Name Name Year and Sec Sectio tion n Dat Date
:______________________________________________ :_____ :________ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ _____ __ :______________________________________________
Problem No.1 A CPA was engaged by BOOMPANES COMPANY in 2014 to eamine its boo!s and re"ords and to ma!e w#ate$er w#a te$er "orre"tions are ne"essary. An eamination o% t#e a""o&nts dis"loses t#e %ollowing' a( )i$idends )i$idends #ad been de"lared de"lared on )e"emb )e"ember er 1* in 2012 2012 and 201+ 201+ b&t #ad not been been entered in t#e boo!s &ntil ,aid. b( -m,ro$ements in b&ildings and e&i,ment o% P+24/000#ad been debited to e,ense at t#e end o% o % A,ril A,ril 2011. -m,ro$ements are estimated to #a$e 12 year li%e. #e "om,any &ses straig#t line met#od in re"ording de ,re"iation and "om,&tes de,re"iation to t#e nearest mont#. "( #e ,#ysi"al ,#ysi"al in$entory in$entory o% mer"#an mer"#andise dise #ad been been o$erstated o$erstated by P /000 at t#e t#e end o% 2012 and by P42/*00 at t#e end o% 201+. d( #e mer"#andi mer"#andise se in$entori in$entories es at t#e end o% 201+ 201+ and 2014 2014 did not in"l&de in"l&de mer"#andise t#at was t#en in transit and to w#i"# t#e "om,any #ad title. #ese s#i,ments o% P+/000 and P 3/000 were re"orded as ,&r"#ases in 5an&ary o% 2014 and 201*/ res,e"ti$ely. e( #e "om,any "om,any #ad %ailed %ailed to to re"ord re"ord sales "ommission "ommission ,ayable ,ayable o% P3/000 and and P++/000 at t#e end o% 201+ and 2014 /res,e"ti$ely. /res,e"ti$ely. %( #e "om,any "om,any #ad %ailed %ailed to to re"ogni6e re"ogni6e s&,,lies s&,,lies on #and o% P2*/*00 and and P*1/00 P*1/00 at t#e end o% 201+ and a nd 2014/ res,e"ti$ely. g( A deli$e deli$ery ry $e#i"le $e#i"le was sold sold %or P100/000 P100/000 on 5&ly 5&ly 1/2014 and t#e t#e ,ro"eeds ,ro"eeds were "redited to t#e Sales A""o&nt. #e $e#i"le was a"&ired on 5an&ary 1/2011/ %or P00/000. At t#at time/ it #ad an estimated li%e o% years wit# no resid&al $al&e. No de,re"iation was re"orded on t#is $e#i"le in 2014. #e retained earnings a""o&nt a,,eared as s#own below on t#e date t#e CPA began t#e eamination. Retained Earnings Date 2012 Jan.1 Dec. 31 2013 Jan.10 &ar. $ Dec. 31 2014 Jan.10 Dec. 31
Item
Debit
Balance Net income for the year Diidend! "aid 'toc( !old e)ce!! oer "ar Net income for the year Diidend! "aid Net lo!! for year
%9*,500 9,%00
d. P13/*00
2.7#at is t#e "orre"ted 201+ net in"ome8 a.P 11/000 b. P2 P22+/000 ". P4 P41/000
d. P+ P+3/000
+.7#at is t#e "orre"ted 2014 net n et loss8 a. P2 P2/*00 b.P 2*4/00 ". P2 P23/*00
d. P 202/*00
4. 7#at is t#e "orre"ted retained earnings on )e"ember +1/201+8 a. P 21/000 b. P 2/000 ". P2*2/000 d. P 20/000 *. 7#at is t#e "orre"ted retained earnings on )e"ember +1/20148 a. P /100 b. P *3/*00 ". P/*00 d. P/*00
Balance
P344,000
P195,000 539,000
1%3,000 %$9,000
15%,500 %*5,500 544,500
P3#$,500
1.7#at is t#e "orre"ted 2012 net in"ome8 a.P41+/000 b. P2+0/000 ". P221/000
Problem No. 2
Credit
%4*,000 %3*,#00
BE9NA)EE CO. began o,eratios on 5an&ary 1/2014. A&t#ori6ed were 100/000 ordinary s#ares o% P*0 ,ar $al&e and *0/000 "on$ertible ,re%eren"e s#ares o% 10: P*0 ,ar$al&e. #e %ollowing transa"tions in$ol$ing s#are#olders; e&ity o""&rred d&ring t#e %irst year o% o,erations. 5an. 1 -ss&ed 10/000 ordianry s#ares to t#e "or,oration ,romoters in e"#ange %or ,ro,erty $al&ed at P 1/2*0/000 and ser$i"es $al&ed at P2*0/000. #e ,ro,erty #ad "ost t#e ,romoters P00/000 t#ree years be%ore and was "arried on t#e ,romoters; boo!s at P*0/000.
Sold 2*/000 ordinary s#ares %or P1+0 ,er s#are. -ss&e "ost were P100/000.
A,r 10
20/000 ordinary s#ares were sold &nder s#are s&bs"ri,tions at P1* ,er s#are. No s#are "erti%i"ates are iss&ed &ntil a s&bs"ri,tion "ontra"t is ,aid in %&ll. No "as# was re"ei$ed. 5&ly 1* E"#ange 12/000 ordinary s#aresand 20/000 ,re%eren"es s#ares %or a b&ilding wit# a %air$al&e o% P+/*00/000. #e b&ilding was originally ,&r"#ased %or P+/2*0/000 by t#e owner and #as a boo! $al&e o% P2/400/000. -n addition/ 10/000 ordinary s#ares were sold %or P 1/*00/000 "as#. A&g 1 9e"ei$ed ,ayments in %&ll %or #al% o% t#e s#are s&bs"ri,tions and ,artial ,ayments on t#e rest o% t#e s&bs"ri,tions. otal "as# re"ei$ed was P2/2*0/00. S#are "erti%i"ates were iss&ed %or t#e s&bs"ri,tions ,aid in %&ll.
A&g +1
9e"ei$ed noti"e %rom #olders o% s#are s&bs"ri,tions %or */000 s#ares t#at t#ey wo&ld not ,ay %&rt#er on t#e s&bs"ri,tions be"a&se t#e ,ri"e o% t#e s#are #ad %allen to P* ,er s#are. #e amo&nt still d&e on t#ose "ontra"ts was P*0/000. Amo&nt ,re$io&sly ,aid on t#e "ontra"ts are%or%eited a""ording to t#e agreement. )e"+1 Net in"ome %or t#e %irst year o% o,erations was P 1/*00/000. Based on t#e ,re"eeding in%ormation/ determine t#e "orre"t balan"es o% t#e %ollowing at )e"ember+1/2014' 1. Ordinary S#are "a,ital a. P 2/3*0/000 b. P+/+*0/000
". P 4/**0/000
d. P 2/*0/000
2.S#are ,remi&m ordinary a. P */*/000 b. P /*/000
". P/*/000
d. P /3*0/000
+. S#are ,remi&m ,re%eren"e a. P32*/000 b. P*0/000
". P3*/000
d. P3*0/000
4. S&bs"ri,tion re"ei$able a. P2/2*0/000 b. P *0/000
". P1/2*0/000
d. P*00/000
*. otal s#are#olders e&ity a. P14/2*/000 b. P12/*/000
". P1+/*/000
d. P1*/2*/000
Problem no. +
Presented below are t#ree =+( inde,endent "ases relating to t#e a&dit o% s#are#olders; e&ity. Answer t#e &estion>s at t#e end o% ea"# "ase. C?-N-O COMPANY began o,eration on 5an&ary 1/201+ by iss&ing at P1* ,er s#are one #al% o% t#e *00/000 ordinary s#ares =P1 ,ar $al&e( t#at #ad been a&t#ori6ed %or iss&e. -n addition / C?-N-O #as 2*0/000 : ,re%eren"e s#ares =P* ,ar $al&e( a&t#ori6ed. )&ring 201+/ C#inito re,orted net in"ome o% P20/000 and de"lared di$idends o% P1+0/000. )&ring 2014/ C#inito "om,leted t#e %ollowing transa"tions' 5an 10 A,r 2 5&ly 21
O"t 2* )e" +1
-ss&ed an additional 40/000 ordinary s#ares %or P13 ,er s#are. -ss&ed 11*/000 ,re%eren"e s#ares %or P ,er s#are. A&t#ori6ed t#e a"&isition o% a "&stom made ma"#ine to be deli$ered in 5an&ary 201*. C#inito a,,ro,riated o% P14/*00 o% reta ned earnings %or t#e ,&r"#ase o% t#e ma"#ine. -ss&ed an additional **/000 ,re%eren"es s#ares %or P ,ers#are. 9e,orted P10/000 o% net in"ome and de"lared a di$idend o% P+1/*00 to s#are#olders o% re"ord on 5an&ary +1/201*/ to be ,aid on
1. 7#at is t#e total s#are#olders; e&ity on )e"ember+1/20148 a. P /**2/*00 b. P 4/240/000 ". P/40*/000 d. P/30/000 2. 7#at is t#e &na,,ro,riated retained earnings balan"e on )e"ember +1/20148 a. P 40/000 b. P*2/*00 ". P +*/000 d. P 32/*00 B@9-O CO is a&t#ori6ed to iss&e +00/000 o% P2 ,ar $al&e ordinary s#ares. #e "om,any #as t#e %ollowing transa"tions' a( -ss&ed 0/000 s#ares at P3 ,er s#are re"ei$ed "as#. b( -ss&ed *0 s#ares/ selling at P+* ,er s#are/ to lawyers %or ser$i"es in "onne"tion wit# t#e organi6ation o% t#e "or,oration. #e $al&e o% t#e legal ser$i"es was P2/000. "( -ss&ed 00 s#ares/ $al&ed obe"ti$ely at P+0/000 to t#e em,loyees instead o% ,aying t#em "as# wages. d( -ss&ed 0/000 s#ares in e"#ange %or a b&ilding $al&ed at P33*/000 and land $al&ed at P240/000. =#e b&ilding was originally a"&ired by t#e in$estor %or P*0/000 and #as P+00/000 o% a""&m&lated de,re"iation t#e land was originally a"&ired %or P0/000.( e( 9e"ei$ed "as# %or P1/*00 s#ares iss&ed at P+3 ,er s#are. %( -ss&ed 12/000 s#ares at P4* ,er s#arere"ei$ed "as#. +. #e statement o% %inan"ial ,osition will re,ort s#are ,remi&m o% a. P2/*1/200 b. P2/1/00 ". P2/*33/*00 d. P2/*+/000 C?-D@-O COMPANY #as been ,aying reg&larly &arterly di$idends o% P1.*0 and wants to ,ay t#e same amo&nt in t#e t#ird &arter o% 2014. #e %ollowing in%ormation relates to t#e "om,any;s e&ity' 5an 1
S#are o&tstanding/ +*0/000 P2 ,ar=*0/000 s#ares a&t#ori6ed(. -ss&ed +0/000 new s#ares at P10.*0. Paid &arterly di$idends o% P1.*0 ,er s#are. Con$erted P1/000/000 o% P1/000bonds to ordinary s#ares at t#e rate o% 40 s#ares ,er P1/000 bond. 5&ne 1* -ss&ed a 10: sto"! di$idend. +0 Paid &arterly di$idends o% P1.*0 ,er s#are. 4. 7#at is t#e total amo&nt t#at "#i&ito will #a$e to ,ay in di$idends in t#e t#ird &arter in order to ,ay P1.*0 ,er s#are8 a. P *2*/000 b. P2/000 ". P*0/000 d. P+/000
*. 7#at is t#e total amo&nt o% di$idends to be distrib&ted d&ring t#e year ass&ming no e&ity transa"tion o""&r a%ter 5&ne +08 a. P2/230/000 b. P2/4/000 ". P2/2/000 d. P2/202/000
Problem No.4 BEBE CO. was %ormed on 5&ly 1/2011. -t was a&t#ori6ed to iss&e 1/300/000 s#ares o% P10 ,ar $al&e ordinary s#ares and 00/000 s#ares o% 3 ,er"ent P2* ,ar $al&e/ "&m&lati$e and non ,arti"i,ating ,re%eren"e s#ares. BEBE CO. #as a 5&ly 1 5&ne +0 %is"al year. #e %ollowing in%ormation relates to t#e s#are#olders e&ity a""o&nts o% BEBE CO.' Ordinary Shares
Prior to t#e 201+ 2014 %is"al year/ BEBE CO. #ad 0/000 ordinary s#ares iss&ed as %ollows' 1. *10/000 s#ares were iss&ed %or "as# on 5&ly 1/2011/ at P+1 ,er s#are. 2. On 5&ly 24/2011/ +0/000 s#ares were e"#ange %or a ,lot o% land w#i"# "ost t#e seller P 420/000 in 200* and #ad an estimated mar!et $al&e o% P1/+20/000 on 5&ly 24/2011. +. 120/000 s#ares were iss&ed on Mar"# 1/2012/ %or P42 ,er s#are. )&ring t#e 201+ 2014 %is"al year/ t#e %ollowing transa"tions regarding ordinary s#ares too! ,la"e' No$ember +0/201+ BEBE CO. ,&r"#ased 12/000 o% its own s#ares on t#e o,en mar!et at P+ ,er s#are. )e"ember 1*/201+ BEBE CO. de"lared a *: sto"! di$idends %or s#are#olders o% re"ord on 5an&ary 1*/2014/ to be iss&ed on 5an&ary +1/2014. BEBE CO. was #a$ing a li&idity ,roblem and "o&ld not a%%ord a "as# di$idend at t#e time. BEBE CO.;s ordinary s#ares were selling at P*2 ,er s#are on )e"ember 1*/201+ 5&ne 20/2014 BEBE CO. sold o% its own ordinary s#ares t#at it #ad ,&r"#ased on No$ember+0/201+ %or P12/000. Preference Shares
BEBE Co. iss&ed 240/000 ,re%eren"e s#ares at P44 ,er s#are on 5&ly 1/2012. Cash Dividends
BEBE CO. #as %ollowed a s"#ed&le o% de"laring "as# di$idends in )e"ember and 5&ne/ wit# ,ayment being made to s#are#olders o% re"ord in t#e %ollowing mont#. #e "as# di$idends w#i"# #a$e been de"lared sin"ein"e,tion o% t#e "om,any t#ro&g# 5&ne +0/2014/ are s#own below' Declaration Date
'hare Ca"ital +rdinary
'hare Ca"ital Preference
1%15%01%
P0.30 "er !hare
P1.00 "er !hare
$15%013
P0.30 "er !hare
P1.00 "er !hare
-
P1.00 "er !hare
1%15%013
No cash dividends were declared during June 2014 due to the company’s liquidity problems.
Retained Earnings As o% 5&ne +0/201+/ BEBE Co;s retained earnings a""o&nt #ad a balan"e o% P4/140/000.
Com,&te t#e ad&sted balan"es o% t#e %ollowing as o% 5&ne +0/2014' a. b. c. d. e. f. . h.
'hare ca"ital - "reference 'hare ca"ital - ordinary 'hare "remim - "reference 'hare "remim - ordinary 'hare "remim - trea!ry /etained earnin! before a""ro"riation for trea!ry !hare!2 rea!ry !hare! otal !hareholder! eity
Problem No. * #e s#are#olders; e&ity se"tion o% BA?9A-N CO9PO9A-ON;s statement ,osition as o% )e"ember +1/201+/ is as %ollows' S#are "a,ital Ordinary =P10 ,ar/*0/000 s#ares A&t#ori6ed/ 412/*00 iss&ed and o&tstanding S#are ,remi&m otal ,aid in "a,ital @na,,ro,riated retained earnings A,,ro,riated retained earnings otal retained earnings otal s#ares#olders; e&ity
P4/12*/000 32*/000 P4/*0/000 P2/002/*00 *0/000 2/*2/*00 P/02/*00
Ba#rain Cor,oration #ad t#e %ollowing s#are#olders; e&ity transa"tion d&ring 2014' 5an 1* Com,leted t#e b&ilding reno$ation %or w#i"# P*0/000 o% retained earnings #ad been restri"ted. Paid t#e "ontra"tor P2/*00/ all o% w#i"# is "a,itali6ed. Mar + -ss&ed 1*0/000additional ordinary s#ares %or P13 ,er s#are. May 13 )e"lared a di$idend o% P1.*0 ,er s#are to be ,aid on 5&ly +1/2014/ to s#are#olders o% re"ord on 5&ne +0/2014. 5&ne 1 A,,ro$ed additional b&ilding reno$ation to be %&nded enternally. #e estimated "ost o% t#e ,roe"t is P00/000/ and retained earnings are to be restri"ted %or t#at amo&nt. 5&ly +1 Paid t#e di$idend. No$ 12 )e"lared a ,ro,erty di$idend to be ,aid on 5an&ary */201*. #e di$idend is to "onsist o% e&i,ment t#at #as a "arrying amo&nt o% P+0/000 and a %air $al&e o% P42/*00 on No$ember 12. )e" +1 Net in"ome %or 2014 = be%ore re"ognition o% im,airment loss on t#e e&i,ment de"lared as ,ro,erty di$idend( is P1/+2/*00. #e e&i,ment;s %air $al&e less "ost to distrib&te on )e"ember +1 is P++0/000. 1.S#are "a,ital ordinary on )e"ember +1/2014 is a. P*/2*/000 b. P4/12*/000 ". P4/*0/000
d. P/*0/000
2. S#are ,remi&m on )e"ember +1/2014 is a. P2/2*/000 b. P32*/000 ". P2/02*/000
d. P1/200/000
+.@na,,ro,riated retained earnings on )e"ember +1/2014 is a. P2/1+/*0 b. P2/24/2*0 ". P 2/1++/*0
d.P 2/2/2*0
4.#e total s#are#older;s e&ity on )e"ember +1/2014 is a. P10/+/2*0 b. P10/*2/2*0 ". P/2/2*0
d. P/*0/000
PROBE! NO"#
Yo& were engaged by C-Y CO9PO9A-ON/ a ,&bli"ly #eld "om,any w#ose s#ares are traded on t#e P#ili,,ines Sto"! E"#ange/ to "ond&"t an a&dit o% its 2014 %inan"ial statements. Yo& were told by t#e "om,any;s "ontroller t#at t#ere were n&mero&s e&ity transa"tions t#at too! ,la"e in 2014. #e s#are#olders; e&ity a""o&nts at )e"ember +1/201+/ #ad t#e %ollowing balan"es' S#are "a,ital Pre%eren"e/ P100 ,ar $al&e/: "&m&lati$e +0/000 s#ares a&t#ori6ed 13/000 s#ares iss&ed And o&tstanding S#are "a,ital Ordinary/ P1 ,ar $al&e / 1/300/000 s#ares A&t#ori6ed 1/200/000 s#ares iss&ed and o&tstanding S#are ,remi&m 9etained Earnings otal s#are#olders; e&ity
P1/300/000 1/200/000 2/400/000 30/000 P /+30/000
Yo& s&mmari6ed t#e %ollowing transa"tion d&ring 2014 and ot#er in%ormation relating to t#e s#are#olders; e&ity in yo&r wor!ing ,a,ers as %ollows' •
•
•
•
•
• •
•
•
5an&ary /204 F -ss&ed 4*/000 ordinary s#ares e"#ange %or land. On t#e date iss&ed/ t#e s#ares #ad a mar!et ,ri"e o% P1.*0 ,er s#are. #e land #ad a "arrying $al&e o% P420/000/ and an assessed $al&e %or ,ro,erty taes o% P40/0000. 5an&ary +1/2014F Sold 2/400/ 1/000/12: bonds d&e 5an&ary +1/2024/ at 3 wit# one deta"#able s#are warrant atta"#ed to ea"# bond . -nterest is ,ayable ann&ally on 5an&ary +1. #e %air $al&e o% t#e bonds wit#o&t t#e s#are warrants is *. #e deta"#able warrants #a$e a %air $al&e o% P*0 ea"# and e,ire on 5an&ary +1/201*. Ea"# warrant entitles t#e #older to ,&r"#ase 10 ordinary s#ares at P10 ,er s#are.
Ad&sted net in"ome %or 2014 was P340/000. Based on the oregoing and the result o your audit ! answer the ollowing" #$gnore income ta% implications.& 1. S#are "a,ital ordinary at )e"ember +1/2014 is a. P1/20/00 b. P1/+0*/00 ". P1/231/000 d.P1/2/00 2. ?ow m&"# is t#e total s#are ,remi&m as o% )e"emeber +1/20148 a. P4/2+/00 b. P4/+1/00 ". P4/++/200 d. P4/0*/100 +. #e &na,,ro,riated retained earnings on )e"ember +1/2014 is a. P32/**0 b. P22/**0 ". P/**0 d. P0/**0 4. ?ow m&"# is t#e total s#are#olders; e&ity on )e"ember+1/20148
a. P3/134/0*0
b. P/3/0*0
". P3/13/*0 d. P3/10/0*0
Problem No. At t#e beginning o% 2014/ an entity grants +00 s#are o,tions ea"# to 1/000 em,loyees. #e grant is "onditional &,on t#e em,loyees remaining in t#e entity;s em,loy d&ring a $esting ,eriod o% t#ree years. #e eer"ise ,ri"e at grant date is estimated at P+0. ?owe$er/ t#e eer"ise ,ri"e dro,s to P20 i% t#e entity;s earnings in"rease by at least an a$erage o% 10: ,er year o$er t#e t#ree year ,eriod. On grant date/ t#e entity estimates t#at t#e %air $al&e o% t#e s#are o,tions / wit# an eer"ise ,ri"e o% P20/ is P10 ,er o,tion. -% t#e eer"ise ,ri"e is P+0/ t#e entity estimates t#at t#e s#are o,tions #a$e a %air $al&e o% P ,er o,tion. #e %ollowing a"t&al e$ents o""&rred' $%&' •
•
0 em,loyees #a$e le%t. #e entity e,e"ts/ on t#e basis o% a weig#ted a$erage ,robability/ t#at a %&rt#er 0 em,loyees will lea$e d&ring 201 and 201/ res,e"ti$ely. #e entity;s earnings in"reased by 12: / and t#e entity e,e"ts t#at earnings will "ontin&e to in"rease at t#is rate o$er t#e net two years. #e entity t#ere%ore e,e"ts t#at t#e earnings target will be a"#ie$ed/ and #en"e / t#e s#are o,tions will #a$e an eer"ise ,ri"e o% P20.
$%&( •
•
At year end/ a %&rt#er 0 em,loyees #a$e resigned. #e entity e,e"ts t#at %&rt#er 0 em,loyees will lea$e d&ring 201. #e entity;s earnings in"reased by 1+:/ and it "ontin&es to e,et t#at t#e earnings target will be a"#ie$ed.
$%&# • •
A %&t#er* em,loyees #a$e le%t by t#e end o% t#e year )&e to a general de"rease in mar!et demand/ t#e entity;s earning in"reased by only +: Be"a&se t#e earnings target was not a"#ie$ed/ t#e 100 $esteds#are o,tions %or ea"# em,loyee #a$e eer"ise ,ri"e o% P+0.
Based on the preceding inormation! determine the ollowing" 1. Com,ensation e,ense %or 2014 a. P 310/000 b/. P320/000
". P*/300
d. P+2/00
2. Com,ensation e,ense %or 201* a. P*/300 b. P320/000
". P300/000
d. P310/000
+. Com,ensation e,ense %or 201 a. P*/300 b. P320/000
". P310/000
d. P300/000
4. S#are o,tions o&tstanding at t#e end o% 201* a. P2/4+0/000 b. P1/+/300 ". P300/000
d. P1/20/000
*. S#are o,tions o&tstanding at t#e end o% 201 a. 2/4+0/000 b. P0 ". P2/40/000 d. P2/1/300
Problem no. 3
An entity grants 100 "as# s#are a,,re"iation rig#ts =SA9s( to ea"# o% its *00 em,loyees/ on "ondition t#at t#e em,loyees remain in its em,loy %or t#e net t#ree years. )&ring year 1/ +* em,loyees #a$e le%t. #e entity estimates t#at a %&rt#er 0 will lea$e d&ring years2 and +. )&ring year 2/ 40 em,loyees #a$e le%t and t#e entity estimates t#at a %&rt#er 2* will lea$e d&ring year + . )&ring year +/22 em,loyees #a$e le%t. At t#e end o% year+/1*0 em,loyees eer"ised t#eir SA9s/ anot#er 1 40 em,loyees eer"ised t#eir SA9s at t#e end o% year 4 and t#e remaining 11+ em,loyees eer"ised t#eir SA9s at t#e end o% year *. #e entity estimates t#e %air $al&e o% t#e SA9s at t#e end o% ea"# year in w#i"# a liability eistas s#own below. At t#e end o% year +/ all SA9s #eld by t#e remaining em,loyees $ested. #e intrinsi" $al&es o% t#e SA9s at t#e date o% eer"ise =w#i"# e&al t#e "as# ,aid o&t( at t#e end o% year+/4 and * are also s#own below. 6ear
7air 8ale 1 % 3 4
Intrin!ic8ale
P14.40 15.50 1#.%0 %1.40
P15.00 %0.00
5
%5.00
RE)*+RED: Com,&te t#e amo&nts o% "om,ensation e,ense and liability t#at t#e entity s#o&ld re,ort in years 1 to *.
Problem No. An entity grants to an em,loyee t#e rig#t to "#oose eit#er 1/000 ,#antom s#ares=i.E./ a rig#t to a "as# ,ayment e&al to t#e $al&e o% 1/000 s#ares( or 1/200 s#ares wit# a ,ar $al&e o% P10 ,er s#are. #e grant is "onditional &,on t#e "om,letion o% t#ree years; ser$i"e. -% t#e em,loyee "#ooses t#e s#are alternati$e/ t#e s#ares m&st be #eld %or t#ree years a%ter $esting date. At grant date/ t#e entity;s s#are ,ri"e is P*0 ,er s#are. At t#e end o% years1/2 and +/ t#e s#are ,ri"e is P*2/ P** and P0 res,e"ti$ely. #e entity does not e,e"t to ,ay di$idends in t#e net t#ree years. A%ter ta!ing into a""o&nt t#e e%%e"ts o% t#e ,o st $esting trans%er restri"tions / t#e antity estimates t#at t#e grant date%air $al&e o% t#e s#ares alternati$e is P43 ,er s#are. At t#e and o% year +/ t#e em,loyee "#ooses' S"enario 1' #e "as# alternati$e S"enario 2' #e e&ity alternati$e Based on t#e ,re"eeding in%ormation / answer t#e %ollowing' 1. 7#at is t#e total %air $al&e o% t#e e&ity "om,onents as a res< o% t#e s#are based ,ayment transa"tion wit# settlement alternati$es8 a. P/00 b. P10/000 ". P2/400 d. P0 2. 7#at is t#e "om,ensation e,ense in year 18 a. P1/+++ b. P1/3 ". P1/+++
d. P2+/++4
+. 7#at is t#e "om,ensation e,ense in year 28 a. P1/3 b. 1/+++ ". P21/3
d. P1/+++
4.7#at is t#e "om,ensation e,ense in year +8 a. P2+/++4 b. P2*/3 ". P1/+++ d. P1/3 *. -% t#e em,loyee #as "#osen t#e "as# alternati$e / t#e amo&nt to be ,aid at t#e end o% year + s#o&ld be
a. P**/000
b. P/00
". P*2/000
d. P0/000
.-% t#e em,loyee #as "#osen t#e s#are alternati$e/ t#e amo&nt o% s#are ,remi&m to be re"ogni6ed is a. P/00 b. P**/00 ". P0/000 d. P/00
Problem no. 10 1. -n an eamination o% s#are#olders; e&ity / an a&ditor is most "on"erned t#at a. Ca,ital sto"!s transa"tions are ,ro,erly a&t#ori6ed. b. Sto"!s s,lits are "a,itali6ed at ,ar or stated $al&e on t#e di$idend de"laration date. ". )i$idends d&ring t#e year &nder a&dit were a,,ro$ed by t#e s#are#olders d. C#anges in t#e a""o&nts are $eri%ied by a bar! ser$ing as a registrar and sto"! trans%er agent 2.-n an a&dit o% a medi&m si6ed man&%a"t&ring "on"ern/ w#i"# one o% t#e %ollowing areas "an be e,e"tedto re&ire t#e least amo&nt o% a&dit time8 a. Owner;s e&ity ". 9e$en&e b. Assets d. Giabilities +. 7#en a "or,orate "lient maintains its own sto"! re"ords / t#e a&ditor ,rimarily will rely &,on. a.Con%irmation wit# t#e "om,any se"retary o% s#ares o&tstanding a t year end. b. 9e$iew o% t#e "or,orate min&tes %or data as to s#ares o&tstanding. ". Con%irmation o% t#e n&mber o% s#areso&tstanding at yearend wit# t#e a,,ro,riate starte o%%i"ial. d. -ns,e"tion o% t#e sto"! boo! at year end and a""o&nting %or all "erti%i"ate n&mbers. 4. 7#en a "lient "om,any does not maintains its own sto"! re"ords/ t#e a&ditor s#o&ld obtain written "on%irmation %rom t#e trans%er agent and registar "on"erning a. 9estri"tions on t#e ,ayment o% di$idends. b. #e n&mber o% s#ares iss&ed and o&tstanding ". H&arantees o% ,re%erred sto"! li&idation $al&e d. #e n&mber o% s#ares s&be"t to agreement to re,&r"#ase. *.#e a&ditor is "on"erned wit# establis#ing t#at di$idends are ,aid to "lient "or,oration s#are#olders owning sto"! as o% t#e a. -ss&e date ". 9e"ord )ate b. )e"laration date d. Payment date . An a&dit ,rogram o% t#e retained earnings a""o&nt s#o&ld in"l&de a ste, t#at re&ires $eri%i"ations o% t#e a.
. -n ,er%orming tests "on"erning t#e granting o% sto"!s o,tions/ an a&ditor s#o&ld a. Con%irm t#e transa"tion wit# t#e Se"&rities and E"#ange Commission. b. Ieri%y t#e eisten"e o% o,tion #olders in t#e entity;s ,ayroll re"ords or sto"! ledgers. ". )etermine t#at s&%%i"ient treas&ry sto"! is a$ailable to "o$er any new sto"! iss&ed. d. ra"e t#e a&t#ori6ation %or t#e transa"tion to a $ote o% t#e board o% dire"tors. 10 #e a&ditor wo&ld not e,e"t t#e "lient to debit retained earnings %or w#i"# o% t#e %ollowing transa"tions8 A. A4 %or 1 sto"! s,lit b. JGossK arising %rom dis,osition o% treas&ry s#ares. ". A 1 %or 10 sto"! di$idend. d. Corre"tion o% error a%%e"ting ,rior year;s earnings.
