De La Salle University, Inc.Ramon V. del Rosario - College of BusinessACTPACO - Accounting for Partnership and Corporation2nd Term, AY 2012-2013 Dominguez,CPA

Answer Sheet SCOREName: Test I

ID No.: Test II

Section: Test III

TOTAL

Test I Multiple Choice Theories (10 points) - use scannable answer sheet

Test II Problem Solving and Preparation of Journal Entries. Final answer for problem solvingbelow, journal entries on the worksheet.

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III. Preparation of journal entries and Statement of Realization and Liquidation of the partnership.

De La Salle University, Inc.Ramon V. del Rosario - College of BusinessACTPACO - Accounting for Partnership and CorporationQ6 - Accumulated Profits, Incorporating a Partnership and Special Topics

INSTRUCTIONS TO THE EXAMINEE:1 Only three (3) worksheets, calculator, ballpen and ruler are allowed at your desks. All others should be

placed at the side/platform of the room.2 The examination is good for one and a half hours (1.5 hours).3 Check the completeness and clarity of the questionnaire.4 Read and follow instructions carefully. Ask questions only to the teacher.5 You may write on any portion of the questionnaire.6

I. Multiple Choice Theories: One (1) point each.1 Dividends other than shares shall be recognized as liabilities on the

a. Date of declaration c. Date of paymentb. Date of record d. Date of issuance

2 If share dividend is less than 20%, how much of the accumulated profits should be capitalized?a. Par value of the shares on the date of declarationb. Fair value of the shares on the date of declarationc. Fair value of the shares on the date of recordd. Par value of the shares on the date of record

3 An entity declared a cash dividend on its share capital in December of the current year, payable in Januaryof the next year. Accumulated profits would

a. Increase on the date of declaration c. Not be affected on the date of paymentb. Not be affected on the date of declaration d. Decrease on the date of payment

4 The actual amount of cash dividend to be paid is determined on the date ofa. Record c. Declaration or record, whichever is earlierb. Declaration d. Payment

5 A dividend which is a return to shareholders of a portion of their original investment isa. Liquidating dividend c. Property dividendb. Investment dividend d. Share dividend

6 For which of the following purposes should an appropriation for possible loss contingencies be established?a. To match applicable costs with current revenueb. To reduce fluctuations in net income in order to lend stability to the entityc. To charge operations in periods of rising prices for the losses which may otherwise be

absorbed in periods of falling pricesd. To inform shareholders that a portion of accumulated profits should be set aside from

amounts available for dividends because of such contingencies

7 An entity issued a 20% share dividend, at what amount per share, if any, should accumulated profits be reduced for this transaction?

a. Market value c. Zero, because no entry is madeb. Par value d. Book value

8 How would the declaration of a 15% share dividend affect the following?Accumulated profits Total shareholders' equity

a. No effect No effectb. No effect Decreasec. Decrease No effectd. Decrease Decrease

9 How would the declaration and subsequent issuance of a 10% share dividend by the issuer affect each ofthe following when the market value of shares exceed its par value?

Share capital Share premiuma. No effect No effectb. No effect Increasec. Increase No effectd. Increase Increase

CHEATING is a MAJOR offense, as provided for in Section 13.3.1.1 of the Student Handbook. In additionto the major offense, anybody caught cheating will automatically receive a FINAL GRADE of 0.0.

10 For an entity that has only ordinary shares outstanding, total shareholders' equity divided by the numberof shares outstnading represents

a. Return on equity c. Book value per shareb. Stated value per share d. Price-earnings ratio

II. Problem Solving and Preparation of Journal Entries.

On December 1, 2012, the board of directors authorized the payment of P2 per share, cash dividendsto shareholders on record on the same day. Outstanding shares are 10,000 as of December 1. Paymentwill be made on January 31, 2013. Also declared on December 1 is the distribution of share dividendsof 1,900 for shareholders on record on December 31. Fair value of each share capital is P10 and thecorresponding par value is P9.75.

11 Prepare all the necessary journal entries on the date of declaration, record and payment12 Compute for the amount to be debited to the account accumulated profits on January 31, 2013

The following shareholders' equity section from SM La Salle Company were provided:

Ordinary share capital, P10 par value, 80,000 shares outstanding P 800,000 10% Preference share capital, P20 par value, 20,000 shares outstanding 400,000

Dividends are in arrears for two years. Cash dividends declared amounted to P148,000.

13 Compute for the dividends to be received by BOTH ordinary and preference shareholders as well asdividends per share on each of the below independent assumptions

14 Prepare the entry to journalize the payment of the P148,000 cash dividend

Arena Corporation has been in operation since 2009 and results of each year of business are as follows2009 Net loss P 20,000 2010 Net income 50,000 2010 Dividends 10,000 2011 Net income 100,000 2011 Dividends 20,000 2012 Net income 200,000 2012 Dividends 30,000 2012 Appropriation for treasury share 10,000

15 Compute the balance of accumulated profits at the end of 2012

Dissolving Partnership has the following account balances as of December 31, 2012:Book Value Fair Value

Land P 210,000 500,000 Buildings 250,000 400,000 Equipment 250,000 350,000 Merchandise Inventory 100,000 100,000 Accounts Payable 50,000 50,000 Mortgage Payable 100,000 100,000 Interest Payable 5,000 5,000

16 The New Corporation will take over by issuing 10,000 shares of its 50,000 authorized shares, P100 parvalue. Provide the memo entry upon authorization of shares to New Corporation

17 Journalize the transfer of assets and liabilities to New Corporation

Unfriend Corporation shows the following shareholders' equity balances at its year end:Share capital, P100 par value P 2,500,000 Share premium 500,000 Accumulated profits 750,000 Net income for the year 250,000

18 Compute for book value per share

19 Compute for basic earnings per share

De La Salle University, Inc.Ramon V. del Rosario - College of BusinessACTPACO - Accounting for Partnership and CorporationQ6 - Accumulated Profits, Incorporating a Partnership and Special Topics Dominguez, CPA

Answer KeyI. Multiple choice theories: One (1) point each.

1 A2 B3 C4 A5 A6 D7 B8 C9 D

10 C

II. Problem solving and journalizing solutions. (49 points)

11 ORDeclaration Accumulated profits 20,000 Accumulated profits 39,0001.5 points Dividends payable 20,000 1.5 points Dividends payable 20,000

10,000 shares x P2/share Share dividends distributable 19,00010,000 shares x P2/share

Accumulated profits 19,000 1,900 shares x P10/share

Share dividends distributable 19,0001,900 shares x P10/share

Record No entry.5 point

Payment Dividends payable 20,0001 point Cash 20,000

12Jan 31 Zero

2 points

13 A Non cumulative and non participatingDividends declared P 148,000Preference share (P400,000 x 10%) (40,000)Ordinary share 108,000

Preference share 40,000 2 points 2.00 2 pointsOrdinary share 108,000 2 points 1.35 2 points

B Cumulative and non participatingDividends declared P 148,000Preference share (P400,000 x 10%)2 years (80,000)Balance 68,000

Preference share 80,000 2 points 4.00 2 pointsOrdinary share 68,000 2 points 0.85 2 points

C Cumulative and participatingDividends declared P 148,000Preference share (P400,000 x 10%)2 years (80,000)Balance 68,000

Preference share (P400,000/1,200,000)P68,000 22,667Ordinary share (P800,000/1,200,000)P68,000 45,333

68,000

Preference share 102,667 2 points 5.13 2 pointsOrdinary share 45,333 2 points 0.57 2 points

D Non cumulative and participatingDividends declared P 148,000Preference share (P400,000 x 10%) (40,000)Balance 108,000

Preference share (P400,000/1,200,000)P108,000 36,000Ordinary share (P800,000/1,200,000)P108,000 72,000

108,000

Preference share 76,000 2 points 3.80 2 pointsOrdinary share 72,000 2 points 0.90 2 points

14 Dividends payable 148,000Payment 1 point Cash 148,000

15 P270,000 2 points 2009 Net loss P (20,000)

2010 Net income 50,000 2010 Dividends (10,000)2011 Net income 100,000 2011 Dividends (20,000)2012 Net income 200,000 2012 Dividends (30,000)

270,000

16 The entity was authorized to issue P5,000,000, 50,000 shares, P100 par value..5 point

17 Land 500,000 18 P1504.5 points Buildings 400,000 Share capital, P100 par value P 2,500,000

Equipment 350,000 Share premium 500,000 Merchandise Inventory 100,000 Accumulated profits 750,000

Accounts Payable 50,000 Shareholders' equity 3,750,000 Mortgage Payable 100,000 Outstanding shares (P2,500,000/P100 par) 25,000 Interest Payable 5,000 Book value per share P 150 Share capital 1,000,000 Share premium 195,000 19 P10

Share capital = 10,000 shares x P100/share Net income for the year P 250,000

Share premium = Assets - Liabilities - Share Capital Outstanding shares (P2,500,000/P100 par) 25,000 Basic earnings per share P 10