Intermediate Accounting 3 Finals Quiz 2

A. Multiple Choice Theories: Choose the BEST answer. (1 pt each)

1. As per Accounting Standard-3, Cash Flow is B. An increase in equity

classified into C. A footnote
D. An increase in noncurrent liabilities for
A. Operating activities and investing the current portion liabilities for the
activities long term portion.
B. Investing activities and financing
activities 8. Noncumulative preference dividends in arrears
C. Operating activities and financing A. Are not paid and not disclosed
activities B. Must be paid before any other cash
D. Operating activities, financing activities dividend can be distributed
and investing activities C. Are disclosed as a liability until paid
D. Are paid to preference shareholders if
2. The statement of cash flows tells us sufficient funds remain after payment of
A. how much profit the business has made during the current preference dividend.
an accounting period
B. the forecast cash movements over a period of 9. Cash Flow Statement is based upon
time
C. how much cash has been received and paid A. Cash basis of accounting
during an accounting period B. Accrual basis of accounting 
D. the financial position of the business at a C. Credit basis of accounting 
point in time D. None of the above

3. Earnings per share disclosures are required 10. Which of the following is not a financing
for activity:
A. Entities whose ordinary shares and A.  Issuance of bonds payable 
potential ordinary shares are publicly B.  Sale of investment 
traded. C.  Purchase of treasury stock 
B. Entities that are in the process of D.  Issuance of common stock
issuing ordinary shares in the public
market 11. Dilution of EPS is defined as
C. All entities A. Decrease in earnings per share when any
D. Entities whose ordinary shares and financial instrument is converted to any form
potential ordinary shares are publicly of share capital.
traded or entities that are in the B. Decrease in share capital
process of issuing ordinary shares in C. Decrease in earnings per share when
public market. convertible instruments are converted to
ordinary shares
4. When an entity issues both consolidated and D. Decrease in earnings per share when share
separate financial statements, the Earnings capital is converted to debt capital.
per Share (EPS) information is required
A. For both sets of financial statements 13. Which of the following would not be revealed by
B. In neither set of financial statements a company's statement of cash flows?
C. Only for consolidated financial A.  Whether the company has paid a dividend during
statements the year
D. Only for separate financial statements. B.  How the company has managed its working capital
over the last financial year
C.  Whether the company has exceeded its overdraft
5. The objectives of Cash Flow Statement are limit during the year
I. Analysis of cash position  D.  Whether the company has raised extra long-term
II. Short-term cash planning funding during the year
III. Evaluation of liquidity
IV. Comparison of operating Performance 14. Antidilutive securities
A. Should be included in the computation of
A. Both I and II diluted earnings per share
6. Earnings Per Share shall be computed on the B. Are those value inclusion would decrease basic
B. Both I
basis ofand III earnings per share
C. A. IIAverage
Both and IV ordinary shares outstanding C. Include share options whose exercise price is
during the year less than the average market price
D. I, B.
II, Ordinary
III, IV shares outstanding at the D. Should be ignored in all earnings per share
end of the year calculations.
1. WhichC. ofOrdinary
the following
shares isoutstanding
not an operating
at the
cash flow?
beginning of the year
A.  collection
D. Averageof cash from receivables 
ordinary and preference
B.  paymentshares
of income tax 
outstanding during the year.
C.  payment of cash for operating expenses 
D.  purchase
7. Cumulativeofpreference
equipment for cash
dividends in arrears
should be reported as
A. An increase in current liabilities
15. Which one of the following would reduce the cash D.  Dividends paid
balances of a business and not reduce the profit for
the year? 16. Options and warrants are dilutive if
A. Interest paid A. The option shares represent fifty percent of the
B. Distribution costs ordinary shares actually outstanding.
C.  Wages paid
Intermediate Accounting 3 Finals Quiz 2
B. The option price is equal to the average market B. Income form continuing operation
price C. Income from operations
C. The option price is higher that the average D. Net income.
market price 19. Earnings per share is calculated before
D. The option price is lower than the average market accounting for which of the following items?
price. A. Minority interest
B. Ordinary dividend
17. The cash flow direct method calculates cash C. Preference dividend for the period
generated from operations from D. Taxation.
A. changes in working capital
B. analysis of all receipts and payments relating to 20. Under PAS 33, the weighted average number of
operating activities shares outstanding for all periods shall be
C. analysis of the changes in cash and overdraft adjusted for
levels A. Any prior period error
D.operating profiit B. Any issue of shares for cash
C. Any convertible instruments settled in cash
18. The earnings per share computation is not D. Any change in the number of ordinary shares
required for without change in resources.
A. Discontinued operation

B. Problem Solving: Encircle the final answer. Show your solutions. (5 pts each)

1.3. Corona Company used the direct method to prepare the statement of cash flows. The entity had the
following cash flows during the current year:

Cash receipts from issuance of ordinary shares 4,000,000

Cash receipts from customers 2,000,000
Cash receipts from dividends on long-term investments 300,000
Cash receipts from repayment of loan made to another entity 2,200,000
Cash payment for wages and other operating expenses 1,200,000
Cash payment for insurance 100,000
Cash payments for dividends 200,000
Cash payment for taxes. 400,000
Cash payment to purchased land 800,000
Cash balance-beginning 3,500,000

1. What is the net cash provided by operating activities?

2. What is the net cash provided by investing activities?
3. What is the net cash provided by financing activities?

4. Quarantine Entity provided the following shareholder’s equity at year-end:

10% Cumulative Preference share capital, P100 par, 30,000 shares 3,000,000
Ordinary share capital, P100 par value, 50,000 shares 5,000,000
Retained earnings 4,000,000

Dividends in arrears on the preference shares are for 5 years. If the entity were to be liquidated, the
preference share would receive par plus a premium of P300,000. What is the book value per ordinary share?

5. Boring Company had 100,000 ordinary shares issued and outstanding at the beginning of current year.
During the current year, the entity revealed the following ordinary share transactions:

April 1 Issued 30,000 previously unissued shares

May 1 Split the share 2 for 1
June 30 Purchased 10,000 shares for the treasury
July 31 Distributed a 20% bonus issue
December 31 Split the stock 3 for 1

What is the weighted average number of shares for EPS purposes?

6. On December 31, 2018, COVID Company had 300,000 ordinary shares and 5%, 100 par value 10,000 cumulative
preference shares outstanding. No dividends were declared on either the preference or ordinary shares in
2018 or 2019. On January 30, 2020, prior to the issuance of financial statements for 2019, the entity
declared a 100% share dividend on ordinary shares. Net income for 2019 was P950,000. What amount of basic
earnings per share should be reported in the 2019 financial statements?