Reference no: EM132624048

Questions -

Q1. On December 12, 2016, the entity declared the yearly cash dividend on preference share, payable on January 15, 2017.

On January 15, 2017, before the accounting records were closed for 2016, the entity became aware that rent income for the year ended December 31, 2015 was overstated by P1,000,000. The after-tax effect on 2015 net income was P700,000.

After correcting the rent income, net income for 2016 was P3,000.000.

What amount should be reported as retained earnings on December 31, 2016?

a. 5,000,000

b. 5,100,000

c. 5,200,000

d. 4,800,000

Q2. Brown company reported the following shareholder's equity on December 31, 2016:

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

Share premium 1,500,000

Retained earnings (deficit) (2,100,000)

On December 31, 2016, the shareholder approved a quasi-reorganization by reducing the par to P5 and eliminating the defiit against share premium.

Immediately after 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

Q3. Gaston company has sustained heacy losses over a period of time and conditions warrant that the enity should be undergo a quasi-reorganization on December 31, 2016 *inventory with cost of 6,500,000 was recorded on December 31, 2016 at the market value of P6,000,000

*property, plant and equipment were recorded on depreciation. The sound value was P8,000,000.

*on December 31, 2016 , the share capital; is 7,000,00 consisting of 700,000 shares with par value of P10, the share premium is P1,600,00 and the deficit in retained earnings is 900,000.

* the par value of share is to be reduced from P10 to P5.

Immediately after the quasi-reorganization, what is the shareholder's equity?

a. 3,300,000

b. 3,500,000

c. 3,700,000

d. 4,200,000

Q4. Adverse financial and operating circumstances warrant that Solid company should undergo a quasi- reorganization on December 31, 2016.

The following information may be relevant in accounting for quasi- organization:

*inventory with fair value of 2,000,000 is currently recorded in the account at cost of 2,500,000

*plant assets with fair value of 7,000,000 are currently recorded at 8,500,000, net accumulated depreciation.

*individual shareholders contribute 4,000,000 to create additional capital to facilitate the reorganization.

No new shares are issued.

* par value of the share is reduced from 25 to 5.

Immediately before these events, the shareholder's equity appear as follows:

Share capital, P25 par, 100,000 shares outstanding 2,500,000

Share premium 1,750,000

Retained earnings (3,000,000)

After the quasi- organization, what amount should be reported as share premium?

a. 2,750,000

b. 3,250,000

c. 3,750,000

d. 1,750,000