True or False

1, A share dividend will cause an increase in total share capital at the date the dividend is declared .

2. In a share split, the par value of all shares in the issued class is increased in proportion to the additional shares issued.

3. Dividends in arrears pertain to non-cumulative preference shares.

4. A restrictionon retained earnings is recorded with a debit.

5. A property dividend is often referred to as a dividend in kind.

6. Cumulative preference shares entitle the holder to receive all current and previously postponed dividends after the ordinary share dividends are distributed.

7. A person owning stock on the date of record will receive share dividends that have been declared.

8. Retained earnings represent cash generated from profitable operations that have been retained in the business.

9. A restriction on retained earnings leaves total retained earnings unchanged.

10. After the declaration of share dividends, the shareholders have a greater proportional interest in the asset of the corporation than before.

11. A possible reason to restrict retained earnings would be to reserve a certain amount for dividends on ordinary shares.

12. Dividends on cumulative preference shares do not become a liability of the corporation until they are declared by the board of directors.

Problem 1

On Feb. 1, 2019, Patag Corp. issued 5,000 shares of P100 par convertible preference shares for P110 per share. One share of preference shares can be converted into 2 shares of Patag Corp's P10 par value ordinary shares at the option of the preference shareholder. On Dec. 31, 2020, when the market value was P40 per share, all of the preference shares was converted.

How much should be credited to share premium-ordinary as a result of the conversion on Dec. 31, 2020?