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During the current year, Line Company received a donation of 2,000 shares with
P50 par value from a shareholder. On that date, the share market value was
P350. The shares were originally issued for P250 per share.
What is the decrease in shareholder’s equity as a result of the donation?

a. 700,000
b. 500,000
c. 200,000
d. 0
Day Company held 10,000 shares of P10 par value as treasury reacquired in
2014 for P120,000. On December 31, 2015, the entity reissued all 10,000 shares
for P190,000
Under the cost method of accounting for treasury shares, what is credited for the
excess of the reissue price over the cost of treasury shares?
a. Share capital of P100,000
b. Retained earning of P70,000
c. Gain on sale of investment P70,000
d. Share premium of P70,000
At the beginning of the current year, Ria Company issued 10,000 ordinary shares
of P20 par value and 20,000 convertible preference shares of P20 par value for a
total of P800,000. At this date, the ordinary share was selling for P36, and the
convertible preference share was selling for P27.
What amount of the proceeds should be allocated to the convertible preference

shares?
a. 600,000
b. 540, 000
c. 480,000
d. 440,000
Long Company had P10,000 shares issued and outstanding on January 1, 2015.
On March 15, the entity declared a 2 for 1 share split when the fair value of share
was P80. On December 15, the entity declared a P5 per share cash dividend.
What amount should be reported as dividends?

a. 50,000
b. 100, 000
c. 850, 000
d. 950, 000
Ray company declared a 5% stock dividend on 100,000 issued and outstanding
shares of P20 par value, which had a fair value of P50 per share before the stock
dividend was declared. This stock dividend was distributed 60 days after the
declaration date.
What is the increase in current liabilities as a result of the stock dividend

declaration?
a. 250,000
b. 100,000
c. 150, 000
d. 0
The direction of Ontario Company whose P50 par value share capital is currently
selling of P60 per share have decided to issue a stock dividend. The selling price
is not expected to be affected by the stock dividend. The entity, which has an
authorization for 1,000,000 shares, had issued 500,000 shares, of which 100,000
shares are now held as treasury
In order to capitalize P2,400,000 of retainer earnings, what percentage should be

declared as a stock dividend by the directors?
a. 10%
b. 8%
c. 6%
d. 4%
On January 1, 2015, Eagle Company reported P1,750,000 of appropriated

retained earnings for the construction of a new office building, which completed
in 2015 at a total cost of P1,500,000.
In 2015, the entity appropriated P1,200,000 of the retirement earnings for the
construction of a new plant. Also, P2,000,000 of cash was restricted for the
retirement of bonds due in 2016.
In the December 31, 2015 statement of financial position, what amount should be
reported as appropriated retained earnings?
a. 1,200,000
b. 1,450,000
c. 2,950,000
d. 3,200,000
On January 1 2015, Rama Company had 20,000 treasury shares of P100 par
value that had been acquired in 2014 at P120 per share. In December 2015, the
entity reissued 15,000 of these treasury shares at P150 per share. The cost
method is used to record treasury transactions.
On December 31, 2015, what amount should be reported as a restriction of

retained earnings as a result of the treasury share transactions?
a. 2,400,000
b. 1,800,000
c. 600,000
d. 500,000
Brown Company provided the following shareholders’ equity on December 31,

2015:
Share capital, P30 par, 100,000 shares 3,000,000

authorized and outstanding
Share premium 1, 500,000
Retained earnings (deficit) (2,100,000)
On December 31, 2015, the entity put into effect a quasi-reorganization by

reducing the par value of the share to P5 and eliminating the deficit against share
premium
Immediately after the quasi-reorganization, what amount should be reported as

share premium?
a. 1,500,000
b. 1,900,000
c. 4,000,000
d. 600,000
Irish Company granted 10,000 share options to each of its five directors on
January 1, 2015. The options vest on January 1, 2015 is P50 and it is anticipated
that all of the share options will vest on January 1, 2019.
What amount should be reported as increase in expense and equity for the year
ended December 31, 2015?
a. 750,000
b. 500,000
c. 625,000
d. 125,000
On January 1, 2015, Kline Company granted Morgan, the president,

compensatory share options to buy 10,000 ordinary shares of P10 par value. The
options call for a price of P20 per share and are exercisable in 3 years following
the grant date. Morgan exercised the options on December 31, 2015. The market
price of the share was P60 on January 1, 2015, and P70 on December 31, 2015.
The fair value of the share option is P30 on the date of grant.
What is the net increase in shareholders’ equity as a result of the grant and
exercise of the options?
a. 200,000
b. 300,000
c. 500,000
d. 700,000
Esmeralda Company issued fully paid shares to 200 employees on December

31, 2015. Normally, shares issued to employees vest over a two-year period but
these shares have been given as a bonus to the employees because of their
exceptional performance during the year. The shares have a market value of
P500,000 on December 31, 2015 and an average fair value of P600,000 for the
year.
What amount should be expensed for this share-based payment transaction?

a. 600,000
b. 500,000
c. 300,000
d. 250,000
Elizabeth Company granted 100 share appreciation rights to each of the 1,000
employees in January 2015. The entity estimated that 90% of the awards will
vest on December 31, 2017. The fair value of each share appreciation right on
December 31, 2015 is P10.
What is the accrued liability on December 31, 2015?

a. 300,000
b. 900,000
c. 100,000
d. 90,000
On January 1, 2015. Omega Company granted the chief executive officer (CEO)
50,000 share appreciation tights for past services. The rights are exercisable
immediately and expire on December 31, 2016. On exercise, the CEO is entitled
to receive cash for the excess of the share market price on exercise data over
the market price on grant date. The CEO did not exercise any of the rights in
2015.
The market price of the share was P100 on January 1, 2015 and P115 on
December 31, 2015. The CEO exercised the rights on December 31, 2016 when
the market place was P110
What amount should be recognized as gain on reversal of share appreciation

rights in 2016?
a. 750,000
b. 500,000
c. 250,000
d. 0
Norway Company granted 200 share appreciation rights to each of the 500
employees on January 1, 2012. The rights are due to the vest on December 31,
2015 with payment being made on December 31, 2016. Only 80% of the awards
vest.
Share price
January 1, 2012 (Predetermined price) 150
December 31, 2012 180
December 31, 2015 210
December 31, 2016 190
How should be settlement of the share appreciation rughts be accounted for on

December 31, 2016?
a. Payment of P3,200,000 and no gain is recorded
b. Payment of P4,800,000 and no gain recorded
c. Payment of P1,600,000 and gain of P3,200,000 recorded
d. Payment of P3,200,000 and gain P1,600,000 recorded

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During the current year, Line Company received a donation of 2,000 shares with

What is the decrease in shareholder’s equity as a result of the donation?

What amount of the proceeds should be allocated to the convertible preference

What amount should be reported as dividends?

What is the increase in current liabilities as a result of the stock dividend

In order to capitalize P2,400,000 of retainer earnings, what percentage should be

On January 1, 2015, Eagle Company reported P1,750,000 of appropriated

On December 31, 2015, what amount should be reported as a restriction of

Brown Company provided the following shareholders’ equity on December 31,

Share capital, P30 par, 100,000 shares 3,000,000

On December 31, 2015, the entity put into effect a quasi-reorganization by

Immediately after the quasi-reorganization, what amount should be reported as

On January 1, 2015, Kline Company granted Morgan, the president,

Esmeralda Company issued fully paid shares to 200 employees on December

What amount should be expensed for this share-based payment transaction?

What is the accrued liability on December 31, 2015?

What amount should be recognized as gain on reversal of share appreciation

How should be settlement of the share appreciation rughts be accounted for on

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