CHAPTER 7
Exercise 1
a)
Aug. 1 Authorized to issue 50,000 8% preference shares at
P100 par and 100,000 ordinary shares at P50 par.
Subscription Receivable-Ordinary share 1,500,000
Subscribed Ordinary Share Capital 1,500,000
(30,000 x P50)
Cash 500,000
Subscription Receivable-Ordinary Share 500,000
Aug. 5 Subscription Receivable-Preference Share 2,000,000
Subscribed Preference Share Capital 2,000,000
20,000 x P100
Cash 1,000,000
Subscription Receivable-Preference Share 1,000,000
Aug. 10 Cash (20,000 x 55) 1,100,000
Ordinary Share Capital 1,000,000
Ordinary Share Premium 100,000
Aug. 12 Equipment 560,000
Preference Share Capital 500,000
Preference Share Premium 60,000
Aug. 30 Cash 1,000,000
Subscription Receivable-Preference Share 1,000,000
Subscribed Preference Share Capital 2,000,000
Preference Share Capital 2,000,000
Sept. 1 Cash 500,000
Subscription Receivable-Ordinary Share Capital 500,000
Sept. 30 Cash 466,667
Subscription Receivable-Ordinary Share 466,667
Subscribed Ordinary Share Capital 1,400,000
Ordinary Share Capital 1,400,000
b)
Preference Shares:
Authorized to issue 50,000 preference shares par P100
Issued 25,000 shares P2,500,000
Ordinary Shares:
Authorized to issue 100,000 ordinary shares par P50
Issued 48,000 shares 2,400,000
Subscribed 2,000 shares 100,000
Additional Paid In
Preference Share Premium 60,000
Ordinary Share Premium 100,000
Total Paid In P5,160,000
Ex .2 a)
2014
May1 Authorized to issue 100,000, 12% Cumulative
Preference shares at P100 per share
Authorized to issue 200,000 ordinary shares
At P50 per share
Subscription Receivable-Preference Shares (30,000 xP100) 3,000,000
Subscribed Preference Share Capital 3,000,000
To record common stock subscription of incorporators.
Subscription Receivable- Ordinary Shares (60,000 x P50 ) 3,000,000
Subscribed Ordinary Share Capital 3,000,000
To record common stock subscription of incorporators.
43
Cash 1,500,000
Subscription Receivable-Preference Share(3,000,000 x .25) 750,000
Subscription Receivable-Ordinary Share (3,000,000 x .25) 750,000
To record downpayment of incorporators.
June
05 Organization Expense 120,000
Cash 120,000
Paid for organization cost.
15 Subscription Receivable-Preference Share(5,000 x P110) 550,000
Subscribed preference share capital (5,000 x P100) 500,000
Preference share Premium 50,000
To record subscription of various investors.
Cash (550,000 x .25) 137,500
Subscription Receivable-Preference share 137,500
To record downpayment of various investors.
17 Subscription Receivable-Ordinary Share(30,000 x P52) 1,560,000
Subscribed Ordinary Share Capital 1,500,000
Ordinary Share Premium 60,000
Cash (1,560,000 x .25) 390,000
Subscription receivable-Ordinary Share 390,000
To record downpayment of common stock subscription.
30 Cash 2,250,000
Subscription receivable-Preference Share 1,125,000
Subscription Receivable-Ordinary Share 1,125,000
To record first installment of incorporators.
July
1 Cash 1,170,000
Subscription Receivable-Ordinary Share 1,170,000
Subscribed Ordinary Share 1,500,000
Ordinary Share Capital 1,500,000
15 Cash 137,500
Subscription Receivable-Preference Share 137,500
18 Land 75,000
Ordinary Share Capital 70,000
Ordinary Share Premium 5,000
20 Cash 750,000
Subscription Receivable-Preference Share 375,000
Subscription Receivable-Ordinary Share 375,000
Subscribed Preference Share 1,000,000
Subscribed Ordinary Share 1,000,000
Preference Share Capital 1,000,000
Ordinary Share Capital 1,000,000
30 Cash 1,500,000
Subscription Receivable-Preference Share 750,000
Subscription Receivable-Ordinary Share 750,000
Subscribed Preference Share Capital 2,000,000
Subscribed Ordinary Share Capital 2,000,000
Preference Share Capital 2,000,000
Ordinary Share Capital 2,000,000
Income Summary 105,000
Retained Earnings 105,000
Preference Subscribed Pref Share Ordinary Subscribed Ordinary Retained
Share Preference Premium Share Ordinary Shares SharePrem Earnings
5/1 3,000,000 3,000,000
6/15 500,000 50,000
6/17 1,500,000 60,000
7/1 1,500,000 (1,500,000)
44
7/18 70,000 5,000
7/20 1,000,000 (1,000,000) 1,000,000 (1,000,000)
7/30 2,000,000 (2,000,000) 2,000,000 (2,000,000) 105,000
P3,000,000 500,000 P50,000 P4,570,000 0 P65,000 105,000
Legal Capital P8,070,000
Shareholders’ Equity:
Paid In Capital
Authorized 100,000 18% cumulative preference
shares, at P100 par
Issued and Outstanding Preference Share, 30,000 P3,000,000
Subscribed 5,000 500,000
Authorized 200,000 common shares, at P50 par
Issued and Outstanding Ordinary Shares, 91,400 4,570,000
Additional Paid In Capital:
Premium on Preference Shares 50,000
Premium on Ordinary Shares 65,000 115,000
Total Paid In Capital P8,185,000
Ex. 3. a) Journal entries:
Jan 05 Unissued preference share (20,000 x P100) 2,000,000
Authorized Preference share capital 2,000,000
Unissued Ordinary Share (50,000 x P50) 2,500,000
Authorized Ordinary Share 2,500,000
Subscription Receivable-ordinary shares 625,000
Subscribed Ordinary Shares 625,000
Cash 156,250
Subscripton Receivable-ordinary shares 156,250
Subscription Receivable – preference share (5,000xP100) 500,000
Subscribed preference share 500,000
Cash 250,000
Subscription Receivable – preference share 250,000
30 Cash (750 x P105) 78,750
Unissued preference share (750 x P100) 75,000
Preference Share Premium 3,750
Feb 21 Land (P50,000 x 2.20) 110,000
Unissued preference share (1,100 x P100) 110,000
25 Organization Expense 75,000
Cash 75,000
28 Cash 234,375
Subscription Receivable-Ordinary shares 234,375
Mar 1 Subscription Receivable – Ordinary Share (2,000 x P62) 124,000
Subscribed Ordinary Share (2,000 x P50) 100,000
Paid in capital in excess of stated value-ordinary share 24,000
Cash (124,000 x .25) 31,000
Subscription Receivable – ordinary share 31,000
10 Cash 70,400
Subscription Receivable – ordinary share 70,400
Subscribed ordinary share (1,200 x P50) 60,000
Unissued ordinary share 60,000
18 Cash 250,000
Subscription Receivable – preference share 250,000
Subscribed preference share 500,000
45
Unissued preference share 500,000
31 Income & expense summary 85,000
Retained earnings 85,000
b) Shareholders Equity Section:
Paid In Capital
Authorized preference share, 2,000 shares at P100 par P2,000,000
Less Unissued 1,315,000
Issued and Outstanding Preference Share, 6,850 P 685,000
Authorized Ordinary Share, 50,000 at P50 stated value P2,500,000
Less: Unissued Ordinary shares, 35,000 shares 2,440,000
Issued and Outstanding Ordinary Shares, 1,200 P60,000
Subscribed Ordinary Shares P665,000
Less Subscription Recble 256,975 408,025 P 468,025
Additional Paid In Capital:
Preference Share Premium 3,750
Paid In Capital in excess of Stated Value –Ordinary 24,000 27,750
Total Paid In Capital P1,180,775
Retained Earnings 85,000
Total Shareholders’ Equity P1,265,775
c) Legal Capital:
Preference Share, issued and outstanding P 685,000
Ordinary shares issued and outstanding 60,000
Subscribed ordinary shares 665,000
Paid in Capital in excess of stated value 24,000
Total Legal Capital P1,434,000
Ex 4.
Due from Highest Bidder 38,333
Subscription Receivable-Ordinary Shares 33,333
Cash 5,000
Cash 18,433
Due from Highest Bidder 38,333
Interest Income (33,333 x .18 /12= 500 per mo / 2) 250
Subscribed Ordinary Shares 100,000
Ordinary Share Capital 100,000
Two Certificates: Rex for 1,500 shares and Adela for
500 shares
Ex. 5.
Ordinary Treasury Shares 18,333
Due form Highest Bidder 18,333
Subscribed Ordinary Shares 40,000
Ordinary Shares 40,000
6. Journal Entries:
2014 Jan 1 Authorized to issue 50,000 common shares at
P100 par value
Subscription Receivable-Ordinary 1,250,000
Subscribed Ordinary Share Capital 1,000,000
Ordinary Share Premium 250,000
Cash 312,500
Subscription Receivable- Ordinary Shares 312,500
Ma31 Cash 468,750
Subscription Receivable- Ordinary Shares 468,750
31 Cash 445,312.5
Subscription Receivable-Ordinary Shares 445,312.5
Subscribed Ordinary Share Capital 950,000
46
Ordinary Share Capital 950,000
Due from Highest Bidder 24,812.5
Subscription Receivable – Ordinary 23,437.5
Cash 1,375
Cash 24,812.5
Due from Highest Bidder 24,812.5
Subscribed Ordinary Share Capital 50,000
Ordinary Share Capital 50,000
7. a)
June 10 Treasury Shares Cost (500 x P80) 40,000
Cash 40,000
Reacquired 500 shares.
12 Cash (50 x 75) 3,750
Retained Earnings (50 x 5) 250
Treasury Shares (50 x 80) 4,000
15 Cash (100 x 100) 10,000
Treasury Shares (100 x P80) 8,000
Additional Paid In Capital – Treasury Shares 2,000
20 Cash (150 x P70) 10,500
Additional Paid In Capital-treasury shares 2,000
Retained Earnings 500
Treasury Shares (150 x P80) 12,000
25 Ordinary Share Capital (100 x P100) 10,000
Treasury Shares (100 x P80) 8,000
Additional Paid In Capital – Stock retirement 2,000
Shareholders’ Equity
Ordinary Shares, par 100, issued 9,900 of which 100 P990,000
shares are in the treasury
Share Premium 50,000
Paid In Capital from Stock Retirement 2,000
Retained Earnings
Free P1,191,250
Appropriated for Treasury Shares 8,000 1,199,250
Total 2,241,250
Less Treasury Shares (100 shares) (8,000)
P2,233,,250
Ex. 8.
Aug 12 Cash (1,500 x 55) 82,500
Retained Earnings 7,500
Treasury Shares (1,500 x 60) 90,000
Aug 20 Cash (1,500 x 62) 93,000
Paid In Capital from Treasury Shares 3,000
Treasury Shares (1500x P60) 90,000
Aug 31 Ordinary Shares (500 x 50) 25,000
Share Premium 3,378
Paid in Capital from Treasury Shares 1,622
Treasury Shares 30,000
Shareholders’ Equity:
Ordinary Shares, 18,000 issued P900,000
Share Premium 121,622
Paid in capital from treasury shares 1,378
Retained Earnings 4,492,500
Ex. 9.
June 5 Preference Share Capital 50,000
Paid In Capital in Excess of Par 5,000
Retained earnings 20,000
Cash 75,000
30 Preference Share Capital 50,000
Cash 45,000
47
Paid In Capital from Stock Retirement 5,000
Shareholders’ Equity
Redeemable Preference Share, P100 par, 4,000 issued
and outstanding P 400,000
Preference Share Premium 45,000
Paid In Capital from Stock Retirement 5,000
Retained Earnings 80,000
Total Shareholders’ Equity P530,000
10. NOVA Corp. Journal Entries:
a) July 1 Ordinary Share Capital (5,000 x P15) 75,000
Cash (5,000 x P15) 75,000
b) Dec. 1 Ordinary Share Capital 34,000
Cash (4,000 x P8.50) 34,000
11. NINA Corporation:
a) journal Entries
Mar 10 Treasury Shares 24,000
Cash 24,000
(2000 x 12)
May 15 Cash (P14 x 1000) 14,000
Treasury Shares (1000 x P12) 12,000
Paid In Capital from Treasury Shares 2,000
June 12 Cash (P11 x 500) 5,500
Paid in capital – Treasury Shares 500
Treasury Shares (500 x P12) 6,000
July 25 Memorandum entry: received from Shareholders
100 shares as donated stock.
Aug. 1 Cash (P15 x 1000) 15,000
Paid in Capital from Donated Shares 15,000
Nov. 1 Treasury Shares 20,000
Merchandise Inventory 20,000
Dec. 5 Cash (P15 x 500) 7,500
Treasury Shares 5,000
Paid In Capital from Treasury Shares 2,500
10 Ordinary Shares (P10 x 500) 5,000
Share Premium Capital 2,500
(5,00/200,000 x 100,000)
Treasury Shares 6,000
Paid In Capital – Stock Retirement 1,500
Retained Earnings 15,000
Reserve for Treasury Shares 15,000
Retained Earnings 50,000
Income and Expense Summary 50,000
b) NINA Corp.
Shareholders’ Equity Section
As of Dec. 31, _
Capital stock. Par P10,issued 199,500 of which1,500 P1,995,000
are in the treasury
Additional paid In Capital
Share Premium P 97,500
Donated Capital 15,000
Paid In From treasury Shares 4,000
Paid in From Stock Retirement 1,500 118,000
Retained Earnings
Appropriated for Treasury Shares 15,000
Unappropriated 535,000 550,000
Total 2,663,000
Less Treasury Shares ( 1,500 at cost ) 15,000
48
P2,648,000
12. PINOY CORP
SHAREHOLDERS’ EQUITY SECTION
Dec. 31, 2015
Paid In Capital
18% Preference Share Capital, par value of P100
authorized 10,000 shares, issued and outstanding,
8,000 shares P 800,000
Subscribed Preference Share Capital P100,000
Less Subscription Receivable, Preference Share 40,000 60,000 P 860,000
Ordinary Share Capital, no par, authorized 25,000 shares
Stated value of P100, issued 15,000 shares of
which 1,000 shares are in the treasury P1,500,000
Subscribed Ordinary Share Capital P50,000
Less Subscription Receivable, Ordinary share 20,000 30,000 1,530,000
Total P2,390,000
Additional Paid in Capital
Premium on Preference Shares P 10,000
Paid In Capital in Excess of Stated Value 15,000
Donated Capital 75,000 100,000
Retained Earnings
Unappropriated Retained Earnings P 45,000
Appropriated Retained earnings for Treasury Shares 120,000 165,000
Total P2,655,000
Less Treasury Shares (at Cost) 1,000 ordinary shares 120,000
Total Shareholders’ Equity P2,535,000
13. Preference Shares Ordinary Shares
Authorized number of shares 50,000 shares 10,000 shares
Issued Shares 17,000 shares 5,000 shares
Unissued Shares 33,000 shares 5,000 shares
Issued and outstanding shares 17,000 shares 4,500 shares
Subscribed Shares 2,000 shares 0
Still available for subscription 31,000 shares* 5,000 shares
Unissued 33,000
Subscribed 2,000
31,000
Legal Capital
Preferred Stock, issued P1,700,000
Preferred Stock, Subscribed 200,000
Common Stock, issued 500,000
Paid in capital in excess of stated value 55,000
Total P2,455,000
14. 1) Journal Entries
2016 Jan. 10 Cash 75,000
Subscription Receivable-Preference Shares 75,000
Subscribed Preference Share 100,000
Redeemable preference Share 100,000
20 Due from highest Bidder 75,000
Subscription Receivable 75,000
Due from Highest Bidder 5,500
Cash 5,500
25 Cash 81,250
Interest Income 750
Due from highest Bidder 80,500
Subscribed Preference Shares 100,000
Redeemable Preference shars 100,000
49
31 Land 250,000
Redeemable Pref Shares (2,000 x P100) 200,000
Premium on Preference Shares 50,000
Feb 8 Cash 45,000
Treasury Shares 36,000
Paid In Capital from sale of Treasury Shares 9,000
20 Cash 70,000
Unissued Ordinary Shares (500 x P100) 50,000
Paid In Capital In Excess of Stated Value 20,000
28 Redeemable Preference Share Capital 500,000
Premium on Preference share(5/22 x 150,000) 34,091
Retained Earnings 65,909
Cash (5,000 x P120) 600,000
March 1 Cash 10,000
Paid In Capital from Treasury Shares 2,000
Treasury Shares (100 x P120) 12,000
2) Shareholders’ Equity Section
Paid In Capital
Redeemable Preferred Stock, par P100, authorized 50,000 shares P1,600,000
Authorized Common Stock, P100 stated value P1,000,000
Less: Unissued Common Stock 450,000 __550,000
Total P2,150,000
Additional Paid In Capital
Premium on Preferred Stock P315,909
Paid In Capital in Excess of Stated value 75,000
Paid In Capital from Treasury Stock 7,000 397,909
Total 2,547,909
Less: Treasury Stocks (200 common shares) 12,000
Total Stockholders’ Equity P2,535,909
3) Preference Share Ordinary Share
Authorized number of shares 50,000 10,000
Issued Shares 16,000 5,500
Unissued shares 34,000 4,500
Issued and outstanding 16,000 5,000
Still available for subscription 34,000 5,000
Legal Capital
Preferred Stock, issued P1,600,000
Common Stock, issued 550,000
Paid In Capital in Excess of Stated Value 75,000
Total P2,225,000
ETHICAL ISSUE
1) Loyalty to company means protecting the rights, interests and resources of company.
2) There is conflict of interest when officers act and violate corporate policy to push their own personal interest.
ACCOUNTING ISSUE
1) Your right over the corporation will decrease 5,000/100,000 or 5% to 5,000/300,000 or 1.67%
2) You have to buy 5% of 200,000 or 10,000 shares. Total shares will be 15,000/300,000 will still be 5%.
3) Option price of P1,250 x 10,000 shares in P12,500,000.
50
