LYCEUM OF THE PHILIPPINES – LAGUNA

ACCOUNTING FOR CORPORATIONS

SHAREHOLDER’S EQUITY
1. The accounts below appear in the December 31, 200A trial balance of Neil Company:
Authorized Ordinary Shares 5,000,000
Unissued Ordinary Shares 2,000,000
Subscription Receivable 400,000
Subscribed Ordinary Shares 1,000,000
Share Premium 500,000
Accumulated Profits – unappropriated 600,000
Accumulated Profits – appropriated 300,000
Treasury shares @ cost 100,000

In its December 31, 200A Statement of Financial Position, Neil should report total
shareholder’s equity at
a. 4,900,000
b. 5,000,000
c. 3,900,000
d. 4,600,000

If the total authorized share capital is P1,000,000 at P10 par, the unissued share capital is
25,000 shares and all the issued shares were sold at P15, then the shareholders’ equity
before any operation activities is:
a. 1,125,000
b. 750,000
c. 375,000
d. 250,000

OUTSTANDING SHARES
1. B Corporation issued 200,000 ordinary shares when it began operations in 200A and
issued additional 100,000 ordinary shares in 200B. B also issued 50,000 preference
shares convertible to 100,000 ordinary shares. In 200C, B purchased 75,000 of its
ordinary shares and held it in treasury. On December 31, 200C, the number of ordinary
shares outstanding would be:
a. 400,000
b. 325,000
c. 300,000
d. 225,000

LEGAL CAPITAL
1. A Company’s total number of shares issued and outstanding is 100,000. If the shares
were issued 20% above par of P100, how much is the legal capital?
a. P 2,000,000
b. P 10,000,000
c. P12,000,000
d. P22,000,000
2. B Company’s issued 20,000 share capital receiving land with fair value of P500,000. If
the share capital is no par and no stated value and the cost of the land is P200,000, how
much is the legal capital?
a. P 0
b. P 200,000
c. P 300,000
d. P 500,000
ACCOUNTING FOR SUBSEQUENT SHARE CAPITAL TRANSACTIONS
CONVERSION OF PREFERENCE SHARES
1. During 200A, ITS Co. issued 5,000 shares of P100 par convertible preference shares for
P110 per share. One share of preference shares can be converted into three shares of ITS’
P25 par ordinary shares at the option of the preferred shareholder. On December 31,
200B, when the market value of the ordinary shares was P40 per share, all of the
preference shares were converted. What amount should ITS credit to ordinary shares and
to share premium – ordinary shares as a result of the conversion?
Ordinary Share premium – Ordinary
shares shares
A. P375,000 P175,000
B. P375,000 P225,000
C. P500,000 P 50,000
D. P600,000 P-0–

OUTSTANDING SHARES
2. On December 31, 200A, Russ Corp.’s board of directors canceled 50,000 shares of P2.50
par value ordinary shares held in treasury at an average cost of P13 per share. Before
recording the cancellation of the treasury shares, Russ had the following balances in its
shareholders’ equity accounts:
Ordinary shares P540,000
Additional paid-in capital 750,000
Accumulated earnings 900,000
Treasury shares at cost 650,000

In its Statement of Financial Position at December 31, 2001, Russ should report ordinary
shares outstanding of
a. P - 0 - .
b. P250,000.
c. P415,000.
d. P540,000.

RETIREMENT OF TREASURY SHARES

3. In 200A, Nathan Corporation issued 5,000 shares of P10 par value of ordinary shares for
P100 per share. In 200B, Nathan reacquired 2,000 of its shares at P150 per share from the
estate of one of its deceased officers and immediately canceled these 2,000 shares.
Nathan uses the cost method in accounting for its treasury share transactions. In
connection with the retirement of these 2,000 shares, Nathan should debit
Share premium Accumulated Earnings
A. P20,000 P280,000
B. P100,000 P180,000
C. P180,000 P100,000
D. P280,000 P-0-

TREASURY SHARES
4. The following are the balances of shareholders’ equity section of X Corporation:
Ordinary shares, P10 par P1,000,000
Share premium 200,000
Accumulated profits 300,000

Which of the following will best describe the acquisition of the 20,000 shares at P12 per
share?
a. Increase in shareholders’ equity by P40,000.
b. Decrease in shareholders’ equity by P40,000.
c. Decrease in shareholders’ equity by P240,000.
d. Increase in shareholders’ equity by P480,000.
TREASURY SHARES REISSUANCE
5. The equity section of Y Company are as follows:
Share capital, 500,000 shares P5,000,000
Share premium 500,000
Accumulated profits 1,500,000
Appropriation reserve 1,200,000
Treasury, 100,000 shares (1,200,000)
Total shareholders’ equity P7,000,000

The treasury shares were subsequently sold at P9 per share. The new total shareholders’
equity amounts to
a. P8,200,000.
b. P7,900,000.
c. P7,000,000.
d. P6,700,000.

6. Based on No. 5, assume that all the treasury shares were retired. How much would be the
balance of accumulated profits available for dividend?
a. P2,700,000.
b. P2,600,000.
c. P1,500,000.
d. P1,400,000.

JOURNAL ENTRIES FOR ACQUIRING TREASURY SHARES

7. If 20,000 shares are acquired as treasury shares at cost of P12 per share and par value is
P10 per share, the journal entry for the acquisition will have a
a. debit to treasury share of P200,000.
b. credit to share premium of P40,000.
c. debit to accumulated profits of P240,000.
d. credit to cash of P200,000.

EFFECT OF REISSUANCE ON TOTAL SHE

8. The 50,000 treasury shares have a P10 cost per share and P8 par value per share. The
corresponding amount of accumulated profits was appropriated. These were subsequently
sold as 25,000 shares at P12 per share, and the remaining 25,000 shares were
subsequently sold at P9 per share. The net effect of the subsequent sales to total
shareholders’ equity is
a. increase of P25,000.
b. increase of P500,000.
c. increase of P525,000.
d. increase of P50,000.

CONVERSION OF PREFERENCE SHARES

9. Z Corporation has the following shareholders’ equity balance:
Preference, 100,000 shares P2,000,000
Share premium – preference shares 500,000
Ordinary, 200,000 shares 3,000,000
Share premium – ordinary shares 150,000
Accumulated profits 600,000

The preference shares carry a conversion privilege of 2 ordinary shares per preference
share. What will be the balance of accumulated profits and total shareholders’ equity if
50,000 preference shares were converted to ordinary shares?
Accumulated profits Shareholders’ equity
A. P350,000 P6,000,000
 B. P600,000 P6,250,000
C. P350,000 P6,250,000
D. P100,000 P6,250,000

STOCK SPLIT
10. R Corporation’s shareholders’ equity shows the following:
Share capital, par P10 P5,000,000
Share premium 500,000
Subscribed share capital, 200,000 shares 2,000,000
Subscriptions receivable 1,000,000
Treasury, 300,000 shares 3,600,000

How much would be the new total amount of shareholders’ equity if the share split up of
5 is declared?
a. P5,780,000
b. P4,900,000
c. P2,900,000
d. P1,156,000

11. Same as No. 2, except that reverse split of 2 is declared. How much will be the new total
amount of shareholders’ equity?
a. P7,900,000
b. P4,900,000
c. P2,900,000
d. P1,700,000

RETIREMENT OF TREASURY SHARES

12. In 200A, Y Company issued 5,000 shares of P10 par value ordinary share for P100 per
share. In 200D, Y reacquired 2,000 of its shares at P150 per share from the estate of one
of its deceased officers and immediately cancelled these 2,000 shares. Y uses the cost
method in accounting for its treasury share transactions. In connection with the retirement
of these 2,000 shares, Y should debit
Share premium Accumulated profits
a.P 20,000 P280,000
b.P100,000 P180,000
c.P180,000 P100,000
d.P280,000 P-0-

CASH AND SHARE DIVIDENDS

13. On January 1, 2019, Katrina Company provided the following information:

Share capital, 250,000 shares authorized;

100,000 shares issued and
outstanding 3,000,000
Share premium 4,000,000
Retained earnings 8,000,000

The entity declared a 10% share dividend on April 1, 2019 when the market value of the
share was P70.
The share dividend was issued on July 1, 2019 when the market value of the share was
P100. The share has a par value of P30.
The entity sustained a net loss of P1,200,000 for 2019.
What amount should be reported as retained earnings on December 31, 2019?
a. 6,100,000
b. 6,500,000
 c. 6,800,000
d. 5,050,000

PROPERTY DIVIDENDS
14. On November 1, 2019, Grande Company declared a property dividend of equipment
payable on March 1, 2020.
The carrying amount of the equipment is P3,000,000 and the fair value is P2,500,000 on
November 1, 2019.
However, the fair value less cost to distribute the equipment is P2,200,000 on December
31, 2019 and P2,000,000 on March 1, 2020.
14.1 What amount should be reported as dividend payable on December 31, 2019?
a. 2,500,000
b. 2,200,000
c. 3,000,000
d. 0

14.2 What is the measurement of the equipment on December 31, 2019?

a. 2,500,000
b. 2,200,000
c. 3,000,000
d. 2,000,000

14.3 What amount of loss on distribution of property dividend is recognized on March

1, 2020?
a. 300,000
b. 200,000
c. 500,000
d. 0

APPROPRIATION OF RETAINED EARNINGS

15. At the beginning of current year, Elvis Company reported the following shareholders’
equity:

Share capital, P5 par, 600,000 shares authorized;

200,000 shares issued and outstanding 1,000,000
Share premium 6,000,000
Retained earnings 2,800,000
Total shareholders’ equity 9,800,000

During the current year, the following chronological transactions affected shareholders’
equity:
 Reacquired 10,000 shares at P30 per share to be held as treasury.
 Declared and issued a 30% share dividend.
 Declared and paid cash dividend of P10 per share.
 Net income for the current year amounted to P3,000,000.
What amount should be reported as unappropriated retained earnings at year-end?
a. 2,745,000
b. 3,045,000
c. 2,700,000
d. 2,600,000

QUASI-REORGANIZATION
16. provided the following shareholders’ equity at year-end:

Share capital, P30 par, 100,000 shares

authorized and outstanding 3,000,000
Share premium 1,500,000
 Retained earnings (deficit) (2,100,000)

The entity put into effect a quasi-reorganization by reducing the par value of the share to
P5 and eliminating the deficit against share premium.
Immediately after the 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

BOOK VALUE PER PREFERENCE SHARE COMPUTATION

17. Tarr Company reported the following shareholders’ equity at year-end:

Preference share capital – 12%, P50 par, 20,000 shares 1,000,000

Ordinary share capital, P25 par, 100,000 shares 2,500,000
Share premium 200,000
Retained earnings 400,000
Retained earnings appropriated 100,000
Revaluation surplus 300,000

Dividends on preference share have not been paid for three years. The preference share
has a liquidating value of P55 and a call price of P58.

What is the book value per preference share?

a. 61
b. 56
c. 55
d. 58

BOOK VALUE PER ORDINARY SHARE COMPUTATION

18. Nova Company provided the following shareholders’ equity on December 31, 2019:

Cumulative preference share capital, P100 par, 8% 500,000

Ordinary share capital, P100 par 1,100,000
Share premium 200,000
Retained earnings 260,000
Treasury ordinary shares – 1,000 at cost (150,000)

Dividends on preference shares are in arrears for 2018 and 2019.

What is the book value per ordinary share on December 31, 2019?
a. 125
b. 191
c. 133
d. 141

COMPREHENSIVE PREFERENCE DIVIDENDS

19. Simplex Company provided the following data at year-end:

Preference share capital, 10% cumulative and nonparticipating,

P100 par, dividends are in arrears for 3 years 2,000,000
Ordinary share capital, P100 par, 40,000 shares 4,000,000
Subscribed ordinary share capital, 20,000 shares 2,000,000
Subscription receivable 500,000
Share premium 1,000,000
Retained earnings 2,400,000
Treasury ordinary shares, 10,000 at cost 800,000
 What is the book value per ordinary share?
a. 172
b. 200
c. 160
d. 150

20. Yodel Company had 50,000 ordinary shares of P100 par value and 25,000 preference
shares of P100 par value, 6% cumulative and participating.
Dividends on the preference shares are two years in arrears including the current year.
The entity distributed P1,350,000 as dividends in the current year.
What amount should be reported as dividend payable to the ordinary shareholders?
a. 1,050,000
b. 1,200,000
c. 800,000
d. 550,000

21. Tunn Company reported the following balances on December 31, 2019.

12% nonparticipating, noncumulative preference share capital,

par value of P100, 10,000 shares 1,000,000
10% fully participating, cumulative preference share capital,
par value of P100, 25,000 shares 2,500,000
Ordinary share capital, par value of P100, 75,000 shares 7,500,000

The entity plans to declare cash dividends. It has not paid a cash or a share dividend
before.
There has been no change in the capital balances since the entity started operations five
years ago.
The entity reported the following net income and loss for the five years of operations:

2015 1,500,000 loss

2016 1,000,000 loss
2017 500,000 loss
2018 1,750,000 income
2019 6,250,000 income

If the maximum amount available for dividend on December 31, 2019 is declared and
paid, what amount should be distributed to
21.1 12% Preference shareholders?
a. 600,000
b. 120,000
c. 300,000
d. 150,000

21.2 10% Preference shareholders?

a. 1,970,000
b. 1,250,000
c. 250,000
d. 500,000

21.3 Ordinary shareholders?

a. 3,750,000
b. 2,910,000
c. 500,000
d. 750,000

BASIC EARNINGS PER SHARE

 22. Royal Company reported the following capital structure on January 1, 2019:

Shares issued and outstanding

Ordinary share capital 200,000
Preference share capital 50,000

On October 1, 2019, the entity issued a 10% share dividend on ordinary shares and
declared the annual cash dividend of P200,000 on preference shares.
The preference shares are noncumulative, nonparticipating and nonconvertible.
Net income for the year ended December 31, 2019 was P1,920,000.
What amount should be reported as basic earnings per share?
a. 8.20
b. 8.72
c. 9.36
d. 7.82

23. Ute Company had the following capital structure during 2018 and 2019:

Preference share capital, P10 par, 4% cumulative,

25,000 shares issued and outstanding 250,000

Ordinary share capital, P5 par, 200,000 shares

issued and outstanding 1,000,000

The entity reported net income of P500,000 for the year ended December 31, 2019.
The entity paid no preference dividends during 2018 and paid P16,000 in preference
dividends during 2019.

What amount should be reported as basic earnings per share?

a. 2.42
b. 2.45
c. 2.48
d. 2.50

BASIC LOSS PER SHARE

24. During the current year, Innova Company had outstanding 200,000 ordinary shares and
20,000 cumulative preference shares with a P10 per share dividend. Each preference
share is convertible into five ordinary shares.
The entity had a P3,000,000 net loss for the year. No dividends were paid or declared.
What amount should be reported as basic loss per share?
a. 15.00
b. 16.00
c. 10.00
d. 10.67

COMPUTATION OF AVERAGE SHARES

25. Wisconsin Company had 250,000 ordinary shares outstanding on January 1, 2019.
During 2019 and 2020, the following transactions took place:

2019 March 1 Sold 24,000 shares

July 1 Issued a 20% share dividend
October 1 Sold 16,000 shares
December 1 Purchased 15,000 shares to be held in treasury

2020 June 1 3 for 1 share split

September 1 Sold 60,000 shares
 25.1 What is the weighted average number of shares for 2019 to be used in the earnings
per share computation for comparative financial statements of 2019?
a. 980,250
b. 329,800
c. 984,000
d. 969,000

25.2 What is the weighted number of shares for 2020 to be used in the earnings per
share computation for comparative financial statements of 2020?
a. 1,009,400
b. 1,049,400
c. 1,169,400
d. 989,400

THEORIES
1. Which of the following is NOT a characteristic of a CORPORATION?
a. Limited liability of shareholders c. Flexible ownership
b. Separate legal entity d. Nontaxable entity

2. Which of the following is NOT among the basic rights of a SHAREHOLDER?

a. To share in corporate earnings
b. To vote in the election of directors
c. To subscribe for additional share issues
d. To represent himself in the name of the corporation

3. Any direct costs incurred to issue shares above par value (i.e., SHARE ISSUE COSTS)
shall be debited to __________
a. Expense c. Organization cost
b. Share premium d. Retained earnings

4. Shares issued for noncash consideration such as property, plant and equipment shall be
measured at:
a. Par value of the shares issued
b. Fair value of the shares issued
c. Fair value of the noncash consideration received
d. Carrying amount of the noncash consideration received

5. Shares issued for services rendered are measured at:

a. Par value of the shares issued
b. Fair value of the shares issued
c. Fair value of the services rendered
d. Liquidation value of the shares issued

6. Shares issued to extinguish a financial liability shall be measured initially at:

a. Fair value of liability extinguished
b. Par value of equity instruments issued
c. Fair value of equity instruments issued
d. Carrying amount of liability extinguished

7. Which of the following is issued to shareholders of a corporation to acquire its unissued

or treasury shares within a specific time at a specific price?
a. Share option c. Share dividend
b. Share warrant d. Share split

8. An entity issued STOCK RIGHTS to its existing shareholders to purchase unissued

ordinary shares at more than par value. Share premium would be recorded when the
rights _______
a. Are issued c. Are exercisable
b. Are exercised d. Are not exercised
9. A company-issued SHARE OPTION is an instrument that gives holder the right but not
the obligation to:
a. Buy a certain number of shares in the company by a specified date at a stated price
b. Sell a certain number of shares in the company by a specified date at a stated price
c. Receive a bonus issue of shares in a proportion as notified by the company
d. Receive a certain dividend declared by the company by a specified date

10. Share Options as an EQUITY-SETTLED share-based compensation are

a. Rights or privileges granted to existing shareholders only
b. Considered as additional compensation to the officers and employees
c. Privileges granted to company employees to acquire stocks of other entities
d. Usually offered at an option price higher than the market value of the option shares

11. Under PFRS 2, the method used to measure employee stock options and other payments
to employees in the form of equity securities is:
a. Par value c. Selling price
b. Fair value d. Discounted cash flows

12. Under PFRS 2, if the fair value of the share options cannot be estimated reliably, then
share options are measured based on
a. Par value c. Appraised value
b. Intrinsic value d. Theoretical parity value

13. Under PFRS 2, a CASH-SETTLED share-based payment (e.g., share appreciation rights)
will increase which of the following elements of the financial statement?
a. Income c. Liability
b. Asset d. Equity

14. In a share-based payment transaction where the ENTITY HAS SETTLEMENT CHOICE:
a. If an entity elects to settle in cash, the settlement is accounted for as an expense
b. The entity must settle in equity unless there is no commercial substance to the
transaction
c. The entity has a present obligation to settle in cash where it has a past practice or
stated policy of settling in cash
d. Where a present obligation does not exist, the entity has a choice of classification as
equity or cash settled share based payment transaction.

15. TREASURY SHARES are recorded at:

a. Par value of the shares reacquired
b. Cost only if acquired below par value
c. Cost only if acquired above par value
d. Cost regardless of whether they are acquired above or below par value

16. The purchase (acquisition) of treasury shares ________

a. Increases issued shares
b. Decreases issued shares
c. Increases outstanding shares
d. Decreases outstanding shares

17. The ‘gain’ on sale (re-issuance) of treasury shares is:

a. Disclosed in the notes to the financial statements
b. Considered in the computation of profit or loss
c. Credited to retained earnings
d. Credited to share premium

18. The ‘loss’ on sale (re-issuance) of treasury shares is:

a. Considered in the computation of profit or loss
b. Disclosed in the notes to the financial statements
c. Debited to retained earnings even when share premium is sufficient to absorb the loss
d. Debited to retained earnings only when share premium is insufficient to absorb the
loss
19. A restriction of retained earnings is most likely to be required by the _________
a. Purchase of treasury stock
b. Amortization of past service cost
c. Bifurcation of embedded derivatives
d. Sale of property, plant and equipment

20. RETAINED EARNINGS are a component of:

a. Reserves c. Contributed equity
b. Other equity d. Comprehensive income

21. Whether a DIVIDEND is paid by a company depends on the decisions made by the:
a. Auditors of the company c. Creditors of the company
b. Directors of the company d. Shareholders of the company

22. Which dividend when declared does NOT create a liability?

a. Cash dividend c. Scrip dividend
b. Share dividend d. Property dividend

23. Which of the following dividends is usually NOT debited to retained earnings?
a. Cash dividend c. Share dividend
b. Property dividend d. Liquidating dividend

24. Under IFRIC 17, noncash asset distribution to owners like property dividends should be
recognized as
a. A direct deduction from share capital
b. An appropriation of retained earnings
c. A liability based on the fair value of the asset to be distributed
d. A liability based on the carrying amount of the asset to be distributed

25. The BONUS ISSUE (i.e., stock dividend) of shares has the following impact on the
equity of a company:
a. Total equity increases
b. Total equity decreases
c. Only the amount of issued share capital changes
d. One equity account increases and another equity account decreases by an equal
amount

26. At what amount per share should retained earnings be reduced for a 20% stock dividend?
a. Zero
b. Par value
c. Market value at the date of declaration
d. Market value at the date of issuance

27. If the stock dividend is less than 20%, how much of the retained earnings should be
capitalized?
a. Par value of the shares
b. Fair value of the shares on the date of record
c. Fair value of the shares on the date of issuance
d. Fair value of the shares on the date of declaration

28. Dividends IN ARREARS are

a. Dividends on common stock that have not been declared
b. Dividends on preferred stock that have been declared but not paid
c. Cumulative preferred dividends that have not been declared for a given period of time
d. Noncumulative preferred dividends that has not been declared for a given period of
time

29. Dividends paid out of preference shares with mandatory redemption (i.e., financial
liability) are:
a. Not recorded
b. Charged as expense
 c. Charged against retained earnings
d. Charged against related financial liability

30. The primary purpose of a QUASI-REORGANIZATION is to give the entity the

opportunity to ____
a. Obtain relief from its creditors
b. Eliminate a deficit in retained earnings
c. Revalue understated assets to their fair value
d. Distribute shares of a newly created subsidiary to shareholders

31. When an entity goes through a quasi-reorganization, the balance sheet carrying amounts
are stated at:
a. Original cost c. Replacement value
b. Original book value d. Fair value

32. Immediately after the quasi-reorganization, the retained earnings account ________
a. Has a zero balance
b. Remains the same as it was before the quasi-reorganization
c. Has a debit balance equal to the write-down of the assets which were overstated
d. Is appropriated to the full amount until the company shows sign of financial recovery

33. The accounting for quasi-reorganization usually involves ________

a. Write-up of assets and write-down of retained earnings
b. Write-down of both assets and retained earnings
c. Write-down of assets and elimination of a deficit
d. Write-up of assets and elimination of deficit

34. A company may effect a STOCK SPLIT in order to ________

a. Lower the market price per share
b. Raise the unit market price of its shares
c. Decrease the number of shares outstanding
d. Narrow down distribution of its shares to shareholders

35. EARNINGS PER SHARE (EPS) disclosures are strictly required for:
a. Small and medium entities c. Both SMEs and PAEs
(SMEs) d. Neither SMEs nor PAEs
b. Publicly accountable entities
(PAEs)

36. The basic earnings per share and diluted EPS must be presented in an entity’s:
a. Statement of financial position even if the amounts are negative
b. Statement of changes in equity even if the amounts are negative
c. Statement of profit or loss and other comprehensive income only if the amounts are
positive
d. Statement of profit or loss and other comprehensive income even if the amounts are
negative

37. If an entity presents both consolidated and separate financial statements, PAS 33
disclosures shall be determined based on:
a. Parent entity only
b. Subsidiary entities only
c. Consolidated information
d. Either parent entity or consolidation

38. If the entity has a discontinued operation, then it must also calculate and disclose the:
a. The basic EPS only for the discontinued operation in the statement of profit or loss
and other comprehensive income.
b. The diluted EPS only for the discontinued operation in the statement of profit or loss
and other comprehensive income.
c. The basic and diluted EPS for the discontinued operation in the statement of profit or
loss and other comprehensive income.
 d. The basic and diluted EPS for the discontinued operation in the statement of profit or
loss and other comprehensive income only if the discontinued operation contributed a
profit in the current reporting period.

39. Any errors or adjustments resulting from changes in accounting policies that are
accounted for retrospectively requires:
a. A retrospective adjustment to basic earnings per share only
b. A retrospective adjustment to diluted earnings per share only
c. A retrospective adjustment to both basic and diluted earnings per share
d. No retrospective adjustment to either basic or diluted earnings per share

40. In computing the BASIC EPS, the numerator used is the ________
a. Income before interests and taxes
b. Income available to ordinary shares
c. Income available to ordinary shares and preference shares
d. Income after interests and taxes but before preference share dividends

41. In computing the basic EPS, the denominator used is the _______
a. Ordinary shares outstanding at the end of the year
b. Ordinary shares outstanding at the beginning of the year
c. Weighted average ordinary shares outstanding during the year
d. Weighted average ordinary and preference shares outstanding during the year

42. To compute basic EPS, the amount of preferred dividends on noncumulative preferred
stock should be:
a. Disregarded
b. Added to net income, only when declared
c. Deducted from net income, only when declared
d. Deducted from net income, whether declared or not

43. To compute basic loss per share, the annual preferred dividend on cumulative preferred
stock is _______
a. Deducted from the net loss, whether declared or not
b. Added to the net loss, whether declared or not
c. Added to the net loss, only when declared
d. Disregarded

44. What is the inherent justification underlying the concept of potential ordinary shares
(diluters) in EPS computation?
a. Cost-benefit c. Materiality
b. Substance over form d. Timeliness

45. For the purposes of calculating diluted EPS, an entity shall adjust the profit attributable to
ordinary shareholders by the after-tax effect of the following item(s) related to dilutive
potential ordinary shares:
a. Interest only c. Other income or expenses only
b. Dividends only d. Dividends, interest, other income
or expenses

46. In computing DILUTED EPS, dividends on non-convertible cumulative preferred stock

should be:
a. Ignored
b. Added to net income, net of related tax
c. Deducted from net income only when declared
d. Deducted from net income whether declared or not

47. In computing diluted EPS, dividends on convertible cumulative preferred stock should
be:
a. Ignored
b. Added to net income, net of related tax
c. Deducted from net income only when declared
d. Deducted from net income whether declared or not