Audit of Shareholders' Equity Practice Problems I
Audit of Shareholders' Equity Practice Problems I
Audit of Shareholders' Equity Practice Problems I
PRACTICE PROBLEMS I
CASE 1. During the current year, an entity issued 10,000 ordinary shares with P100 par value and 20,000
convertible preferences shares with P200 par value for 8,000,000. On the date of issuance, the ordinary
share is selling at P360 and the preferences share is selling at P270. The entity also issued 6% bonds with
a maturity value of P6,000,000, together with 20,000 ordinary shares with P100 par value for a combined
cash amount of 11,000,000. The market value of the ordinary share cannot be determined. If the bonds
were issued separately, the bond would have sold for 5,000,000 on an 8% yield to maturity basis.
a. 4,000,000 c. 800,000
b. 6,000,000 d. 0
a. 4,000,000 c. 2,200,000
b. 6,600,000 d. 6,200,000
CASE 2. An entity reported the following equity at the beginning of the current year:
During the current year, the entity had the following share transactions:
a. 2,125,000 c. 2,000,000
b. 2,150,000 d. 1,975,000
CASE 3. An entity had issued 100,000 ordinary shares. Of these 5,000 shares were held as treasury on at
the beginning of current year. During the current year, transaction involving ordinary shares were as
follow:
May 1 1,000 shares of treasury were sold
Aug 1 10,000 previously unissued shares were sold
Nov 1 A -2-for-1 share split took effect.
a. 220,000 c. 222,000
b. 218,000 d. 210,000
a. 212,000 c. 214,000
b. 216,000 d. 218,000
CASE 4. At year end, an entity canceled 5,000 shares of 50 par value held in treasury at an average cost
of P120 per share. Before recording the cancelation of the treasury shares, the entity had the following
shareholders’ equity:
a. 2,500,000 c. 2,250,000
b. 1,900,000 d. 2,125,000
CASE 5. An entity was organized on January 1, 2017. On that date, the entity issued 200,000 shares
with 10 par value at 15 per share. During the period January 1, 2017 through December 31, 2018, the
entity reported net income of 2,000,000 and paid cash dividends of 500,000. On January 5, 2018, the
entity purchased 10,000 shares at P20 per share to be held as treasury. On December 31, 2018, 5,000
treasury shares were sold at P30 per share and the remaining treasury shares were retired, what is the total
shareholders’ equity on December 31, 2018?
a. 4,450,000 c. 4,400,000
b. 4,350,000 d. 4,950,000
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AUDIT OF SHAREHOLDERS’ EQUITY
PRACTICE PROBLEMS II
PROBLEM NO. 1.
An entity was organized at the beginning of current year with 100,000 authorized shares of P 100 par
value. During the current year, the following transaction occurred:
a. 3,000,000 c. 3,700,000
b. 3,200,000 d. 4,800,000
a. 1,800,000 c. 2,930,000
b. 2,900,000 d. 2,650,000
a. 8,000,000 c. 6,000,000
b. 6,900,000 d. 8,030,000
PROBLEM NO. 2
At December 31, 2016, ROBUSTA, INC. had 1,800,000 authorized shares of P10 par value ordinary
shares, of which 600,000 shares were issued and outstanding.
The shareholders’ equity account at December 31, 2016, had the following balances.
QUESTIONS:
a. 1,941,000 c. 2,031,000
b. 2,0004,000 d. 2,034,000
a. 1,875,000 c. 2,475,000
b. 2,460,000 d. 2,556,000
3. The share premium from preferences share as of December 31,2017, is
a. 30,000 c. 105,000
b. 90,000 d. 120,000
a. 3,000,000 c. 3,315,000
b. 3,300,000 d. 3,450,000
a. 14,835,000 c. 14,862,000
b. 14,851,000 d. 14,910,000
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