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Gibbs Corporation owned shares of Oliver Corporation stock that it had purchased in 2009. In 2013, Gibbs declared a property dividend of one Oliver share for every ten Gibbs shares. This reduced Gibbs' retained earnings by $162,000. Hernandez Company had shares outstanding. It declared a 10% stock dividend and later a cash dividend. As a result, retained earnings decreased by $735,000. Ermler Co. had stock, premium on capital stock, and retained earnings on its balance sheet. If it declared a 100% stock dividend, its capital stock account would be $8,000,000. Gunkel Corporation had stock, paid-in capital, and retained earnings. It

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Gibbs Corporation owned shares of Oliver Corporation stock that it had purchased in 2009. In 2013, Gibbs declared a property dividend of one Oliver share for every ten Gibbs shares. This reduced Gibbs' retained earnings by $162,000. Hernandez Company had shares outstanding. It declared a 10% stock dividend and later a cash dividend. As a result, retained earnings decreased by $735,000. Ermler Co. had stock, premium on capital stock, and retained earnings on its balance sheet. If it declared a 100% stock dividend, its capital stock account would be $8,000,000. Gunkel Corporation had stock, paid-in capital, and retained earnings. It

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11. Gibbs Corporation owned 20,000 shares of Oliver Corporation’s P5 par value common stock.

 
These shares were purchased in 2009 for P180,000. On September 15, 2013, Gibbs declared  a
property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder.  On
that date, when the market price of Oliver was P21 per share, there were 180,000 shares  of
Gibbs outstanding. What NET reduction in retained earnings would result from this  property
dividend? 

a. P162,000 

b. P378,000 

c. P108,000 

d. P216,000 

12. Hernandez Company has 490,000 shares of P10 par value common stock outstanding.  During
the year, Hernandez declared a 10% stock dividend when the market price of the  stock was P30
per share. Four months later Hernandez declared a P.50 per share cash  dividend. As a result of
the dividends declared during the year, retained earnings decreased  by 

a. P1,739,500. 

b. P735,000. 

c. P269,500. 

d. P245,000. 

13. On June 30, 2012, when Ermler Co.'s stock was selling at P65 per share, its capital accounts  
were as follows: 

Capital stock (par value P50; 80,000 shares issued) P4,000,000 

Premium on capital stock 600,000 

Retained earnings 4,200,000 

If a 100% stock dividend were declared and distributed, capital stock would be a. P4,000,000. 

b. P4,600,000. 

c. P8,000,000. 

d. P8,800,000. 
14. The stockholders' equity section of Gunkel Corporation as of December 31, 2012, was as 
follows: 

Common stock, par value P2; authorized 20,000 shares;  

issued and outstanding 10,000 shares P 20,000 

Paid-in capital in excess of par 30,000 

Retained earnings 95,000 

P145,000

On March 1, 2013, the board of directors declared a 15% stock dividend, and accordingly  1,500
additional shares were issued. On March 1, 2011, the fair value of the stock was P6 per 
share. For the two months ended February 28, 2013, Gunkel sustained a net loss of P10,000. 

What amount should Gunkel report as retained earnings as of March 1, 2013?

a. P76,000. 

b. P82,000. 

c. P86,000. 

d. P92,000. 

15. On January 1, 2012, Dodd, Inc., declared a 15% stock dividend on its common stock when 
the fair value of the common stock was P20 per share. Stockholders' equity before the stock 
dividend was declared consisted of: 

Common stock, P10 par value, authorized 200,000 shares;  

issued and outstanding 120,000 shares P1,200,000 

Additional paid-in capital on common stock 150,000 

Retained earnings 700,000 

Total stockholders' equity P2,050,000 

What was the effect on Dodd’s retained earnings as a result of the above transaction?

a. P180,000 decrease 

b. P360,000 decrease 
c. P600,000 decrease 

d. P300,000 decrease 

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