Lapu-Lapu Corporation was authorized at the beginning of 2004 with 300,000

authorized shares of P100, par value common stock. At December 31, 2004, the
stockholders equity section of Lapu-Lapu was as follows:
Common stock, par value P100 per share; authorized
300,000 shares; issued 30,000 shares
Additional paid-in capital
Retained earnings
Total stockholders equity

P3,000,000
300,000
450,000
P3,750,000

On June 15, 2005, Lapu-Lapu issued 50,000 shares of its common stock for
P6,000,000. A 5% stock dividend was declared on September 30, 2005 and issued on
November 10, 2005 to stockholders of record on October 31, 2005. Market value of
common stock was P110 per share on declaration date. The net income of Lapu-Lapu
for the year ended December 31, 2005 was P475,000.
During 2006, Lapu-Lapu had the following transactions;
March 1

Lapu-Lapu reacquired 3,000 shares of its common stock for P95 per
share.

May 31

Lapu-Lapu sold 1,500 shares of its treasury stock for P120 per share.

August 10

Issued to stockholders one stock right for each share held to purchase
two additional shares of common stock for P125 per share. The rights
expire on December 31, 2006.

September
15

25,000 stock rights were exercised when the market value of common
stock was P130 per share.

October 31

40,000 stock rights were exercised when the market value of the
common stock was P140 per share.

December 10 Lapu-Lapu declared a cash dividend of P2 per share payable on

January 5, 2007 to stockholders of record on December 31, 2006.
December 20 Lapu-Lapu retired 1,000 shares of its treasury stock and reverted them
to an unused basis. On this date, the market value of the common
stock was P150 per share.
December 31 Net income for 2006 was P500,000.
QUESTIONS:
Based on the above and the result of your audit, determine the following as of
December 31, 2006:
1. Common stock
a. P21,400,000

b. P21,300,000

c. P14,800,000

d. P21,250,000

2. Additional paid-in capital

a. P4,627,500
b. P3,007,500
3. Retained earnings
a. P600,000
P560,000
4. Treasury stock
a. P10,000

b. P565,000

b. P47,500

c. P4,632,500

d. P4,592,500

c. P557,000

c. P50,000

d.

d. P0

5. When a corporate client maintains its own stock records, the auditor primarily
will rely upon
a. Confirmation with the company secretary of shares outstanding at year-end.
b. Review of the corporate minutes for data as to shares outstanding.
c. Confirmation of the number of shares outstanding at year-end with the
appropriate state official.
d. Inspection of the stock book at year-end and accounting for all certificate
numbers.