Quiz

TF PARCOR FINAL QUIZ
1. Ledesma Company December 31, 2020 reported a retained earnings of P 150,000. Net Income
for 2020 was P 85,000 and dividends of P 60,000 were declared and paid in 2020. Ledesma
accountant discovered that net income for 2019 has been overstated by P 25,000 due to an
error in recording depreciation expense for 2019:
Requirement: Compute the retained earnings as of December 31, 2019 100,000
Retained Earnings 25,000

Accumulated Depreciation 25,000
Retained Earnings, 12/31/2020 150,000

Add: Dividends 60,000
Total 210,000
Less: Net Income (85,000)
Less: Overstated Value (25,000)
2. Waban has been employed as an accountant by Bombay Company for a number of years. She
handles all accounting duties, including the preparation of the financial statement. The
following statement prepared by Waban for 2020:
Bombay Company
Statement of Comprehensive Income
Balance January 1, 2020 P 365,000
Add:
Gain on Sale of Trading Securities P 15,000
Interest Revenue 3,000
Net Income for 2020 150,000 158,000
Total P 523,000
Deduct:
Dividends declared and paid P 100,000
Loss on Sale of Equipment 2,500
Loss on Covid 19 Pandemic 83,000 185,500
Balance at December 31, 2020 P 337,500
Required:
1. Compute the net income for Bombay Company? 82,500
Net income 150,000

Add: Gain on Sale of Trading 15,000
Securities
Interest Revenue 3,000 18,000
Total 168,000
Less: Loss on Sale of Equipment 2,500
Loss on Covid 19 Pandemic 83,000 85,500
Adjusted Net Income 82,500
2. Compute the correct retained earnings balance as of December 31, 2020

Answer: 347,500
Retained Earnings, beg. 365,000

Add: Net Income 82,500
Total 447,500
Less: Dividends declared and paid (100,000)
Retained Earnings, ending 347,500
3. The Capital Accounts of Perez Company on June 30, 2020, are as follows:
Ordinary shares P 10 par, 50,000 shares issued and outstanding P 500,000

Shares Premium 250,000
Retained Earnings 3,135,000
The company’s ordinary shares are selling at this time at P 20.
Required: Prepare journal entries in each of the following cases?

A) 15% stock dividend is declared and issued
SMALL SHARE DIVIDEND

DATE OF DECLARATION
Retained Earnings (15% x 50,000 shares x 20) 150,000
Shares Distributable (15% x 50,000 shares x 10) 75,000
Shares Premium 75,000
DATE OF RECORD
No entry
DATE OF ISSUANCE
Shares Distributable 75,000
Ordinary Shares 75,000
B) 20% stock dividend is declared and issued

LARGE SHARE DIVIDEND
DATE OF DECLARATION
Retained Earnings (20% x 50,000 shares x 10 par) 100,000
DATE OF RECORD
No entry
DATE OF ISSUANCE
Ordinary Shares 100,000
C) 4-for-1 stock split is declared and issued. No journal entry needed, just a
memo entry.
50,000 x 4 = 200,000 shares;

10 / 4 = 2.5 par value per share
Memorandum Entry: A 4-for-1 stock split in the corporation increased the number of ordinary
shares issued and outstanding from 50,000 to 200,000 shares and reduced the par value from
10 to 2.5 per share.
4. Maglunsod Company declared a 50% stock dividend on its 10,000 issued and outstanding shares
of P 2 par value ordinary shares, which had a Fair value of P 5 per share before the stock
dividends was declared. This stock dividend was distributed 60 days after the declaration date.
By what amount did Maglunsod’s current liabilities increase as a result of the stock or shares
dividend declaration? 0 or No effect since Share Dividends does not involve any liability
5. At December 31, 2020 Ivan Company had the following equity accounts:
Ordinary shares P 10 par, 100,000 shares authorized, 40,000 shares P 500,000
issued and outstanding
Shares Premium from issuance of ordinary shares 640,000
Retained Earnings 1,000,000
Total Equity P 2,040,000
Each of the 30,000 ordinary shares outstanding was issued at a price of P 26. On January 2,
2021, 2,000 shares reacquired for P 30/share. The cost method is used in accounting for
Treasury Shares.
Required: Compute the amount of the decrease in the Stockholder’s Equity 60,000
Treasury Stock (2,000 x 30) 60,000
Cash 60,000

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TF PARCOR FINAL QUIZ

Requirement: Compute the retained earnings as of December 31, 2019 100,000

Retained Earnings 25,000

Retained Earnings, 12/31/2020 150,000

Net income 150,000

2. Compute the correct retained earnings balance as of December 31, 2020

Retained Earnings, beg. 365,000

Ordinary shares P 10 par, 50,000 shares issued and outstanding P 500,000

The company’s ordinary shares are selling at this time at P 20.

Required: Prepare journal entries in each of the following cases?

SMALL SHARE DIVIDEND

B) 20% stock dividend is declared and issued

50,000 x 4 = 200,000 shares;

Treasury Stock (2,000 x 30) 60,000

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