43. On June 1, 20X4, an entity offered its employees share options subject to the award
being ratified in a general meeting of the shareholders. The award was approved by
a meeting on September 5, 20X4. The entity’s year-end is June 30. The employees
were to receive the share options on June 30, 20X6. At which date should the fair
value of the share options be valued for the purposes of PFRS 2?
a. June 1, 20X4. c. September 5, 20X4.
b. June 30, 20X4. d. June 30, 20X6.

44. On January 1, 20x1, Sealant Co. grants 1,000 share options to each of its 100 key
employees conditional upon each employee remaining in Sealant’s employ over the
next three years. Sealant estimates that the fair value of each share option is ₱60.
Throughout the vesting period, Sealant Co. estimates that 20 per cent of employees
will leave and therefore forfeit their rights to the share options. No employees have
actually left the company during the three-year vesting period. How much is the
salaries expense recognized in 20x3?
a. 1,600,000 c. 2,800,000
b. 1,880,000 d. 0

45. On June 1, 20X6, Oak Corp. granted stock options to certain key employees as
additional compensation. The options were for 1,000 shares of Oak’s ₱2 par value
ordinary share at an option price of ₱15 per share. Market price of this stock on
June 1, 20X6, was ₱20 per share. The options were exercisable beginning January 2,
20X7, and expire on December 31, 20X9. Oak Corp. used the binomial option
pricing model and estimated the value of each option at ₱7. On April 1, 20X7, when
Oak’s stock was trading at ₱21 per share, all the options were exercised. What
amount of pretax compensation should Oak report in 20X6 in connection with the
options?
a. 6,000 b. 5,000 c. 2,500 d.
7,000

Use the following information for the next two questions:

On January 1, 20X6, Doro Corp. granted an employee an option to purchase 3,000
shares of Doro’s ₱5 par value ordinary share at ₱20 per share. The option became
exercisable on December 31, 20X7, after the employee completed two years of service.
The option was exercised on January 10, 20X8. The market prices of Doro’s stock were
as follows:
January 1, 20X6 ₱30
December 31, 20X7 50
January 10, 20X8 45
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The Black-Sholes-Merton option pricing model estimated the value of the options at ₱8
each.

46. For 20X6, Doro should recognize compensation expense of

a. 45,000 b. 12,000 c. 15,000 d. 0

47. Assume that Doro’s plan is an unqualified plan and that the corporate tax rate is
30%, calculate the after tax cost of the stock option plan on the income statement.
a. 8,400 b. 4,800 c. 3,600 d.
7,800

48. Wall Corp.’s employee stock purchase plan specifies the following: For every ₱1
withheld from employees’ wages for the purchase of Wall’s ordinary share, Wall
contributes ₱2. The stock is purchased from Wall’s treasury stock at market price
on the date of purchase. The following information pertains to the plan’s 20x1
transactions:
 Employee withholdings for the year ₱ 350,000
 Market value of 150,000 shares issued 1,050,000
 Carrying amount of treasury stock issued (cost) 900,000

Before payroll taxes, what amount should Wall recognize as expense in 20x1 for the
stock purchase plan?
a. 1,050,000 b. 900,000 c. 700,000 d. 550,000

49. On January 1, 20X6, Pall Corp. granted stock options to key employees for the
purchase of 40,000 shares of the company’s ordinary share at ₱25 per share. The
options are intended to compensate employees for the next two years. The options
are exercisable within a four-year period beginning January 1, 20X8, by the
grantees still in the employ of the company. No options were terminated during
20X6, but the company does have an experience of 4% forfeitures over the life of
the stock options. The market price of the common stock was ₱32 per share at the
date of the grant. Pall Corp. used the Binomial pricing model and estimated the fair
value of each of the options at ₱10. What amount should Pall charge to
compensation expense for the year ended December 31, 20X6?
a. 160,000 b. 200,000 c. 192,000 d. 153,600

50. On January 1, 20x5, Heath Corp. established an employee stock ownership plan
(ESOP). Selected transactions relating to the ESOP during 20x5 were as follows:
 On April 1, 20x5, Heath contributed ₱45,000 cash and 3,000 shares of its ₱10
par value ordinary stock to the ESOP. On this date, the market price of the stock
was ₱18 a share.
 On October 1, 20x5, the ESOP borrowed ₱100,000 from Union National Bank
and acquired 6,000 shares of Heath's common stock in the open market at ₱17 a
share. The note is for one year, bears interest at 10%, and is guaranteed by
Heath.
 On December 15, 20x5, the ESOP distributed 8,000 shares of Heath's common
stock to employees of Heath in accordance with the plan formula. On this date,
the market price of the stock was ₱20 a share.

In its 20x5 income statement, what amount should Heath report as compensation
expense relating to the ESOP?
a. 99,000 b. 155,000 c. 199,000 d. 259,000

51. Many shares and most share options are not traded in an active market. Therefore,
it is often difficult to arrive at a fair value of the equity instruments being issued.
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Which of the following option valuation techniques should not be used as a

measure of fair value in the first instance?
a. Black-Scholes model. c. Monte-Carlo model.
b. Binomial model. d. Intrinsic value.

Use the following information for the next two questions:

On January 1, 20x1, Entity A grants 1,000 share appreciation rights (SARs) to
employees with the condition that the employees remain in service within the next 3
years. Information on the SARs is shown below:

Date No. of SARs expected to vest Fair value of each SAR

Jan. 1. 20x1 1,000 10
Dec. 31, 20x1 900 12
Dec. 31, 20x2 800 15
Dec. 31, 20x3 750 16

52. How much is the salaries expense in 20x3?

a. 3,700 c. 4,000
b. 4,500 d. 4,400

53. How much is the accrued salaries payable on December 31, 20x2?
a. 4,400 c. 8,000
b. 7,500 d. 8,400

54. Elizabeth, a public limited company, has granted 100 share appreciation rights to
each of its 1,000 employees in January 20X4. The management feels that as of
December 31, 20X4, 90% of the awards will vest on December 31, 20X6. The fair
value of each share appreciation right on December 31, 20X4, is ₱10. What is the
fair value of the liability to be recorded in the financial statements for the year
ended December 31, 20X4?
a. ₱300,000 c. ₱100,000
b. ₱10 million d. ₱90,000

55. Jay, a public limited company, has granted 20 share appreciation rights (SARs) to
each of its 500 employees on January 1, 20X4. The rights are due to vest on
December 31, 20X7, with payment being made on December 31, 20X8. Assume that
80% of the awards vest. The fair value of the SARs is not determinable. The share
prices are:
January 1 20X4 ₱15
December 31, 20X4 18
December 31, 20X7 21
December 31, 20X8 19

What liability will be recorded on December 31, 20X7, for the share appreciation
rights?
a. ₱60,000 c. ₱48,000
b. ₱210,000 d. ₱150,000

56. In the tax jurisdiction of Mack, a public limited company, a tax deduction is allowed
for the intrinsic value of the share options issued to employees. The company
issued options on January 1, 20X4, worth ₱15 million, to employees. They vest in
three years. The share options’ intrinsic value at December 31, 20X4 was ₱12
million. The tax rate in the jurisdiction is 30%. What is the tax effect of the above
issue of share options at December 31, 20X4?
a. ₱1.5 million benefit to income statement.
b. ₱1.2 million benefit to income statement.
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c. ₱1.5 million benefit recognized in equity.

d. ₱1.2 million benefit recognized in equity.

57. In the above problem (Mack), what would be the tax effect if the intrinsic value at
December 31, 20X4, was ₱21 million?
a. ₱2.1 million tax benefit to income.
b. ₱2.1 million recognized in equity.
c. ₱1.5 million tax benefit to income, ₱0.6 million recognized in equity.
d. ₱1.5 million recognized in equity, ₱0.6 million tax benefit to income.

58. Doc, a public limited company, has purchased inventory of ₱100,000. The company
has offered the supplier a choice of settlement alternatives. The alternatives are
either receiving 1,000 shares of Doc six months after the purchase date (valued at
₱110,000 at the date of purchase) or receiving a cash payment equal to the fair
value of 800 shares as of December 31, 20X4 (estimated value ₱90,000 at the date
of purchase). What should be the accounting entry at the date of purchase of the
inventory?
a. Inventory ₱90,000, liability ₱90,000.
b. Inventory ₱100,000, liability ₱100,000.
c. Inventory ₱100,000, liability ₱110,000, intangible asset ₱10,000.
d. Inventory ₱100,000, liability ₱90,000, equity ₱10,000.

Use the following information for the next three questions:

Caroline Co.’s equity structure at December 31, 20x1 is shown below:

10% Preference sh., ₱100 par (liquidation value ₱120 per share) 1,000,000
Ordinary shares, ₱100 par 3,000,000
Subscribed share capital - ordinary shares 100,000
Subscription receivable (60,000)
Retained earnings 900,000
Treasury shares (at cost) - 2,000 ordinary shares. (260,000)
Total shareholders' equity 4,680,000

59. The preference shares are cumulative. Dividends are in arrears for three years.
How much is the book value per ordinary share?
a. 150
b. 111.72
c. 112.37
d. 141.38

60. The preference shares are noncumulative. Dividends are in arrears for three
years. How much is the book value per ordinary share?
a. 118.62
b. 112.62
c. 98.87
d. 122.39

61. The preference shares are cumulative. All dividends are paid up to end of the
current year. How much is the book value per ordinary share?
a. 120.00
b. 119.82
c. 118.62
d. 122.07
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62. The shareholders' equity of ABC Construction, Inc. on December 31, 20x1 includes
the following:

8% Preference shares, 20,000 shares, ₱100 par value 3,000,000

10% Preference shares, 10,000 shares, ₱300 par value 4,500,000
Ordinary shares, 50,000 shares, ₱100 par value 7,500,000
Share premium in excess of par 2,250,000
Retained earnings 3,350,000
Total shareholders' equity 20,600,000

The 8% stock is cumulative and fully participating. The 10% stock is noncumulative
and fully participating. Dividends have not been paid for 3 years.

How much is the book value per ordinary share?

a. 192.30
b. 200.30
c. 202.30
d. 205.30

63. PAS 33 is intended to apply to which of the following?

a. Publicly-listed entities
b. Non-publicly listed entities
c. Financial institutions
d. All entities using the PFRSs

64. Which of the following does not result to a retrospective adjustment of prior-period
EPS information?
a. share dividends c. issuance of shares for cash
b. share split d. issuance of stock rights

65. Earnings per share is not required to be computed on

a. profit or loss from continuing operations.
b. results of discontinued operations.
c. profit or loss for the year.
d. other comprehensive income.

66. Entity A had 100,000, ₱10 par, 10% cumulative preference shares outstanding all
throughout 20x1. Entity A reported profit after tax of ₱2,800,000 for the year
ended December 31, 20x1. The movements in the number of ordinary shares are as
follows:
1/1/20x1 Ordinary shares outstanding 120,000
3/1/20x1 Shares issued for cash 42,000
9/30/20x1 Subscribed shares 20,000
11/1/20x1 Reacquisition of treasury shares (12,000)
Outstanding shares at the end of period 170,000

What is the basic earnings per share?

a. 18.92
b. 17.09
c. 18.07
d. 16.98

67. Entity A had the following instruments outstanding all throughout 20x1:
12% convertible bonds payable issued at face amount, each
₱1,000 bond is convertible into 30 ordinary shares ₱2,000,000
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Ordinary shares, ₱10 par, 100,000 shares issued and

outstanding 1,000,000

Profit for the year is ₱800,000. Entity A’s income tax rate is 30%.

What is the diluted earnings per share in 20x1?

a. 6.28
b. 6.05
c. 6.15
d. 5.98

68. Entity A is computing for its basic earnings per share and has gathered the
following information:
Loss for the year (1,000,000)
Preferred dividends 50,000
Outstanding ordinary shares 100,000

There have been no changes in the number of outstanding ordinary shares during the
period. What is the basic earnings (loss) per share?
a. -10.50 c. -9.50
b. 10.50 d. 9.50

69. Entity A had 200,000 ordinary shares outstanding all throughout 20x1. In 20x2, the
following share issuances occurred:
 On April 1, 20,000 shares were issued for cash.
 On September 30, a 10% bonus issue (share dividend) was declared.
 On November 1, a 2-for-1 share split was issued.

Entity A had the following profits: ₱2,200,000 in 20x2 and ₱1,800,000 in 20x1. What
are the earnings per share to be disclosed in Entity A’s 20x2 comparative financial
statements?
20x2 20x1
a. 4.22 4.02
b. 4.37 4.07
c. 4.65 4.09
d. 4.78 4.12

70. Entity A has 200,000 ordinary shares outstanding on January 1, 20x1. Entity A
offers rights issue to its existing shareholders that enable them to acquire 1
ordinary share at a subscription price of ₱120 for every 5 rights held. The rights are
exercised on May 1, 20x1. The market price of one ordinary share immediately
before exercise is ₱180. Entity A reported profit after tax of ₱2,900,000 in 20x1.
What is the basic earnings per share in 20x1?
a. 12.58
b. 12.67
c. 11.92
d. 17.67

71. Who created the concept of present value?

a. Jose Rizal and friends
b. Rodrigo Duterte
c. Manny Pacquiao
d. None of these
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“Do not be deceived: God cannot be mocked. A man reaps what he

sows.” - Galatians 6:7
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