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PROBLEM 1: Presented below are four independent cases relating to the audit of shareholders’ equity. Answer the questions at the end of each case. I.  The retained retained earnings earnings account for for CURDAPIA CURDAPIA C. shows shows the following following !debits" !debits" and credits# credits#  $an. &alance P'()%*(+ % ++ a" ,oss fro- re !/(%*0" b"

1oodwill i-pair-ent

!/''(+++"

c"

2t 2toc3 di4idend

!0++(+++"

d"

,oss on sale of equip-ent

!%*0(0++"

e" f"

5cer’s 5cer’s co-pen co-pensati sation on relate related d to inco-e inco-e of prior prior period periods s6 accrual o4erloo3ed 2hare pre-iu- 6 issuance

!'(%+7(++ +" *)0(+++

g"

2toc3 subscription defaults

h"

1ain on sale of treasury shares

i"

1ain on early retire-ent of bonds at less than carrying 4alue

8%(+++

1ain on life insurance insurance policy policy settle-ent

*8(+++

Correction of prior:period error

/+(0++

 9" 3"

/*('0+ %7*(+++

%. ;hat is the the corrected corrected a-ount a-ount of retain retained ed earning earnings< s< A. P)0'(0++ C. P%0*(0++ &. P/7/(0++ D. P)+/(0++

II. =A>D>1 C?PA>@ began operations on $anuary %( '+%%( by issuing at P%0 per share one: half of the 7*0(+++ ordinary shares !P% par 4alue" that had been authoried for issue. In addition( =andong has '0+(+++ B preference shares !P0 par 4alue" authoried. During '+%%( =andong reported reported net inco-e of P0%'(0++ and declared di4idends di4idends of P%%8(*0+. During '+%'(  $an. April  $uly

ct. Dec.

=andong co-pleted the following transactions# %+ Issued an additional additional 0+(+++ 0+(+++ ordinary ordinary shares for P%* per share share ' Issued *0(+++ preference shares for P8 per share '% Authoried the the acquisition of a custo-:-ade -achine to be deli4ered in $anuary '+%/. =andong appropriated P%7*(0++ of retained earnings for the purchase of the -achine. '0 Iss Issued an an ad additional '0 '0(+++ pr preference sh shares fo for P) P) pe per sh share /% Reported PB PB+*(0++ of of net in inco-e an and declared a di4idend of P/%*(0++ to shareholders shareholders of record on $anuary /%( '+%/( to be paid on ebruary 7( '+%/.

'. ;hat is the the total shareh shareholde olders’ rs’ equity equity on Dece-ber Dece-ber /%( /%( '+%'< A. P0 P0(**/(0++ C. P/()0B('0+ &. PB PB('/8(*0+ D. P0()'%('0+ /. ;hat is the unappropriated unappropriated retained retained earnings earnings balance balance on Dece-ber Dece-ber /%( '+%'< A. PB8/(*0+ C. P80/(*0+ &. P0/B('0+ D. P0BB('0+

III. &URAD C. is authoried to issue /++(+++ of P' par 4alue ordinary shares. The co-pany has the following transactions# transactions# a" Issued Issued B+(+++ B+(+++ shares shares at P/+ per shar shareE eE recei4ed recei4ed cash cash b" Issued *0+ shares( shares( selling selling at P/0 per per share( share( to lawyers for for ser4ices in connection with with the organiation of the corporation. The 4alue of the legal ser4ices was P'*(+++.

c" Issued )++ shares( shares( 4alued ob9ecti4ely ob9ecti4ely at P/+(+++( to the e-ployees instead of of paying the- cash wages. d" Issued /*(0++ shares in eFchange eFchange for a building building 4alued at P880(+++ and land 4alued at P'7+(+++. !the building was originally acquired by the in4estor for P*0+(+++ and has P/++(+++ of accu-ulated depreciationE the land was originally acquired for P)+(+++." e" Recei4ed Recei4ed cash for %)(0++ %)(0++ shares shares issued issued at P/8 per share. f" Issued Issued %'(+++ %'(+++ shar shares es at P70 P70 per shar shareE eE recei4ed recei4ed cash cash 7. The state-ent state-ent of nancial position position will report report share share pre-iupre-iu- of A. P7 P7(+++()0+ C. P7(++%(*++ &. P/ P/()*/(0++ D. P/(/'B(*++

IV.  TA,  TA, C?PA>@ C?PA>@ has been paying paying regular regular quarterly quarterly di4idends of of P%.0+ and wants wants to pay the sa-e a-ount in the third quarter of '+%'. The following infor-ation relates to the co-pany’s equity#  $an. eb. ?arch ?ay

% %0 /% %'

 $une

%0 /+

2hares outstanding( outstanding( 7++(+++E 7++(+++E P' par !*0+(+++ !*0+(+++ shares shares authoried" Issued '0(+++ new shares at P%+.0+ Paid quarterly di4idends of P%.0+ per share Con4erted P% P%(+++(+++ of of P% P%(+++ bo bonds to to or ordinary sh shares at at th the rate of 0+ shares per P%(+++ bond Issued rate of 0+ share share di4idend Paid aid quar quarte terl rly y di4 di4id iden ends ds of P% P%.0 .0+ + per per shar share e

0. ;hat is the total a-ount that that Talo Talo will ha4e to pay in di4idends di4idends in the third quarter quarter in order order to pay P%.0+ per share< A. P*)+(8*0 C. PB/*(0++ &. P*%'(0++ D. P*7)('0+ B. ;hat is the total a-ount a-ount of di4idends di4idends to be distributed distributed during during the year assu-ing no equity transactions occur after $une /+< A. P/ P/(%B/(0++ C. P/(+%+(%'0 &. P/ P/(+80(%'0 D. P/(%'%(8*0

PROBLEM 2:  The >GPA, >GPA, C?PA>@ C?PA>@ is authoried authoried to issue issue B++(+++ shares shares of P%+ par 4alue ordinary ordinary share share capital. >epal’s accounting year ends on Dece-ber /%. The following transactions occurred in '+%'( the co-pany’s rst year of operations. a. Issued Issued '+(+++ '+(+++ shares shares at at P'+ per shar shareE eE recei4ed recei4ed cash cash b. Issued '(0++ shares to attorneys for ser4ices in securing securing the corporate corporate charter and for preli-inary legal costs of organiing the corporation. The 4alue of the ser4ices was P80(+++. c. Issued /++ shares( shares( 4alued ob9ecti4ely at P%0(+++( P%0(+++( to the the e-ployees instead of paying the- cash wages. d. Issued /'0(+++ /'0(+++ shares shares in eFchange eFchange for a building building 4alued 4alued at P/(+++(+++ P/(+++(+++ and land 4alued 4alued at P7(+++(+++. !The building was originally acquired by the in4estor for P'(0++(+++ and has P%(+++(+++ of accu-ulated depreciationE the land was originally acquired for P%(0++(+++." %. ;hat is the ordinary ordinary share share capital balance balance on Dece-ber /%( /%( '+%'< A. P/ P/(70/(+++ C. P/(7)+(+++ &. P/ P/(7*8(+++ D. P7('*8(+++ '. The a-ount of share share pre-iupre-iu- to be reported reported on >epal’s state-ent state-ent of nancial nancial position position at Dece-ber /%( '+%'( is A. P/ P/()B'(+++ C. P/(+''(+++ &. P7 P7(+7*(+++ D. P7(+''(+++ /. The a-ount of organiation organiation eFpense eFpense to be be charged charged against >epals inco-e inco-e for '+%' '+%' is A. P80(+++ C. P'0(+++ &. P+ D. PB+(+++

PROBLEM 3:  The following following are PA=I2T PA=I2TA> A> C?PA>@’s C?PA>@’s equity accounts at Dece-ber Dece-ber /%( '+%%# '+%%# rdinary share share capital( par 4alue P%+E authoried '++(+++ sharesE issued and outstanding

P%('++(++ +

2hare pre-iuRetained earnings

%8+(+++ *'+(+++

Pa3istan Co-pany uses the cost -ethod of accounting for treasury shares. The a. b. c.

following transactions occurred in 2012: Acquir Acquired ed 8(+++or 8(+++ordina dinary ry shares shares for P%77(+ P%77(+++ ++ 2old B(0++ treasur treasury y shares shares at P'+ P'+ per shar share e Retired etired the re-ainin re-aining g treasu treasury ry share shares s

;hat is the share pre-iu- balance on Dece-ber /%( '+%'< A. P%%*(+++ C. P%8%(+++ &. P%B8(+++ D. P%)/(+++

PROBLEM 4: As the newly appointed auditor in '+%' for $RDA> C?PA>@( you ha4e analyed the co-pany’s H2hare Pre-iu- Pre-iu- account. The following is a su--ary of the account since the inception of $ordan Co-pany.

Cash di4idends 6 preference shares Cash di4idends 6 ordinary shares GFcess of a-ount paid in o4er par 4alue of ordinary shares >et inco-e 1ain on early eFtinguish-ent of debt  Treasury  Treasury preference preference sharesE sharesE issued issued and reacquired reacquired at par ,oss on litigation Correction of a prior period error

Debits P%B+(+++ %)0(+++

Credits

P/*0(+++ 0++(+++ 7'(+++ )+(+++ *0(+++ '/(+ ++ P 917,000

P 917,000

%. ;hat is is $ordan’ $ordan’s s correct correct net incoinco-e e for '+%'< '+%'< A. P0++(+++ C. P777(+++ &. P7B*(+++ D. P7**(+++ '. ;hat is the correct correct retained earnings earnings balance balance !before appropriation appropriation for treasury treasury shares" shares" as at the end of the current year< A. P777(+++ C. P8)(+++ &. P%/0(+++ D. P%%'(+++ /. ;hat is the correct correct share pre-iupre-iu- balance as at the end of the the current current year< A. P007(+++ C. P*8%(+++ &. PB++(+++ D. P/*0(+++

PROBLEM 5: I2RAG, C?PA>@ is authoried to issue '++(+++ of P%+ par 4alue ordinary shares( and B+(+++ of B cu-ulati4e and nonparticipating preference shares( par 4alue P%++ per share. The co-pany engaged in the following share capital transactions through Dece-ber /%( '+%'# a. 0+(+++ ordinary ordinary shares shares were issued issued for PB0+(+++ PB0+(+++ and '+(+++ '+(+++ preference preference shares shares for -achinery 4alued at P'(B++(+++. b. 2ubscriptions 2ubscriptions for )(+++ )(+++ ordinary ordinary shares ha4e been ta3en( ta3en( and 7+ of the subscription subscription price of P%8 per share has been collected. The shares will be issued upon collection of the subscription price in full. c. '(+++ treasury treasury ordinary ordinary shares shares ha4e ha4e been purchased purchased for P%' and and accounted for under under the cost -ethod.  The post:closing post:closing retained retained earnings earnings balance at at Dece-ber /%( '+%'( '+%'( is P7'+(+++. P7'+(+++. ;hat is Israel’s total shareholders’ shareholders’ equity at Dece-ber /%( '+%'< A. P/ P/(*%7(8++ C. P/(B/8(8++ &. P/ P/(*%+(8++ D. P/.%%+.8++

PROBLEM 6:

2I>1APRG CRPRATI> recently hired a new accountant with 4ery li-ited eFperience in corporation accounting. During the rst -onth( he -ade the following entries for the corporations share capital.  $anuary '

Cash

'++(+++

2hare capital Issued 10,000 of P5 par value ordinary shares at P20 per share %+

Cash

'++(+++

B++(+++

2hare capital Issued 15,000 of P30 par value preference shares at P40 per share

B++(+++

%0

2hare Capital Cash Purchased 1,000 ordinary shares for the treasury at P per share

8(+++ 8(+++

/%

Cash %(+++ ,oss on sale of share capital %(0++ 2hare capital '(0++ !old 500 treasury shares at P2 per share

Required: Prepare the necessary correcting entries.

PROBLEM 7:  The shareholders’ shareholders’ equity equity of the ?A> C?PA>@ C?PA>@ as of Dece-ber Dece-ber /%( '+%%( was as follows# follows# rdinary shares( P%+ par( authoried /++(+++ sharesE '0+(+++ shares issued and outstanding 2hare pre-iu- 6 issuance Retained Garnings

P'(0++(++ + /(0++(+++ %(*7+(+++

n $une %( '+%'( -an reacquired 7+(+++ ordinary shares at P7+. The following transactions occurred with regard to these shares.  $uly % August % 2epte-ber %

2old %0(+++ shares shares at P78 2old %)(+++ shares at P'* Retired %(+++ shares

 The following following entries were were -ade by the the co-pany’s accountant accountant to record record the preceding preceding transactions.

2012  $une %

Treasury shares

%(B++(+++ %(B++(++ +

Cash  $uly %

Cash

*'+(+++  Treasury  Treasury shares shares

August %

Cash

*'+(+++ 0%/(+++

 Treasury  Treasury shares shares 2epte-ber %

rdinary shares  Treasury  Treasury shares shares

0%/(+++ %+(+++ %+(+++

-an’s net inco-e for '+%' was P%/0(+++. &ased on the preceding infor-ation( deter-ine the correct balances of the following accounts# %. Treas reasur ury y shar shares es

'.

/.

7.

0.

A. P%B+(+++ C. P'%+(+++ &. P%)+(+++ D. P'++(+++ rdi rdina nary ry sha sharres A. P' P'(7)+(+++ C. P'(7B+(+++ &. P' P'(0++(+++ D. P'('%+(+++ 2hare 2hare pre pre-iu -iu- 6 issua issuance nce A. P/ P/(78B(+++ C. P/(B'+(+++ &. P/ P/(0++(+++ D. P/(B+B(+++ 2hare 2hare pre-iupre-iu- 6 treasu treasury ry shar shares es A. P%'+(+++ C. P'7+(+++ &. P+ D. P*%+(+++ Retained Retained earnings earnings !before appropriation appropriation for treasury treasury shares" shares" A. P% P%(*/'(+++ C. P%(0)*(+++ &. P% P%(80)(+++ D. P%(*%8(+++

PROBLEM 8:  The ,A2 C?PA>@ C?PA>@ wants to raise its wor3ing wor3ing capital. capital. After After analysis of the a4ailable a4ailable options( the co-pany decides to issue B(+++ shares of P/+ per preference shares with detachable warrants. The pac3age of the shares and warrants sells for P%'+. The warrants enable the holder to purchase B(+++ shares of P%+ par ordinary shares at P7+ per share. I--ediately following the issuance of the shares( the share warrants are selling at P%+ per share. The -ar3et 4alue of the preference shares without the warrants is P)+. %. ;hat a-ount a-ount should should be assigned to the share warrants issued< A. PB+(+++ C. P%8+(+++ &. P*'(+++ D. P0'+(+++ '. Assu-ing that only only 8+ of the warrants warrants are eFercised( eFercised( the the entry to record record the eFercise eFercise of the warrants should include a "e#it to $redit to A. 2har 2hare e warr warrant ants s outst outstan andin ding( g( 2hare pre-iu-( P'+%(B++ P0*(B++ &. Cash( P%)'(+++ rdinary share capital( P'7)(B++ C. 2hare pre-iu-( P'+%(B++ rdinary share capital( P78(+++ D. Cash( P78(+++ ;arrants outstanding( P0*(B++

PROBLEM 9:  The shareholders’ shareholders’ equity equity section of &AJRAI> &AJRAI> CRPRA CRPRATI>’s state-ent of of nancial position position as of Dece-ber /%( '+%%( is as follows# rdinary share capital !P0 par( '0+(+++ shares authoried( %/*(0++ issued and outstanding" 2hare pre-iu-

P B8*(0++ '*0(++ +

 Total  Total paid:in:capital paid:in:capital Unappropriated retained earnings Appropriated retained earnings  Total  Total retained retained earnings earnings  Total  Total shareholders’ shareholders’ equity equity

P )B'(0++ P BB*(0++ '0+(+ ++ )%*(0+ + P1,880,0 00

&ahrain Corporation had the following shareholders’ equity transactions during '+%'#  $an. %0 Co-pleted the building reno4ation reno4ation for which which P'0+(+++ of retained retained earnings had been restricted. Paid the contractor P'7'(0++( all of which is capitalied.

?arch / ?ay %8  $une %)

 $uly /%

Issued 0+(+++ additional ordinary shares for P8 per share Declared a di4idend of P%.0+ per share to be paid on $uly /%( '+%'( to shareholders of record on $une /+( '+%'. Appro4ed additional building reno4ation to be funded internally.  The esti-ated cost of the pro9ect pro9ect is P'++(+++( P'++(+++( and retained retained earnings are to be restricted for that a-ount. Paid the di4idend

Dec. /%

Declared Declared a property di4idend to be paid on $anuary %+( '+%/( to shareholders of record on $anuary 0( '+%/. The di4idend is to consist of equip-ent with a carrying 4alue of P%0+(+++. The equip-ents fair 4alue at Dece-ber /%( '+%'( is P%0*(0++

Dec. /%

Reported P77'(0++ of net inco-e on Dece-ber /%( '+%'( inco-e state-ent.

%. The balance balance in the ordinary share capital account account at Dece-ber Dece-ber /%( '+%'( '+%'( should be A. P% P%(+)0(+++ C. P)/*(0++ &. P% P%(+8*(0++ D. PB8*(0++ '. The balance balance in the share pre-iupre-iu- account account at Dece-ber /%( '+%'( should should be A. P7'0(+++ C. P'*0(+++ &. P%'0(+++ D. P'B+(+++ /. The balance balance in the unappropriated unappropriated retained retained earnings earnings account account at Dece-ber Dece-ber /%( '+%'( '+%'( should be A. P)'%('0+ C. P'++(+++ &. P*%/(*0+ D. P*'%('0+ 7. The total total sharehol shareholders ders’’ equity at Dece-ber Dece-ber /%( '+%'( '+%'( should should be A. P' P'('//(*0+ C. P'(+8/(*0+ &. P' P'('8/(*0+ D. P'(/*%('0+

PROBLEM 10:  @ou  @ou ha4e been assigned assigned to the the audit of ?A,A@2IA ?A,A@2IA C.( C.( a -anufacturing -anufacturing co-pany. @ou @ou ha4e been as3ed to su--arie the transactions for the year ended Dece-ber /%( '+%'( aKecting shareholders’ equity and other related accounts. The shareholders’ equity section of ?alaysia’s Dece-ber /%( '+%%( state-ent of nancial position follows# rdinary share capital( P' par 4alue( %(+++(+++ shares authoried( %8+(+++ shares issued( %**(08+ shares outstanding 2hare pre-iu- 6 issuance 2hare pre-iu- 6 treasury shares Retained earnings Cost of '(7'+ treasury shares  Total  Total shareholders’ shareholders’ equity equity

P /B+(+++ /(B7+(+++ 70(+++ B7)(/*8 !%70('++ " P 4,549,178

 @ou  @ou ha4e eFtracted eFtracted the following following infor-ation infor-ation frofro- the accounting accounting records records and audit wor3ing papers.

2012  $an. %0

eb. %

?alaysia reissued reissued %(/++ treasury shares for for P7+ per share. share. The '(7'+ '(7'+ treasury shares on hand at Dece-ber /%( '+%%( were purchased in one bloc3 in '+%+. 2old %8+( P%(+++( P%(+++( ) ) bonds bonds due ebruary ebruary %( %( '+''( '+''( at %+/ with one detachable share warrant attached to each bond. Interest is payable annually on ebruary %. The fair -ar3et 4alue of the bonds without the share warrants is )0. The detachable warrants ha4e a fair 4alue of P0+ each and eFpire on ebruary %( '+%/. Gach warrant entities

the holder to purchase %+ ordinary shares at P7+ per share. ?arch B

'(8++ ordinary shares were subscribed for at P77 per share 7+ of the subscription was collected

'+

The The bala balanc nce e due due on '(7+ '(7++ +s sha harres was was recei ecei4e 4ed d and and thos those e sha sharres were issued

>o4. >o4. %

There There were were %%+ shares shares warr warrants ants detached detached frofro- the bonds bonds and and eFercised

?alaysia’s net inco-e for '+%' is P)0+(+++. &ased on the preceding preceding infor-ation( deter-ine the correct Dece-ber /%( '+%'( balance of each of the following# %. rdin rdinary ary shar share e capit capital al A. P/B7(8++ C. P/*'(B++ &. P/*0(8++ D. P/B*(+++ '. 2hare 2hare pre pre-iu -iu- 6 issua issuance nce A. P/ P/(8'*('++ C. P/(8+0(+B0 &. P/ P/(8+8('++ D. P/(*)%(7++ /. 2hare 2hare pre-iupre-iu- 6 treasu treasury ry shar shares es A. P%)(+++ C. P%8*('++ &. P70(+++ D. P%)'(8++ 7. Retained Retained earnings earnings !before appropriation appropriation for treasury treasury shares" shares" A. PB7)(/*8 C. P%(0))(/*8 &. P% P%(0*/(/*8 D. P%(707(%*8 0. Treas reasur ury y shar shares es A. PB*('++ C. P)/('++ &. P%70('++ D. P%7'(B++ B. Total sharehol shareholders ders’’ equity equity A. P0 P0(*''('%8 C. P0(*'+(''/ &. P0 P0(*%B(B%8 D. P0(*%*(+88

PROBLEM 11: During its rst year of operations( ,G&A>> C?PA>@ entered into the following transactions relating to shareholders’ equity. ,ebanon’s articles of incorporation authoried the issue of '(7++(+++ ordinary shares( P%+ par per share( and /++(+++ preference shares( P0+ par per share. ?arch ?arch %7 %7

2old 0++(+++ 0++(+++ ordi ordinary nary shares shares for P%++ per shar share e

%0

Issued Issued '+(+++ '+(+++ ordinar ordinary y shares shares to attorneys attorneys in eFchang eFchange e for legal legal ser4ices.

%0

2old /0(+++ /0(+++ of its ordinar ordinary y shares shares and %+(+++ %+(+++ prefer preference ence shares shares for PB(+++(+++.

>o4. >o4. '+

Issued Issued %()++ %()++ of of its its ordin ordinar ary y shar shares es in in eFcha eFchange nge for equipequip-ent ent for which the cash price was 3nown to be P%80(+++.

&ased on the preceding infor-ation( deter-ine the correct balance of each of the following accounts. %. rdin rdinary ary shar share e capit capital al A. P0 P0(0B)(+++ C. P0(00+(+++ &. P0 P0('%)(+++ D. PB(+B)(+++ '. 2hare 2hare pre-iupre-iu- 6 ordina ordinary ry shar shares es A. P7B(8++(+++ C. P0'(%%B(+++ &. P7)()0+(+++ D. P0+(%%B(+++ /. Prefe Prefere renc nce e share share capital capital A. P' P'(+++(+++ C. P0++(+++ &. P+ D. P'(0++(+++ 7. 2hare 2hare pre-iupre-iu- 6 prefer preference ence shar shares es A. P' P'(0++(+++ C. P'(+++(+++

&. P0(%0+(+++

D. P+

PROBLEM 12: 2@RIA C?PA>@ was for-ed on $uly %( '++). It was authoried to issue B++(+++ share of P%+ par 4alue ordinary shares and '++(+++ shares of 8 P'0 par 4alue( cu-ulati4e and nonparticipating preference shares. 2yria Co-pany has a $uly % 6 $une /+ scal year.  The following following infor-ation infor-ation to the shareholder shareholders’ s’ equity accounts accounts of 2yria Co-pany #

Ordinary Shares Prior to the '+%% 6 '+%' scal year( 2yria Co-pany had ''+(+++ of outstanding ordinary shares issued as follows# a. %)+(+++ shares shares were were issued for cash on $uly %( %( '++)( at P/% per share. share. b. n $uly '7( '++)( '++)( %+(+++ shares shares were eFchanged eFchanged for a plot of land which cost the seller P%7+(+++ in '++/ and had an esti-ated -ar3et 4alue of P77+(+++ on $uly '7( '++). c. '+(+++ shares shares were issued on on ?arch %( '+%%E the the shares shares had been subscribed subscribed for P7' per share on ctober /%( '+%+. During the '+%% 6 '+%' scal year( the following transactions regarding ordinary shares too3 place#

  2011 ct. ct. % >o4. >o4. /+

Dec. %0

2012  $une '+

7(++ 7(+++ + sha sharres wer were iss issue ued d for for cash cash at P7 P7B B per per shar share. e. 2yria 2yria purc purcha hased sed 7(++ 7(+++ + of its its own sha share res s on the the open open -ar3 -ar3et at P/) per share. 2yria declare declared d a 0 0 shar share e di4iden di4idend d for for share sharehold holders ers of recor record d on  $anuary %0( '+%'( '+%'( to be issued issued on $anuary /%( /%( '+%'. 2yria was ha4ing a liquidity proble- and could not aKord a cash di4idend at the ti-e. 2yria’s ordinary shares were selling at P0' per share on Dece-ber %0( '+%%.

2yria sold %(+++ %(+++ of its own ordinary ordinary shares that that it had purchased purchased on >o4e-ber /+( '+%%( for P7'(+++.

Preference Shares 2yria issued %++(+++ preference shares at P77 per share on $uly %( '+%+.

Cash Dividends 2yria has followed a schedule of declaring cash di4idends in Dece-ber and $une with pay-ent being -ade to shareholders of record in the following -onth. The cash di4idends which ha4e been declared since inception of the co-pany through $une /+( '+%'( are shown below. Declaration Date %'L%0L%+ +BL%0L%% %'L%0L%%

Ordinary Shares P+./+ per share P+./+ per share : :::

Preference Shares P%.++ per share P%.++ per share P%.++ per share

>o cash di4idends were declared during $une '+%' due to the co-pany’s liquidity proble-s.

Retained Earnings As of $une /+( '+%%( 2yria’s retained earnings account had a balance of P%(/8+(+++. or the scal year ending $une /+( '+%'( 2yria reported net inco-e of P8+(+++ In ?arch '+%%( 2yria recei4ed a ter- loan fro- $2T >ational &an3. The ban3 requires 2yria to establish a sin3ing fund and restrict retained earnings for an a-ount equal to the sin3ing fund deposit. The annual sin3ing fund pay-ent of P%++(+++ is due on April /+ each yearE the rst pay-ent was -ade on schedule on April /+( '+%'. %. ;hat is the ordinary ordinary share share capital account account balance balance at $une /+( '+%'< A. P' P'(/0+(+++ C. P'(0%+(+++

'.

/.

7.

0.

&. P' P'(/'+(+++ D. P'(0++(+++ The total share pre-iu- 6 ordinary ordinary shares shares at $une /+( '+%'( is A. P0 P0(7/0(+++ C. P7()*+(+++ &. P0 P0(0*)(+++ D. P0(B)/(+++ The unappropria unappropriated ted retained retained earnings earnings at at $une /+( '+%'( '+%'( should be A. P*88(+++ C. P'%*(+++ &. P0*%(+++ D. P%(+//(+++ The total nu-ber of ordinary ordinary shares shares issued and and outstanding outstanding at $une /+( '+%'( should be A. P'78(+++ C. P'/'(+++ &. P'0%(+++ D. P'/0(+++ The total total sharehol shareholders ders’’ equity equity at $une /+( '+%'( '+%'( should should be A. P%/(%%*(+++ C. P%'(*8/(+++ &. P%/(0*B(+++ D. P%/(+++(+++

PROBLEM 13: At the beginning of year %( an entity grants '++ shares each to 0++ e-ployees. The grant is conditional upon the e-ployees re-aining in the entity’s e-ploy until the perfor-ance perfor-ance condition described below is satised. Performance Condition  The shares shares will 4est at the the end of# of#  @ear  @ear % : If the entity’s earnings earnings increase increase by %0  @ear  @ear ' : If the entity’s earnings earnings increase increase by -ore than an a4erage a4erage of %% per year year o4er the two: year period.  @ear  @ear / : If the entity’s earnings earnings increase increase by -ore than an a4erage a4erage of 8 per year year o4er the three 6 year period. • •

•

 The shares shares ha4e a fair 4alue 4alue of P%0 at the the beginning of year %( which which equals the the share price price at grant date. The entity does not eFpect to pay di4idends o4er the three:year period.  The following following e4ents occurred# occurred#  Year  Year 1 /+ e-ployees ha4e left during year % and the entity eFpects( on the basis of a weighted a4erage probability( probability( that a further 7+ will lea4e during year '.  The entity’s earnings earnings ha4e increased increased by by %7 by the end end of year % and and the entity eFpects eFpects that the earnings will continue to increase at a si-ilar rate in year '. Therefore( the entity eFpects that the shares will 4est at the end of year '. •

•

 Year  Year 2 /0 e-ployees ha4e resigned by the end of year ' and the entity eFpects that a further /+ will lea4e during year /. Garnings ha4e increased by only * during year '. Jence( the shares do not 4est at the end of year ' as eFpected by the end of year %. The entity eFpects that by the end of year /( its earnings will increase by at least 0( thereby achie4ing the a4erage of 8 per year. •

•

 Year  Year 3 '8 e-ployees ha4e resigned by the end of year /.  The entity’s earnings earnings ha4e increased increased by by B during during year /. This results in an a4erage increase of ) per year o4er the three:year 4esting period. • •

%ased on the preceding infor&ation, infor&ation, deter&ine the following: %. Cu-ulati4 Cu-ulati4e e co-pensat co-pensation ion eFpens eFpense e at the end end of year % A. P7+*(+++ C. P7/+(+++ &. PB70(+++ D. P8'(0++ '. Cu-ulati4 Cu-ulati4e e co-pensat co-pensation ion eFpens eFpense e at the end end of year ' A. P% P%(')+(+++ C. P8%+(+++ &. P//+(+++ D. P8''(+++ /. Cu-ulati4 Cu-ulati4e e co-pens co-pensation ation eFpense eFpense at the end end of of year year / A. P% P%(''%(+++ C. P%('%0(+++ &. P% P%(')+(+++ D. P%(0++(+++ 7. The year in which which the share options 4ested to the entity’s entity’s e-ployees A. @ear % C. @ear / &. @e @ear ' D. the options did not 4est

0. 2hare 2hare options options outsta outstandin nding g at the the end of of year ' A. P8''(+++ C. PB70(+++ &. P8%+(+++ D. P7/+(+++

PROBLEM 14: At the beginning of year %( an entity grants to a senior eFecuti4e /+(+++ share options. options. The grant is conditional upon the eFecuti4e eFecuti4e re-aining in the entity’s e-ploy until the end of year /.  The share share option can be be eFercised eFercised if the entity’s entity’s hare hare price increase increase fro- P'+ P'+ at the beginning beginning of year % to abo4e P/+ at the end of year '. If the share price is abo4e P/+ at the end of year /( the share option can be eFercised at any ti-e during the neFt 4e years( i.e.( by the end of year 8.  The entity esti-ates esti-ates the fair 4alue of the share share options options on grant date date to be P0 per option. option. The esti-ate ta3es into account the following -ar3et conditions.  The possibility possibility that the share share will eFceed P/+ P/+ at the end of year /( i.e.( share share options options beco-e eFercisableE and  The possibility possibility that the share share price price will not eFceed eFceed P/+ at the end of year /( /( i.e.( the share options will be forfeited. •

•

 The following following actual e4ents occurred occurred in years % to /#  Year  Year 1  The share share price has increased increased to P'7  The entity’s esti-ate esti-ate of the fair fair 4alue of the options options is P7 at the end of year year %. This ta3es into account whether the -ar3et condition condition will be satised by the end of year /. •

 Year  Year 2  The share share price has decreased decreased to P''. Jowe4er( the entity re-ains re-ains opti-istic that that the share price target will be -et by the end of year /.  The esti-ated fair fair 4alue of the the share option option is P/. Again( Again( this esti-ate esti-ate ta3es into account the -ar3et condition noted abo4e. •

•

 Year  Year 3  The share share price only reaches reaches P'8 by the end of year /.  The esti-ated fair fair 4alue of the the share option option is ero( ero( as the -ar3et -ar3et condition has has not been satised. • •

%ased on the preceding infor&ation, infor&ation, deter&ine the following: %. Co-pen Co-pensa satio tion n eFpens eFpense e for year year % A. P0+(+++ C. PB+(+++ &. P7+(+++ D. P/+(+++ '. Co-pen Co-pensa satio tion n eFpens eFpense e for year year ' A. P0+(+++ C. PB+(+++ &. P7+(+++ D. P/+(+++ /. Co-pen Co-pensa satio tion n eFpens eFpense e for year year / A. P0+(+++ C. P7+(+++ &. P+ D. P/+(+++ 7. 2hare 2hare option option outstan outstanding ding at at the end end of year year ' A. P*+(+++ C. P)+(+++ &. P8+(+++ D. P%++(+++ 0. Cu-ulati4 Cu-ulati4e e co-pensati co-pensation on eFpense eFpense for the three:ye three:year ar period period A. P+ C. P%++(+++ &. P%0+(+++ D. P*+(+++

PROBLEM 15: At the beginning of '+%'( and entity grants %++ share options each to %(+++ e-ployees. The grant is conditional upon the e-ployees re-aining in the entity’s e-ploy during a 4esting period of three years.  The eFercise eFercise price price at grant date date is esti-ated at at P/+. Jowe4er( the the eFercise eFercise price drops drops to P'+ if the entity’s earnings increase increase by at least an a4erage of %+ per year o4er the three:year period.

n grant date( the entity esti-ates that the fair 4alue of the share options( with an eFercise price of P'+( is P%+ per option. If the eFercise price is P'+( the entity esti-ates that the share options ha4e a fair 4alue of P) per options.  The following following e4ents occurred# occurred# 2012 B+ e-ployees ha4e left. The entity eFpects( on the basis of a weighted a4erage probability( that a further B+ e-ployees will lea4e during '+%/ and '+%7( respecti4ely.  The entity’s earnings earnings increased increased by %'( and the entity eFpects eFpects that earnings earnings will continue to increase at this rate o4er the neFt two years. The entity therefore eFpects that the earnings target will be achi4ed( and hence( the share options will ha4e an eFercise price of P'+. •

•

2013 •

•

At year end( a further *+ e-ployees ha4e resigned. The entity eFpects that a further B+ e-ployees will lea4e during '+%7.  The entity’s earnings earnings increased increased by %/( and it continues continues to eFpect that that the earnings earnings target will be achie4ed.

2014 • •

A further 0B e-ployees ha4e left by the end of the year Due to a general decrease in -ar3et de-and( the entity’s earnings increased by only /. &ecause the earnings target was not achie4ed( the %++ 4ested share option for each e-ployee ha4e eFercise price of P/+.

%ased on the preceding infor&ation, infor&ation, deter&ine the following: %. Co-pen Co-pensa satio tion n eFpens eFpense e for '+%' '+%' A. P'*+(+++ C. P'*/(/// &. P%)'(B++ D. P'77('++ '. Co-pen Co-pensa satio tion n eFpens eFpense e for '+%/ '+%/ A. P%)'(B++ C. P'*/(/// &. P'BB(BB* D. P'*+(+++ /. Co-pen Co-pensa satio tion n eFpens eFpense e for '+%7 '+%7 A. P'*/(/// C. P'BB(BB* &. P'*+(+++ D. P%)'(B++ 7. 2hare 2hare options options outsta outstandin nding g at the the end of of '+%/ A. P07+(+++ C. P'BB(BB* &. P8%+(+++ D. P70)('B* 0. 2hare 2hare option option outstan outstanding ding at at the end end of '+%7 '+%7 A. P8%+(+++ C. P8'+(+++ &. P+ D. P*/'(B++

PROBLEM 16: At the beginning of year %( the entity grants %++ shares each to 0++ e-ployees( conditional upon the e-ployees re-aining in the entity’s e-ploy during the 4esting period. The shares will 4est at the end of year if the entity’s earnings increase increase by -ore than %8E at the end of year ' if the entity’s earnings increase increase by -ore than an a4erage of %/ per year o4er the two:year periodE and at the end of year / if the entity’s earnings increase by -ore than an a4erage of %+ per year o4er the three:year period. The shares ha4e a fair 4alue of P'+ per share at the start of year %( which equals the share price at grant date. &y the end of year %( the entity’s earnings ha4e increased by %7( and '+ e-ployees ha4e left. The entity eFpects that earning will continue to increase at a si-ilar rate in year '( and therefore therefore eFpects that the shares will 4est at the end of year '. The entity eFpects( on the basis of a weighted a4erage probability( that a further /+ e-ployees will lea4e during year '. &y the end of year '( the entity’s earnings ha4e increased by only %+ and therefore the shares do not 4est at the end of year '. 7' e-ployees ha4e left during the year. The entity eFpects that a further %0 e-ployees will lea4e during year /( and that the entity’s earnings will increase by at least B( thereby achie4ing the a4erage %+ per year. &y the end of year /( %+ e-ployees ha4e left and the entity’s earnings had increased by 8( resulting in an a4erage of %+.B* per year. %ased on the foregoing, answer the following: %. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year %<

'.

/.

7.

0.

A. P70+(+++ &. P78+(+++ ;hat a-ount a-ount A. P%+7(+++ &. P%/7(+++ ;hat a-ount a-ount A. P/+'(+++ &. P7/'(+++ ;hat a-ount A. P0B7(+++ &. P087(+++ ;hat a-ount A. P)++(+++ &. P)8+(+++

C. P/++(+++ D. P/'+(+++ of co-pensation eFpense should be recognied recognied in year '< C. P%%7(+++ D. P'77(+++ of co-pensation eFpense should be recognied recognied in year /< C. P')'(+++ D. P/%'(+++ should should the entity entity report as as share share options outstanding outstanding at the the end of year '< C. P077(+++ D. PB%7(+++ should should the entity entity report as as share share options outstanding outstanding at the the end of year /< C. P%(+++(+++ D. P80B(+++

PROBLEM 17: At the beginning of year %( Gntity A grants share share options to each of its %++ e-ployees wor3ing in the sales depart-ent. The share options will 4est at the end of year /( pro4ided that the e-ployees re-ain in the entity’s e-ploy( and pro4ided that the 4olu-e of sales of a particular product increases by at least an a4erage of 0 per year. year. If the 4olu-e of sales of the product increases increases by an a4erage of between 0 and %+ per year( each e-ployee will recei4e %++ share options. If the 4olu-e of sales increases by an a4erage of between %% and %0 each year( each e-ployee will recei4e '++ share options. If the 4olu-e of sales increases by an a4erage of %B or -ore( each e-ployee will recei4e /++ share options. n grant date( Gntity A esti-ates that the options ha4e a fair 4alue of P'+ per option. Gntity A also esti-ates that the 4olu-e of sales of the product will increase by an a4erage of between %% and %0 per year( and therefore eFpects that( for each e-ployee who re-ains in ser4ice until the end of year /( '++ share options will 4est. The entity also esti-ates( on the basis of a weighted a4erage probability( probability( that '+ of e-ployees will lea4e before the end of year /. &y the end of year %( se4en e-ployees ha4e left and the entity still eFpects that a total of '+ e-ployees will lea4e by the end of year /. Jence( the entity eFpects that 8+ e-ployees will re-ain in ser4ice for the three:year period. Product sales ha4e increased by %' and the entity eFpects this rate of increase to continue o4er the neFt ' years. &y the end of year '( a further 4e e-ployees ha4e left( bringing bringing the total to %' to date. The entity now eFpects only three -ore e-ployees will lea4e during year /( and therefore eFpects a total of 80 e-ployees will re-ain at the end of year /. Product sales ha4e increased by '+( resulting resulting in an a4erage of %B o4er the two years to date. The entity now eFpects that sales will a4erage %B or -ore o4er the three:year period( and hence eFpects each sales e-ployee to recei4e /++ share options at the end of year /. &y the end of year /( a further two e-ployees ha4e left. Jence( %7 e-ployees ha4e left during the three:year period( and 8B e-ployees re-ain. The entity’s sales ha4e increased by an a4erage of %B o4er the three years. %ased on the preceding infor&ation, answer the following: %. ;hat is is the co-pen co-pensatio sation n eFpense eFpense for for year year %< A. P%+B(BB* C. P%B+(+++ &. P0/(/// D. P%*'(+++ '. ;hat is is the co-pen co-pensatio sation n eFpense eFpense for for year year '< A. P'8B(BB* C. P'//(/// &. P%8+(+++ D. P%B8(+++ /. ;hat is is the co-pen co-pensatio sation n eFpense eFpense for for year year /< A. P%%7(BB* C. P'8'(BB* &. P%*B(+++ D. P%88(+++ 7. ;hat is the cu-ulati4e cu-ulati4e co-pensation co-pensation eFpense eFpense for for years %( '( and /< A. P/'+(+++ C. P/77(+++ &. P0%B(+++ D. P%*'(+++ 0. At the end of year '( the entity entity should report share options options outstanding outstanding of of A. P/'8(+++ C. P'8B(BB* &. P''B(BB* D. P/7+(+++

PROBLEM 18: At the beginning of year %( an entity grants to a senior eFecuti4e /(+++ share options( options( conditional upon the eFecuti4e re-aining in the entity’s e-ploy until the end of year /. The

eFercise price is P7+. Jowe4er( the eFercise price drops to P/+ if the entity’s earnings increase by at least an a4erage of %+ per year o4er the three:year period. n grant date( the entity esti-ates that the fair 4alue of the share options( with an eFercise price of P/+( is P%0 per option. If the eFercise price is P7+( the entity esti-ates that the share options ha4e a fair 4alue of P%' per option. During year %( the entity’s earnings increased increased by %'( and the entity eFpects that earnings will continue to increase at this rate o4er the neFt two years. The entity therefore eFpects that the earnings target will be achie4ed( and hence the share options will ha4e an eFercise price of  P/+. During year '( the entity’s earnings increased increased by %/( and the entity continues to eFpect that the earnings target will be achie4ed. During year /( the entity’s earnings increased by only /( and therefore the earnings target was not achie4ed. The eFecuti4e co-pletes three years’ ser4ice( and therefore satises the ser4ice condition. &ecause the earnings target was not achie4ed( the /(+++ 4ested share options ha4e an eFercise price of P7+. %ased on the preceding infor&ation, answer the following: %. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year %< A. P%'(+++ C. P/+(+++ &. P%0(+++ D. P7+(+++ '. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year '< A. P%'(+++ C. P/+(+++ &. P%0(+++ D. P7+(+++ /. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year /< A. P%'(+++ C. PB+(+++ &. P%0(+++ D. PB(+++ 7. At the end of year '( the entity entity should report share options options outstanding outstanding of  of  A. PB+(+++ C. P/+(+++ &. P8+(+++ D. P'7(+++ 0. ;hat is the cu-ulati4e cu-ulati4e co-pensation co-pensation eFpense eFpense for for years %( '( and /< A. P/B(+++ C. P%%7(+++ &. PB+(+++ D. P7+(+++

PROBLEM 19# At the beginning of year %( an entity grants to a senior eFecuti4e /(+++ share options( options( conditional upon the eFecuti4e re-aining in the entity’s e-ploy until the end of year /. Jowe4er( the share options cannot be eFercised unless share price has increased fro- P0+ at the beginning of year % to abo4e PB0 at the end of year /. If the share price is abo4e PB0 at the end of year /( the share options can be eFercised at any ti-e during the neFt se4en years( i.e.( by the end of year %+.  The entity applies applies a bino-ial bino-ial option pricing pricing -odel( which which ta3es into account the possibility possibility that the share price will eFceed PB0 at the end of year / !and hence the share options beco-e eFercisable" and the possibility that the share price will not eFceed PB0 at the end of year / !and hence the options will be forfeited". It esti-ates the fair 4alue of the share options with this -ar3et condition to be P'+ per option. %ased on the preceding infor&ation, deter&ine the co&pensation e'pense e'pense for years 1, 2, and 3(

PROBLEM 20: An entity grants %++ cash share appreciation appreciation rights !2ARs" to each of its 0++ e-ployees( on condition that the e-ployees re-ain in its e-ploy for the neFt three years. During year %( /0 e-ployees ha4e left. The entity esti-ates that a further B+ will lea4e during years ' and /. During year '( 7+ e-ployees ha4e left and the entity esti-ates that a further '0 will lea4e during year /. During year /( '' e-ployees ha4e left. At the end of year /( %0+ e-ployees eFercised their 2ARs( another %7+ e-ployees eFercised their 2ARs at the end of year 7 and the re-aining %%/ e-ployees eFercised their 2ARs at the end of year 0.  The entity esti-ates esti-ates the fair 4alue of the 2ARs at the end of each each year in which which a liability liability eFists as shown below. At the end of year /( all 2ARs held by the re-aining e-ployees 4ested.

 The intrinsic intrinsic 4alues of the 2ARs at the date date of eFercise eFercise !which !which equal the the cash paid out" out" at the end of years /( 7( and 0 are also shown below.

Year % ' / 7 0

Fair Value P%7.7+ %0.0+ %8.'+ '%.7+

Intrinsic Value

P%0.++ '+.++ '0

%ased on the preceding infor&ation, answer the following: %. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year %< A. P''/('++ C. P%)/(77+ &. P'%%('++ D. P%)7(7++ '. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year '< A. P%)+(/// C. P'%8()// &. P'''())/ D. P'/7(7// /. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year /< A. P'*'(%'* C. P''0(+++ &. P7B+(7B+ D. P%**(8*/ 7. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year 7< A. P'8+(+++ C. P'%8(B7+ &. PB%(/B+ D. P'7%(8'+ 0. ;hat a-ount a-ount of co-pensation eFpense should be recognied recognied in year 0< A. P'7%(8'+ C. P7+(B8+ &. P7B+(7B+ D. P'8'(0++ B. ;hat a-ount of salaries salaries payable should the entity report report at the the end of year /< A. P'7%(8'+ C. P7%/(/// &. P+ D. P7B+(7B+ *. ;hat a-ount of salaries salaries payable should the entity report report at the the end of year 7< A. P'7%(8'+ C. P7%/(/// &. P+ D. P7B+(7B+

PROBLEM 21: An entity grants to an e-ployee the right to choose either %(+++ phanto- shares !i.e.( a right to a cash pay-ent equal to the 4alue of %(+++ shares" or %('++ shares with a par 4alue of P%+ per share. The grant is conditional upon the co-pletion of three years’ ser4ice. If the e-ployee chooses the share alternati4e( the shares -ust be held for three years after 4esting date. At grant date( the entity’s share price is P0+ per share. At the end of years %( '( and /( the share price is P0'( P00 and PB+( respecti4ely. The entity does not eFpect to pay di4idends in the neFt three years. After ta3ing into account the eKects of the post:4esting transfer restrictions( restrictions( the entity esti-ates that the grant date fair 4alue of the share alternati4e is P78 per share. At the end of year /( the e-ployee chooses# 2cena 2cenario rio %# the cash cash alte altern rnati ati4e 4e 2cena 2cenario rio '# The equity equity alter alterna nati4 ti4e e %ased on the preceding infor&ation, answer the following: %. ;hat is the total total fair 4alue of of the equity co-ponent co-ponent as a result result of the share:based share:based pay-ent transaction with settle-ent alternati4es< alternati4es< A. P*(B++ C. P'(7++ &. P%+(+++ D. P+ '. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year %< A. P%*(/// C. P%)(/// &. P%)(8BB D. P'/(//7 /. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year %< A. P%)(8BB C. P'%(8BB &. P%*(/// D. P%)(/// 7. ;hat is is the co-pen co-pensatio sation n eFpense eFpense in in year %< A. P'/(//7 C. P%)(/// &. P'0(8B8 D. P%)(8BB 0. If the e-ployee e-ployee has chosen chosen the cash alternati4e( alternati4e( the a-ount a-ount to be be paid at the end of year / should be

A. P00(+++ C. P0'(+++ &. PB*(B++ D. PB+(+++ B. If the e-ployee e-ployee has chosen chosen the share alternati4e( the a-ount of share share pre-iupre-iu- to be recognied is A. P*(B++ C. PB+(+++ &. P00(B++ D. PB*(B++

PROBLEM 22:  The following following infor-ation infor-ation has been ta3en frofro- the ledger accounts accounts of CJI>A CJI>A CRPRA CRPRATI>#  Total  Total net inco-e inco-e since incorporation incorporation  Total  Total cash di4idends di4idends paid Carrying 4alue of the co-pany’s in4est-ent in @ogi Co-pany declared as property di4idend Proceeds fro- sale of donated shares  Total  Total 4alue of stoc3 stoc3 di4idends distributed 1ains on treasury share transactions Una-ortied pre-iu- on bonds payable Appropriated for contingencies

P/('++(+++ %0+(+++ B++(+++ %0+(0++ 7'+(+++ /*0(+++ 7%/('++ *++(+++

 The current current balance balance of unappropriated unappropriated retained retained earnings earnings is A. P' P'(+/+(+++ C. P%(//+(+++ &. P/ P/('++(+++ D. P%()/+(+++

PROBLEM 23: &A>1,ADG2J C?PA>@’s C?PA>@’s Dece-ber /%( '+%'( audited state-ent of nancial position reported retained earnings of P%0+(+++. >et inco-e for '+%' was P80(+++( and di4idends of PB+(+++ were declared and paid in '+%'. &angladesh’s accountant disco4ered that net inco-e for '+%% had been understated by P'0(+++ due to an error in recording depreciation eFpense for '+%%.  The a-ount of of retained earnings per boo3s as of Dece-ber /%( '+%% '+%% was A. P%0+(+++ C. P%'0(+++ &. P'++(+++ D. P%++(+++

PROBLEM 24: CJI>1 CJI>1 has been e-ployed as an accountant by IRA>( I>C. for a nu-ber of years. 2he handles all accounting duties( including the preparation of nancial state-ents. The following is a state-ent of earned surplus prepared by Ching Ching for '+%'# Iran( Inc. !"!EME#! !"!EME#! O$ E"R#E% &RPL& $OR 2012 &A,A>CG AT $anuary %( '+%' Additions# Change in esti-ate of '+%% a-ortiation 1ain on sale of trading securities Interest re4enue >et inco-e for '+%' Decreased depreciation due to change in esti-ated life Deductions# Di4idends declared and paid ,oss on sale of equip-ent ,oss on earthqua3e &alance at Dece-ber /%( '+%'

%. ;hat is is the corr correct ect net inco-e inco-e of Iran Iran for '+%'< '+%'< A. P8*(0++ C. P87(0++ &. P%*/(+++ D. P8'(0++

P/B0(+++ P

0(+++ /(+++ '(+++ %0+(+++ %/(+++

%*/(+++ 0/8(+++

P %++(+++ '(0++   8/ 8/(+++

%80(0+ + P352,50 0

'. ;hat is the correct correct retained retained earnings earnings balance balance as of Dece-ber /%( /%( '+%'< A. P/7)(0++ C. P7/8(+++ &. P/7*(0++ D. P/0'(0++

PROBLEM 25:  The following following selected accounts accounts were were ta3en frofro- the Dece-ber /%( /%( '+%' trial balance balance of I>D>G2IA CRPRATI># 2ubscribed share capital  Treasury  Treasury shares( shares( B++ B++ shares( shares( at cost Unissued share capital 2hare pre-iuAppropriation for plant eFpansion Retained earnings Authoried share capital 6 %++(+++ shares 2ubscription recei4able

P %('0+(+++ )+(+++ B(+++(+++ %8+(+++ 0++(+++ %('++(+++ %+(+++(+++ /'+(+++

 The -inutes of -eetings of the the board of directors directors re4eal that on Dece-ber 0( '+%'( '+%'( the co-pany’s board declared a %+ cash di4idend payable to shareholders and subscribers of record on Dece-ber '+( '+%'. The di4idend chec3s are to be distributed on $anuary %+( '+%/.  The co-pany’s accountant has has not recorded recorded this di4idend declaration. declaration. ;hat is the a-ount of unrecorded di4idend payable< A. P0%B(+++ C. P78*(+++ &. P0%)(+++ D. P/)7(+++

PROBLEM 26:  The capital accounts of &JUT &JUTA> A> C?PA>@ C?PA>@ on $une /+( /+( '+%'( are are as follows# follows# rdinary shares( P%+ par( 0+(+++ shares issued and outstanding 2hare pre-iuRetained earnings

P 0++(+++ '0+(+++ /(%/0(+++

 The co-pany’s ordinary ordinary shares are are selling at at this ti-e at P'+. )hat entries would you &a*e in each of the following cases+ a" A %+ stoc3 stoc3 di4iden di4idend d is declar declared ed and issued issued b" A /+ stoc3 stoc3 di4iden di4idend d is declar declared ed and issued issued c" A 7:for:% 7:for:% stoc3 stoc3 split split is declare declared d and issue issued d

PROBLEM 27: A1JA>I2TA> C?PA>@ has been paying regular quarterly di4idends to its shareholders. The following equity transactions are shown in the co-pany’s boo3s#  $an. % eb. %0 ?arch /% ?ay %/  $une %B /+

P' par 4alue ordinary sharesE !%(B++(+++ shares outstandingE /(+++(+++ shares authoried". Issued %++(+++ new shares at P0 Paid quarterly di4idends of P'(00+(+++ P'(+++(+++ of P%(+++ bonds were con4erted to ordinary shares at the rate of %++ shares per P%(+++ bond. Issued an %% stoc3 di4idend Paid quarterly di4idends. The di4idend per share is the sa-e as that paid in the rst quarter.

>o other equity transactions occurred after $une /+.

%. ;hat is the a-ount of di4idend per share share that Afghanistan Afghanistan paid on ?arch ?arch /%< /%< A. P%.0+ C. P%.0) &. P+.80 D. P%.*+ '. ;hat is the a-ount a-ount of di4idend di4idend that Afghanistan Afghanistan will will ha4e to pay in in the third third quarter in order to pay the sa-e di4idend rate as that paid in pre4ious quarters< A. P' P'.80+.+++ C. P/(%B/(0++ &. P' P'())*(+++ D. P/(080(/++ /. ;hat is the total a-ount a-ount of di4idends di4idends to be paid during the current current year< A. P%+(/+0()++ C. P%/(/+0()++ &. P%'(+7+(0++ D. P%'(B07(+++

PROBLEM 28: &RU>GI C?PA>@ has 0+(+++ shares of P%+ par 4alue share capital outstanding. In declaring and distributing a 0+ share di4idend( &runei initially issued only '+(+++ new sharesE the other share di4idend shares were not issued because so-e in4estors did not own &runei shares in e4en -ultiplies of %+. To these shareholders( &runei issued fractional share warrants. Prepare ournal entries necessary to record the following: a" Declarat Declaration ion of of the the share share di4idend di4idend b" Issuance Issuance of the the full and fracti fractional onal share share di4ide di4idends nds c" Issuance of of full shares shares through through the surrender surrender of of the required required fractional fractional warrants. warrants. !Assu-e !Assu-e that 8+ of the fractional share warrants were ulti-ately turned in for shares".

PROBLEM 29:  @ou  @ou ha4e been as3ed as3ed to audit the TUR=G@ TUR=G@ C?PA>@ C?PA>@. During the course course of your audit( you are are as3ed to prepare co-parati4e data fro- the co-pany’s inception to the present. @ou ha4e deter-ined the following# a" Tur3ey Co-panyMs Co-panyMs charter beca-e eKecti4e on $anuary '( '++8( '++8( when '+(+++ shares of P%+ ordinary shares and %+(+++ shares of * cu-ulati4e( nonparticipating( preference shares were issued. The ordinary shares were sold at P%' per share( and the preference shares were sold at par 4alue of P%++ per share. b" Tur3ey was unable unable to pay preference preference di4idends di4idends at the end of its year. year. The owners of the preference shares agreed to accept ' ordinary shares for e4ery 0+ preference shares owned in discharge of the preference di4idends due on Dece-ber /%( '++8. The shares were issued on $anuary '( '++)L the fair -ar3et 4alue was P/+ per share for ordinary shares on the date of issue. c" Tur3ey Co-pany Co-pany acquired acquired all the outstanding outstanding shares shares of A3in3a A3in3a Corporation Corporation on ?ay %( %( '+%+( in eFchange for %+(+++ ordinary shares of Tur3ey. d" Tur3ey split split its ordinary ordinary shares / for ' on $anuary $anuary %( '+%%( and ' for % on $anuary $anuary %( '+%'. e" Tur3ey oKered oKered to con4ert '+ of the preference preference shares shares to ordinary ordinary shares on on the basis of  ' ordinary shares for % preference share. The oKer was accepted( and the con4ersion was -ade on $uly %( '+%'. f" >o cash di4idends were declared declared on ordinary ordinary shares shares until Dece-ber Dece-ber /%( /%( '+%'. Cash di4idends per share of ordinary shares were declared and paid as follows#

'+%+ '+%% '+%'

 une !" :: P%.0+ P%.'0

Dec# !$ P/.'+ P'.0+ P%.++

&ased on the preceding infor-ation( deter-ine the following# I. The nu-ber nu-ber of of ordina ordinary ry and and prefer preference ence shares shares outsta outstandin nding g on Dece-ber Dece-ber /% of each of the following years# %. '++) Ordinary Preference A. '+(+++ %+(+++ &.

'+(7++

%+(+++

C.

'0(+++

%+(+++

D.

'+('++

)(8++

'. '+%+

A.

Ordinary /+(+++

Preference %+(+++

&.

/+('++

)(8++

C.

/0(+++

%+(+++

D.

/+(7++

%+(+++

A.

Ordinary 70(/++

Preference %+(+++

&.

70(B++

%+(+++

C.

*B(+++

%+(+++

D.

0'(0++

)(8++

A.

Ordinary )0('++

Preference 8(+++

&.

7)(B++

%+(+++

C.

)/('++

*(87+

D.

)/('++

8(+++

/. '+%%

7. '+%'

II.

The a-ount a-ount of of cash cash di4id di4idends ends declare declared d and and paid paid to shar sharehold eholders ers for each of the the following years# 0. '+%+ A. P% P%%'(+++ C. P) P)*('8+ &. P)B(B7+ D. )B(+++ B. '+%% A. P% P%8'(7++ C. P% P%0)(B++ &. P8/(B++ D. P%'%(B++ *. '+%' A. P' P'%7('++ C. P% P%0/('++ &. P' P'%*('++ D. P'+)('++

PROBLEM 30:  The following following are the the shareholders’ shareholders’ equity accounts accounts of I>DIA I>DIA C?PA>@ C?PA>@ at Dece-ber /%( /%( '+%'. rdinary shares( P%+ parE authoried '++(+++ sharesE issued P)++(++ )+(+++ shares + Preference shares( %' P'0 parE authoried %++(+++ sharesE issued %0(+++ sharesE cu-ulati4e /*0(+++ 2hare pre-iu'(0++(+ ++ Retained earnings 7(*0+(+ ++  Treasury  Treasury shares shares !*(0++ !*(0++ ordinary ordinary shares" shares" /*%('0+  The preference preference shares shares are are participating participating in distribution distribution in eFcess eFcess of a %0 di4idend rate on the ordinary ordinary shares. >o di4idends ha4e been paid in '+%+ or '+%%. n Dece-ber /%( '+%'( India wants to pay a cash di4idend of P' a share to ordinary shareholders. %. ;hat is the the a-ount to be be paid to prefer preference ence shar sharehold eholders< ers< A. P%0/(*0+ C. P%+8(*0+ &. P)+(+++ D. P%/0(+++ '. ;hat is the the a-ount to be be paid to ordina ordinary ry sharehold shareholders< ers< A. P%+0(*0+ C. P))(+++ &. P%'/(*0+ D. P%B0(+++

PROBLEM 31: UN&G=I2TA> C?PA>@ reported the following a-ounts in the shareholders’ equity section of its Dece-ber /%( '+%%( state-ent of nancial position# Preference shares( %+( P%+ par !%++(+++ shares authoried( '+(+++ shares issued" rdinary shares( P0 par !0+(+++ shares authoried %+(+++ shares issued" 2hare pre-iuRetained earnings  TTA,  TTA,

P'++(+++ 0+(+++ )B(+++ B++(++ + P 946,000

The following transactions occurred during 2012: a. Paid the the annual '+%% P% per share share di4idend on prefer preference ence shares shares and P+.0+ per per share share di4idend on ordinary shares. These di4idends had been declared on Dece-ber /%( '+%%. b. Purchased Purchased '(+++ shares shares of its own outstanding outstanding ordinary ordinary shares shares for P'+ per share. share. c. Reiss Reissued ued *++ treasur treasury y shares shares for equip-en equip-entt 4alued at P'0(+++ P'0(+++ d. Issued Issued 0(+++ pref preferen erence ce shares shares at P%0 per share share e. Declared a %+ share share di4idend on the the outstanding outstanding ordinary ordinary shares shares when the shares shares were were selling for P%' per share. f. Issu Issued ed the the shar share e di4i di4ide dend nd g. Declared the annual '+%' P% per share share di4idend on prefer preference ence shares shares and the P+.0+ P+.0+ per share di4idend on ordinary shares. These di4idends are payable in '+%/. h. Appropriated Appropriated retained retained earnings earnings for plant plant eFpansion( eFpansion( P/++(+++. i. Appropri Appropriated ated retained retained earning earnings s for treasur treasury y shares shares..  The net inco-e inco-e for '+%' was P7*+(+++. &ased on the abo4e date( deter-ine the correct Dece-ber /%( '+%'( balances of each of the following accounts# %. Prefe Prefere renc nce e share shares s A. P'0+(+++ C. P'*0(+++ &. P'++(+++ D. P%(+++(+++ '. rdi rdina nary ry sha sharres A. P07(+++ C. P0/(0++ &. P07(/0+ D. P0+(+++ /. 2har 2hare e prepre-iu iuA. P%/*(B++ C. P%/'(+++ &. P%'*(+)+ D. P%/8(+)+ 7. Treas reasur ury y shar shares es A. P'B(+++ C. P%0(+++ &. P7+(+++ D. P%7(+++ 0. Unappro Unappropria priated ted retain retained ed earni earnings ngs A. P*%7(**0 C. P*+/(**0 &. P*+)(**0 D. P*')(**0

PROBLEM 32: C@PRU2 C?PA>@ began operation on $anuary %. Authoried were '+(+++ shares of P%+ par 4alue ordinary shares and 7+(+++ shares of %+( P%++ par 4alue preference shares. The following transactions in4ol4ing shareholders’ equity occurred during the rst year of operations.  $anuary %

Issued 0++ ordinary ordinary shares shares to the corporation corporation pro-oters pro-oters in eFchange eFchange for for property property 4alued at P%*+(+++ and ser4ices 4alued at P*+(+++. The property property had cost the pro-oters P)+(+++ / years before and was carried on the pro-oters’ boo3s at P0+(+++.

ebruary ebruary '/ Issued %+(+++ preference preference shares shares with a par 4alue 4alue of P%++ per share. share. The shares were issued at a price of P%0+ per share( and the co-pany paid P*0(+++ to an agent for selling the shares. ?arch ?arch %+

2old 2old /(+++ /(+++ ord ordina inary ry shar shares es for for P/)+ P/)+ per per shar share. e. Issu Issue e costs costs were were P'0(+ P'0(+++ ++

April Ap ril %+

 $uly %7

7(+++ 7(+++ ordin ordinar ary y shar shares es wer were e sold sold under under share share subsc subscrip riptio tion n at at P70+ P70+ per shar share. e. >o >o shares are issued until a subscription contract is paid in full. >o cash was recei4ed. GFchanged *++ ordinary ordinary shares shares and %(7++ preference preference shares shares for a building building with a fair -ar3et 4alue of P0%+(+++. The building was originally purchased for P/8+(+++ by the in4estors and has a boo3 4alue of P''+(+++. In addition( B++ ordinary shares were sold for P'7+(+++ in cash.

Augus Au gustt /

Recei4e ecei4ed d pay-e pay-ents nts in full full for half half of the the shar share e subsc subscrip riptio tions ns and and paypay-ent ents s on account on the rest of the subscriptions. Total cash recei4ed was P%(7++(+++. 2hares were issued for the subscriptions paid in full.

Dece-ber % Declared a cash cash di4idend of P%+ per share share on preference preference shares( shares( payable on Dece-ber /% to shareholders of record on Dece-ber %0( and a P'+ per share cash di4idend on ordinary shares( shares( payable on $anuary 0 of the following year to shareholders of record on Dece-ber %0. /%

Paid Paid the di4ide di4idend nd to prefe prefere renc nce e shar shareho eholde lders rs..

>et inco-e for the rst year of operations was PB++(+++ &ased on the receding infor-ation( calculate %. Prefe Prefere renc nce e share shares s A. P% P%(%7+(+++ &. P% P%(+++(+++ '. 2hare 2hare pre-iupre-iu- 6 prefer preference ence shar shares es A. P7'0(+++ &. P)+(+++ /. rdi rdina nary ry sha sharres A. P88(+++ &. PB8(+++ 7. 2hare 2hare pre-iupre-iu- 6 ordina ordinary ry shar shares es A. P/ P/(*+*(+++ &. P/ P/(%%+(+++ 0. Retaine etained d earnin earnings gs A. P/%+(+++ &. PB++(+++

the balances of each of the following accounts# C. P%(B00(+++ D. P%(*)0(+++ C. P0%0(+++ D. P070(+++ C. PB%(+++ D. PB'(+++ C. P%()'+(+++ D. P/(B%*(+++ C. P/0+(+++ D. P')+(+++

PROBLEM 33: AR?G>IA C. began operations on $anuary %( '+%%( by issuing at P/+ per share one:half of the )++(+++ shares of P%+ par 4alue ordinary shares that had been authoried for sale. In addition( Ar-enia has 0++(+++ shares of P0+ par 4alue( B preference shares authoried. During '+%%( Ar-enia had P/('++(+++ of net inco-e and declared P'(+++(+++ of di4idends. During '+%'( Ar-enia had the following transactions#  $anuary ) Issued an additional additional %++(+++ %++(+++ ordinary ordinary shares shares for P%8 per share. share. April '  $uly '+

Iss Issued ued *0 *0(+++ (+++ pref prefer eren enc ce sh shares ares for for PB0 PB0 per shar hare. Authoried the the purchase purchase of a custo-:-ade custo-:-ade -achine to be be deli4ered in $anuary '+%/. Ar-enia restricted P8++(+++ of retained earnings for the purchase of the -achine

ctober ctober '% sold an additi additional onal '0(+++ '0(+++ prefer preference ence share shares s for P00 per shar share e Dece Dece-b -ber er /% /% Repor eporte ted d P'( P'(7+ 7++( +(++ +++ + of of net net inc incoo-e e and and decl declar ared ed a di4i di4ide dend nd of P* P*++ ++(+ (+++ ++ to shareholders of record on $anuary %0( '+%/( to be paid on ebruary 7( '+%/. &ased on the preceding preceding data( deter-ine the %. Prefe Prefere renc nce e share shares s A. P0 P0(+++(+++ &. P/ P/(*0+(+++ '. 2hare 2hare pre-iupre-iu- 6 prefer preference ence shar shares es A. P%+('0+(+++

Dece-ber /%( '+%+( balances of the following# C. PB('0+(+++ D. P7(8*0(+++ C. P%('0+(+++

&. P' P'(+0+(+++ /. rdi rdina nary ry sha sharres A. P% P%(+++(+++ &. PB PB(/++(+++ 7. 2hare 2hare pre-iupre-iu- 6 ordina ordinary ry shar shares es A. P) P )(8++(+++ &. P) P)(+++(+++ 0. Retained etained earning earnings s !unappr !unappropri opriated ated"" A. P' P'()++(+++ &. P' P'(%++(+++

D. P%(%'0(+++ C. P7(0++(+++ D. P0(0++(+++ C. P%%(+0+(+++ D. P)()'0(+++ C. P/('++(+++ D. P%('++(+++

PROBLEM 34#  @G?G> CRPRA CRPRATI> has incurred incurred losses frofro- operations for -any years. At At the reco--endation of the newly hired president( the board of directors 4oted to i-ple-ent a quasi:reorganiation( sub9ect to shareholders’ and creditors’ appro4al. I--ediately( prior to the quasi:reorganiation( on $une /+ '+%'( @e-en’s state-ent of nancial position was as follows# "''e(' Current assets Property( Plant and Gquip-ent !net" ther noncurrent assets  Total  Total Assets

P%(/*0(+++ /(/*0(+++ 0++(+++ P 5,250,000

Lia)i*i(ie' + are-*der' Equi(/  Total  Total liabilities liabilities rdinary shares( P%+ par 2hare pre-iuRetained earnings  Total  Total ,iabilities ,iabilities O shareholders’ shareholders’ equity equity

P%(0++(+++ 7(+++(+++ *0+(+++ !%(+++(++ +" P 5,250,000

 The shareholders shareholders and creditors creditors appro4ed the the quasi:reorgania quasi:reorganiation tion eKecti4e $uly %( %( '+%'( to be acco-plished by a reduction in property( plant( and equip-ent !net" of P8*0(+++( a reduction in other noncurrent assets of P/*0(+++( and a reduction in par 4alue fro- P%+ to P0. %. @e-en’s $uly %( '+%'( '+%'( state-ent of nancial position position after the quasi:reorganiat quasi:reorganiation ion should show total assets of  A. P7 P7(+++(+++ C. P7(/*0(+++ &. P' P'(0++(+++ D. P/(8*0(+++ '. The balance in the share share pre-iu- account account after the the quasi:reorganiat quasi:reorganiation ion on $uly %( '+%'( '+%'( should be A. P*0+(+++ C. P0++(+++ &. P'(+++(+++ D. P+ /. @e-en’s decit after after the quasi:reor quasi:reorganiation ganiation on $uly %( '+%'( should be A. P% P%(+++(+++ C. P0++(+++ &. P'0+(+++ D. P+

PROBLEM 35: 2hown below are A,&A>IA C?PA>@’s C?PA>@’s condensed state-ents of nancial position i--ediately before and one year after it had co-pleted a quasi:reorganiation. Dec# !$% &"$&

Dec# !$% &"$!

'(efore  * )uasi 

Current assets Property( Plant( and Gquip-ent !net"  TTA,  TTA, assets

rdinary shares 2hare pre-iu-

P)++(+++ 0(%++(+++ P 6,000,000

P %(/0+(+++ /(8*+(+++ P5,220,000

P*('++(+++ BB+(+++

P7(B0+(+++ )+(+++

Retained earnings  Total  Total shareholders’ shareholders’ equity equity

!%(8B+(+++" P 6,000,000

78+(+++ P 5,220,000

In '+%/( Albania reported net inco-e of P78+(+++ and depreciation eFpense of P//+(+++. The quasi:reorganiation on Dece-ber /%( '+%'( included the write down of the co-pany’s in4entories by P/B+(+++. >o purchases or sales of property( plant( and equip-ent ite-s and no share transactions occurred in '+%/. Prepare all the 9ournal entries -ade at the ti-e of the quasi:reorganiation.

PROBLEM 36: &A,I,I( I>C. began operations in $anuary '+%+( and reported the following results for each of its three years of operations. '+%+ '+%% '+%'

P/++(+++ /+(+++ /()0+(+++

>et loss >et loss >et inco-e

At Dece-ber /%( '+%'( the co-pany’s capital accounts were as follows# 0 cu-ulati4e preference shares( par 4alue P%++E authoried( %++(+++ sharesE issued and outstanding( B+(+++ shares rdinary shares( par 4alue P%+E authoried( %(+++(+++ sharesE issued and outstanding( 8++(+++ shares

P B(+++(+++

8(+++(+++

&alili( Inc. has ne4er paid a cash or share di4idend and there has been no change in the capital accounts since it began operations. %. ;hat is the boo3 4alue 4alue of the preference preference shares shares on Dece-ber Dece-ber /%( '+%'< '+%'< A. P%+0 C. P%++ &. P%%+ D. P%%0 '. ;hat is the boo3 4alue 4alue of the ordinary shares on Dece-ber /%( '+%'< A. P%/.7+ C. P%7.%0 &. P%7.0' D. P%/.*8  -ssu&e that the preference shares shares have a li.uidation value of P105 per share( /. ;hat is the boo3 4alue 4alue of the preference preference shares shares on Dece-ber Dece-ber /%( '+%'< '+%'< A. P%%0 C. P%%+ &. P%'+ D. P%+0 7. ;hat is the boo3 4alue 4alue of the ordinary shares on Dece-ber /%( '+%'< A. P%/.*8 C. P%/.7+ &. P%7.%0 D. P%/.+'

PROBLEM 37:  @ou  @ou are are auditing the nancial nancial state-ents state-ents of the ITA, ITA,@ @ C?PA>@ C?PA>@ as of Dece-ber Dece-ber /%( '+%'. The The co-pany’s general ledger shows the following liability liability and equity accounts at the end of the reporting period. Accounts payable Accrued eFpenses Reser4e for bond retire-ent Preference shares( B cu-ulati4e( P%++ parE B(+++ shares authoriedE 7(+++ shares issuedE /(*++ shares outstanding rdinary shares( P%+ parE '++(+++ shares authoriedE 8+(+++ shares issued and outstanding 2hare pre-iuRetained earnings  Treasury  Treasury preference preference shares( shares( at at cost

P 0/+(+++ 7%(B++ /'+(+++ 7++(+++

8++(+++ %07(B++ 'B'(0'+ /B(+++

%. ;hat is the boo3 4alue 4alue of the preference preference shares shares on Dece-ber Dece-ber /% '+%'< '+%'<

A. P%%B C. P%%+ &. P%%0 D. P%'' '. ;hat is the boo3 4alue of the ordinary ordinary shares shares on Dece-ber Dece-ber /%('+%'< A. P%8.7* C. P%8./B &. P%8.B8 D. P%8.7+