Reference no: EM132947182

Questions -

Q1) Effective April 2, 2020, the stockholders of Leo Co. approved a 2 for 1 split of the company ordinary share, and an increase in authorized shares from 100,000 shares (par value P20per share) to 200,000 shares (par value P10). Leo's stockholders equity accounts immediately before issuance of the stock split shares follows:

Ordinary shares, par P20; 100,000 shares authorized 500,000 shares outstanding 1,000,000

Share premium 150,000

Retained earnings 1,350,000

What should be the balance in Leo's share premium and retained earnings account immediately after the stock split is affected, respectively?

a. 150,000; 350,000

b. 1,150,000; 350,000

c. 150,000; 1,350,000

d. 0; 500,000

Q2) Fitness Corporation has outstanding 10,000 shares of P10 par value ordinary shares and retained earnings of P500,000. If Fitness declares a 10 percent share dividend when the fair value of the shares is P85 per share, the entry includes:

a. No entry is required for a share dividend

b. A debit to cash for P85,000

c. A debit to Retained Earnings for P10,000

d. A credit to Share Premium-Ordinary for P75,000