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    Minglana (Quiz-Answers)

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    Mitch Minglana
    The document contains 3 accounting problems involving the calculation of book value per share and earnings per share under different share capital structures and transaction scenarios. Problem 1 involves calculating book value per preference and ordinary share under 5 different preference share conditions. Problem 2 shows how to present earnings per share on the income statement under different share capital assumptions. Problem 3 demonstrates calculating average shares outstanding and earnings per share when there are share transactions during the year.

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    Minglana (Quiz-Answers)

    Uploaded by

    Mitch Minglana
    1K views4 pages
    The document contains 3 accounting problems involving the calculation of book value per share and earnings per share under different share capital structures and transaction scenarios. Problem 1 involves calculating book value per preference and ordinary share under 5 different preference share conditions. Problem 2 shows how to present earnings per share on the income statement under different share capital assumptions. Problem 3 demonstrates calculating average shares outstanding and earnings per share when there are share transactions during the year.

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    MINGLANA (QUIZ-ANSWERS)

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    The document contains 3 accounting problems involving the calculation of book value per share and earnings per share under different share capital structures and transaction scenarios. Problem 1 involves calculating book value per preference and ordinary share under 5 different preference share conditions. Problem 2 shows how to present earnings per share on the income statement under different share capital assumptions. Problem 3 demonstrates calculating average shares outstanding and earnings per share when there are share transactions during the year.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    1K views4 pages

    Minglana (Quiz-Answers)

    Uploaded by

    Mitch Minglana
    The document contains 3 accounting problems involving the calculation of book value per share and earnings per share under different share capital structures and transaction scenarios. Problem 1 involves calculating book value per preference and ordinary share under 5 different preference share conditions. Problem 2 shows how to present earnings per share on the income statement under different share capital assumptions. Problem 3 demonstrates calculating average shares outstanding and earnings per share when there are share transactions during the year.

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    © All Rights Reserved
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    The document discusses computing book values and earnings per share under different capital structures and share transactions.

    The book values per preference share and ordinary share change under different conditions regarding whether the preference shares are cumulative, participating, and what percentage they can participate up to. The values generally decrease as the preference shares receive less priority and participation rights.

    To compute basic earnings per share, net income is calculated and then divided by the weighted average number of shares outstanding during the period. Any preference dividends are deducted from net income.

    MINGLANA, MITCH T.

    BSA 301

    PROBLEM 1:

    Endless Company provided the following shareholder’s equity on December 31, 2020:

    Preference share capital, 12% P100 par 1,000,000


    Ordinary share capital, P100 4,000,000
    Share premium 2,000,000
    Retained earnings 1,000,000

    Dividends have been paid on the preference share up to December 31, 2018.

    Required:

    Compute the book value per ordinary share and per preference share under each of he
    following conditions with respect to preference share:

    a. Cumulative and fully participating

    ANSWER AND SOLUTION:

    Excess Preference Ordinary


    P3, 000,000 1,000,000 4,000,000
    (240,000) 240,000
    (480,000) 480,000
    P 2,280,000
    1/5 456,000
    4/5 1,824,000
    Balance 1,696,000 6,304,000
    Outstanding shares / 10,000 / 40,000
    Book value per share P 169.6 P 157.6
    b. Cumulative and fully participating after ordinary share receives 15%

    ANSWER AND SOLUTION:

    Excess Preference Ordinary


    P3, 000,000 1,000,000 4,000,000
    (240,000) 240,000
    (600,000) 600,000
    P 2,160,000
    1/5 432,000
    4/5 1,728,000
    Balance 1,672,000 6,328,000
    Outstanding shares / 10,000 / 40,000
    Book value per share P 167.2 P 158.2

    c. Cumulative and participating up to 16%

    ANSWER AND SOLUTION:

    Excess Preference Ordinary


    P3, 000,000 1,000,000 4,000,000
    (240,000) 240,000
    (480,000) 480,000
    P 2,280,000
    4% 40,000
    2,240,000
    Balance 1,280,000 6,720,000
    Outstanding shares / 10,000 / 40,000
    Book value per share P 128 P 168

    d. Cumulative and nonparticipating

    ANSWER AND SOLUTION:

    Excess Preference Ordinary


    P3, 000,000 1,000,000 4,000,000
    (240,000) 240,000
    P 2,760,000 2,760,000
    Balance 1,240,000 6,760,000
    Outstanding shares / 10,000 / 40,000
    Book value per share P 124 P 169
    e. Noncumulative and nonparticipating

    ANSWER AND SOLUTION:

    Excess Preference Ordinary


    P3, 000,000 1,000,000 4,000,000
    (120,000) 120,000
    P 2,880,000 2,880,000
    Balance 1,120,000 6,880,000
    Outstanding shares / 10,000 / 40,000
    Book value per share P 112 P 172

    PROBLEM 2:

    Zonal Company reported the following information for the current year:

    Income before tax 5,000,000


    Income tax 1,600,000
    Loss from discontinued operations 600,000

    Required:

    Present the basic earnings per share on the face of the income statement under each of the
    following assumptions:

    1. The entity has only one class of share capital, 50,000 ordinary shares with par
    value of P100.
    2. The entity has two classes of share capital:
    Preference share, 10% cumulative, P100 par 2,000,000
    Ordinary share, P100 par, 50,000 shares 5,000,000

    ANSWER AND SOLUTION:

    A. Net income = P2,800,000


    Outstanding ordinary share 50,000

    BASIC EARNINGS PER SHARE = P 56

    B. Net income = P2,800,000- 200,000


    Outstanding ordinary share 50,000

    BASIC EARNINGS PER SHARE = P 52


    PROBLEM 3:

    New Company had the following ordinary share transactions for the current year.

    January 1 Beginning balance, 120,000 shares, P 50 par


    June 1 Issued 12,000 shares at P60 per share
    September 30 Purchased 24,000 shares at P55 per share to be held as treasury

    The entity reported net income of P 3,630,000, after an expropriation loss of P605,000 for
    the current year.

    Required:
    1. Compute the average shares outstanding.
    2. Compute the basic earnings per share.

    ANSWER AND SOLUTION:

    Date shares Months Outstanding Peso Months


    Jan. 1 120,000 12/12 120,000
    Jun. 1 12,000 7/12 7,000
    Sept. 30 (24,000) 3/12 (6,000)
    121,000

    EPS= P 3,630,000
    121,000

    EPS= P 30

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