The maximum number of shares that a corporation can be legally issue as prescribed in its articles of incorporation is

1. The maximum number of shares that a corporation can be legally issue as prescribed in its articles of incorporation is _______________.

a. Subscribed share capital

b. Outstanding capital stock

c. Authorized share capital

d. Authorized shares

 

2. Natasha Company uses journal entry method in recording share capital transaction. On January 1, 2020, the company authorized to issue 100,000 shares with a par value of P10. What would be the correct entry for this transaction?

a. Authorized Share capital 1,000,000

Unissued Share Capital 1,000,000

b. Unissued Share Capital 1,000,000

Authorized Share Capital 1,000,000

c. Only a memorandum entry is necessary

d. Cash 1,000,000

Share Capital 1,000,000

 

3. Under the memorandum entry method of accounting for share capital transactions, how would TINY journalize the transaction on February 3, 2020?

a. Subscription Receivable 250,000

Share Capital 250,000

b. Cash 250,000

Share Capital 250,000

c. None, since the transaction will be recorded through memorandum entry only.

d. Subscription Receivable 250,000

Subscribed Share Capital 250,000

 

4. Under the journal entry method of accounting for share capital transactions, how would TINY journalize the issuance of shares on February 10, 2020?

a. Subscribed Share Capital 50,000

Share Capital 50,000

b. Subscribed Share Capital 32,500

Unissued Share Capital 32,500

 

c. Subscribed Share Capital 50,000

Unissued Share Capital 50,000

d. Subscribed Share Capital 32,500

Share Capital 32,500

 

5. Assuming four of the ten subscribers of RAZOR CO. who still have a balance payable on their subscriptions made full payment, how many shares of ordinary share capital will be issued?

a. 120,000 shares

b. 48,000 shares

c. 60,000 shares

d. none of the above

 

6. When all of the subscriptions receivable of RAZOR CO. have been collected and the shares issued what is the total amount of Share Capital issued and the total number of shares issued?

a. P4,300,000 equal to 430,000 shares

b. P1,200,000 equal to 120,000 shares

c. P4,900,000 equal to 490,000 shares

d. P3,700,000 equal to 370,000 shares

 

7. CAIRNE issued 30,000 shares of P100 stated value in exchange for land and factory building with total fair value of P9 million pesos. The value of land is twice as much the value of the building. What would be the entry of CAIRNE to record the transaction?

a. Land 6,000,000

Building 3,000,000

Share Capital 3,000,000

Share Premium 6,000,000

b. Land 2,000,000

Building 1,000,000

Share Capital 3,000,000

c. Land 2,000,000

Building 1,000,000

Share Capital 3,000,000

d. Land 6,000,000

Building 3,000,000

Share Capital 9,000,000

 

8. MIRANA Co. owes P150,000 loan payable to RIKIMARU UNIVERSAL BANK as of June 30, 2014. RIKIMARU accepted 20,000 shares of MIRANA as full payment of the loan. At this date the shares are selling at P6 per share. The share has P5 par value based on the share records. By what amount would the shareholder’s equity change as a result of the issuance of shares to RIKIMARU.

a. P150,000 decrease

b. P100,000 increase

c. P120,000 decrease

d. P120,000 increase

 

9. On September 1, RAZZIL issued 3,000 shares with par value of P50 par ordinary shares to Atty. Rigor for 100 hours of legal consultation. Based on the website of Atty. Rigor, the rate of his service is usually P2,000 per hour. On the website of Philippine Stock Exchange (PSE), the shares are quoted at P60 per share on that date of issuance. What journal entry should RAZZIL record on its books related to the issuance?

a. Professional expenses 180,000

Share capital 150,000

Share premium 30,000

b. Professional expenses 200,000

Share capital 150,000

Share premium 50,000

c. Professional expenses 200,000

Share capital 200,000

d. Professional expenses 180,000

Share capital 180,000

 

10. The December 31, 2020 condensed Statement of Financial Position of ALL STAR Entertainment Services, a sole proprietorship of RATTLETRAP follows:

 

Current Assets P 1,400,000

Property, Plant and Equipment – net 1,300,000

P 2,700,000

Liabilities P 700,000

RATTLETRAP, Capital 2,000,000 P 2,700,000

On January 15, 2020, ALL STAR Entertainment Services was incorporated with 10,000 shares of P100 par value common shares issued. Prior to incorporation, Mr. RATTLETRAP had determined the following fair market values:

Current Assets P 1,600,000

Property, Plant and Equipment 2,100,000

Liabilities 700,000

What amount should be credited to Share Premium?

a. P2,000,000

b. P2,300,000

c. P3,200,000

d. P2,500,000

11. What is the total legal capital of HUSKAR Inc. as of December 31, 2014?

a. P1,157,000

b. P1,055,000

c. P1,097,000

d. P1,115,000

 

12. A primary source of equity i

a. both income retained by the company and contributions by shareholders.

b. appropriated retained earnings.

c. income retained by the company.

d. contributions by shareholders.

 

13. Statement 1: If the company uses the journal entry method, issuance of share capital for cash should be recorded with a credit of Unissued Share Capital account.

Statement 2: Subscription Receivable, if collectible within one year is reflected in the shareholder’s equity section as deduction from the related subscription share capital.

a. Both statements are correct.

b. Both statements are incorrect.

c. Only Statement 1 is correct.

d. Only Statement 2 is correct.

 

14. The issuance of shares of preferred stock to shareholders

a. Decreases preferred stock authorized

b. Has no effect on preferred stock outstanding

c. Increases preferred stock authorized

d. Increases preferred stock outstanding

 

15. The par value of a share capital is

a. The present value of the share

b. The legal nominal value assigned to the share

c. The liquidation value of the share

d. The amount received by the corporation when the share capital was originally issued

 

 

 

 

16. On January 1, 2020, SB Conglomerates, authorized ordinary share was sold on a subscription basis at a price in excess of par value. 20% of the subscription price was collected. On March 1, 2020, the remaining 80% of the subscription price was collected. Additional paid in capital would increase on

January 1, 2020 March 1, 2020

a. Yes No

b. No No

c. Yes Yes

d. No Yes

 

17. In a sale of delinquent shares at a public auction, the highest bidder is the one who

a. Willing to pay the unpaid subscription price in exchange for the lowest number of shares

b. Willing to pay the full subscription price in exchange for the lowest number of shares

c. Willing to pay the unpaid subscription price, the expenses related to the delinquent shares, and accrued interest in exchange for the highest number of shares.

d. Willing to pay the unpaid subscription price, the expenses related to the delinquent shares, and accrued interest in exchange for the lowest number of shares

18. In cases when there is no bidder for a delinquent subscription, the subscribed shares shall be issued in the name of the corporation and shall be considered as ___________.

a. Treasury share

b. Delinquent share

c. Unissued delinquent share

d. Bidder share

 

19. LUCIA Co. has the following information related to its accounts as of December 31, 2020:

Ordinary share capital, P50 par value P1,000,000

Preference share capital, P30 par value 450,000

Share premium – ordinary 400,000

Share premium – preference 120,000

Retained earnings 250,000

Treasury shares – ordinary, P55 cost per share 275,000

 

What is the number of outstanding shares for each class of share?

Ordinary Preference

a. 20,000 shares 10,000 shares

b. 15,000 shares 15,000 shares

c. 20,000 shares 15,000 shares

d. 15,000 shares 10,000 shares