PROBLEM 20-1

Requirement a

1 MEMO ENTRY

Subscriptions receivable 1,250,000

Subscribed share capital 1,250,000
(25% x 100,000-25.000 shares)

2 Cash (25% x 1,250,000) 312,500

Subscriptions receivable 312,500

3 Cash 562,500
SubsCriptions receivable (15,00 x 50 x 75%) 562,500

Subscribed share capital 750,000

Share capital (15,000 x 50) 750,000

4 Land 600,000
Share capital (10,000 x 50) 500,000
Share premium 100,000

5 Cash (5,000 x 60) 300,000

Share capital (5,000 x 50) 250,000
Share premium 50,000

6 Legal expenses 100,000

Share capital (2,000 x 50)) 100,000

Requirement b

Shareholders Equity:
Share capital, P50 par, 100,000 shares authorized, 32,000 shares
issued 1,600,000
Subseribed share capital 500,000
Subscriptions receivable (375,000)
Share premium 150,000
1,875,000

PROBLEM 20-2

Requirement a

1 Unissucd share capital 5,000,000

Authorized share capital 5,000,000

Subscriptions receivable 2,000,000

 Subscribed share capital 2,000,000
(40% x 50,000 20,000 shares)

2 Cash (25% x 2,000,000) 500,000

Subscriptions receivable 500,000

3 Cash 750,000
Subscriptions receivable (10.000 x 100x 75%) 750,000

Subscribed share capital 1,000,000

Unissued share capital (10,000 shares x 100) 1,000,000

4 Patent 5,000 x 100) 500,000

Unissued share capital 500,000

5 Cash (15,000 x 120) 1,800,000

Unissued share capital (15,000 shares x 100) 1,500,000
Share premium 300,000

Requirement b

Sharcholders' cquity:
Authorized share capital, PI00 par, 50,000 shares 5,000,000
Unissucd share capital (2,000,000)
Issued share capital, 30,000 shares 3,000,000
Subscribed share capital 1,000,000
Subseriptions receivable (750,000)
Share premum 300,000
3,550,000
PROBLEM 20-3

Requirement a
1 Subscriptions receivable 4,000,000
Subscribed share capital (40,000 x 100) 4,000,000

2 Accounts receivable 350,000

Note receivable 70,000
Inventory 680,000
Accounts payable 100,000
Subscriptions receivable 1,000,000

3 Land 150,000
Building 850,000
Subscriptions receivable 1,000,000

4 Cash 375,000
Subscriptions receivable (15,000 x 100 x 256) 375,000
 5 Legal expenses 50,000
Share capital 50,000

6 Subscriptions receivable (1,000 x 120) 120,000

Subscribed share capital 100,000
Share premium 20,000

Cash (1,000x 40) 40,000

Subscriptions receivable 40,000

7 Cash 1,100,000
Subscriptions receivable 1,100,000

A 200,000
B 300,000
C (800,000x 75%) 600,000
Total 1,100,000

Subscribed share capital 3,300,000

Share capital (33,000 x 100) 3,300,000

Requirement B

Shareholders' cquity:
Share capital, P100 par
Authorized-50,000 shares
Issued and outstanding-33,500 shares 3,350,000
Subscribed share capital 8,000 shares 800,000
Subscriptions receivable (605,000)
Share premium 20,000
3,565,000

PROBLEM 20-4

1 MEMO

Preference share capital, P100 par, 30,000 shares 3,000,000

Ordinary share capital, P50 par, 100,000 shares 5,000,000
Total authorized share capital 8,000,000

2 Cash 2,400,000
Ordinary share capital 2,000,000
Share premium-ordinary share 400,000

3 Cash 1,200,000
Preference share capital 1,000,000
Share premium ordinary share 200,000
 4 Subscriptions receivable 1,000,000
Subscribed preference share capital 1,000,000

5 Cash 400,000
Subscriptions receivable 400,000

6 Legal expenses 100,000

Preference share capital 100,000

7 Property, plant and equipment 1,300,000

Preference share capital 1,000,000
Share premium-preference share 300,000

8 Subscriptions receivable 750,000

Subscribed ordinary share capital 750,000

9 Cash 300,000
Subscriptions receivable 300,000

10 Cash 600,000
Subscriptions receivable 600,000

Subscribed preference share capital 1,000,000

Preference share capital 1,000,000

11 Profit and loss 2,000,000

Retained eamings 2,000,000

Brook Company
Shareholders' equity
31-Dec-20

Preference share capital 2,100,000

Ordinary share capital 3,000,000
Subseribed ordinary share capital 750,000
Subseriptions receivable (450,000)
Share premium:
Preference share 200,000
Ordinary share 700,000 900,000
Retained eanings 2,000,000
Shareholders' cquity 8,300,000

PROBLEM 20-5

1 Unissued ordinary share capital 10,000,000

Authorized ordinary share capital 10,000,000
 2 Subscriptions receivable 2,500,000
Subscribed ordinary share capital 2,500,000

3 Cash 625,000
Subscriptions receivable 625,000

4 Cash 750,000
Subscriptions receivable (10,.000 x 100x 75%) 750,000

5 Subscribed ordinary share capital 1,000,000

Unissued ordinary share capital 1,000,000

6 Land 800,000
Building 2,500,000
Unissued ordinary share capital 3,000,000
Share premium 300,000

7 Loan payable 1,100,000

Acerucd interest payable 200,000
Unissucd ordinary share capital 1,000,000
Share premium 200,000
Gain on extinguishment 100,000

8 Profit and loss 3,000,000

Retained eamings 3,000,000

Shareholders' equity
Authorized ordinary share capital 10,000,000
Unissued ordinary share capital (5,000,000)
Issued ordinary share capital 5,000,000
Subscribed ordinary share capital 1,500,000
Subscriptions receivable (1,125,000)
Share premium 500,000
Retaincd earnings 3,000,000
8,875,000
PROBLEM 20-6

1 Subscriptions receivable- PS (20,000 x 100) 2,000,000

Subseribed preference share capital 2,000,000

2 Subscriptions receivable- PS (4,000 shares x 120) 480,000

Subscribed preference share capital 400,000
Share premium-preference 80,000

3 Cash (2,480,000-120,000) 2,360,000

Subscriptions receivable PS 2,360,000
 4 Subseribed preference share capital 2,200,000
Preference share capital (22,000 x 100) 2,200,000

5 Land 230,000
Ordinary share capital (8,000 x 10) 80,000
Share premium ordinary 150,000

6 Subscription receivable CS 1,200,000

Subseribed ordinary share capital (40,000 x 10) 400,000
Share premium ordinary (950,000- 150,000) 800,000

Ordinary shares issued and outstanding 24,000

Ordinary shares subscribed 24,000
Total 48,000
Less: Ordinary shares issued to acquire land 8,000
Ordinary shares originally subscribed 40,000

7 Cash (1,200,000-360,000) 840,000

Subscriptions receivable ordinary 840,000

8 Subseribed ordinary share capital 160,000

Ordinary share capital (24,000- 8,000 x 10) 160,000

Preference Ordinary

Issued 2,200,000 240,000

Subscribed 200,000 240,000
Share premium 80,000 950,000
Subscriptions receivable (120,000) (360,000)
Contributed capital 2,360,000 1,070,000

PROBLEM 20-7

Requirement a

JAN 1 Land 2,500,000

Organization expense 500,000
Ordinary share capital (10,000 shares) 1,000,000
Share premium-ordinary 2,000,000

FEB 20 Cash (15,000 x 120) 1,800,000

Preference share capital 1,500,000
Share premium preference 300,000

Share premium -preference 50,000

Cash 50,000
MAR. 10 Cash (25,000x 260) 6,500,000
Ordinary share capital 2,500,000
Share premium ordinary 4,000,000

Share premium preference 200,000

Cash 200,000

APR 1 Subscription receivable (20,000 x 350) 7,000,000

Subscribed ordinary share capital 2,000,000
Share premium-ordinary 5,000,000

JULY 15 Cash (10,000 shares) 3,000,000

Ordinary share capital 1,000,000
Share premium-ordinary 2,000,000

Building 7,000,000
Ordinary share capital (12,000 x 100) 1,200,000
Share premium-ordinary (12,000 x 200) 2,400,000
Preference share capital (20,000 x 100) 2,000,000
Share premium-preference 1,400,000

AUG 1 Cash 4,500,000

Subscription receivable 4,500,000

Subscribed ordinary shure capital 1,000,000

Ordinary share capital (10,000 x 100) 1,000,000

DEC 31 Subscribed ordinary share capital (5,000 shares) 500,000

Share premium ordinary (5,000 x 250) 1,250,000
Subscription receivable 1,500,000
Share premium-forfcited subscriptions 250,000

31 Income summary 3,000,000

Retained eamings 3,000,000

Requirement a

Preference share capital, P100 par, 50,000 shares authorized,

35,000 shares issued and outstanding 3,500,000
Share premium preference 1,650,000
Ordinary share capital, P100 par, 100,000 shares authorized,
67,000 shares issued and outstanding 6,700,000
Subscribed ordinary share capital-5,000 shares 500,000
Share premium-ordinary 13,950,000
Share premium- forfeited subscriptions 250,000
Subseription receivable (1,000,000)
 Retained eamings 3,000,000
Total shareholders' equity 28,550,000

PROBLEM 20-8

1 Preference share capital (5,000 x 100)

Share premium- PS (5,000/ 50,000 x 500,000)
Ordinary share capital (5,000 x 50)
Share premium ordinary share

Preference share capital

Share premium - PS
Retained earnings
Ordinary share capital (20,000 x 50)

2 Preference share capital

Share premium- PS
Retained earnings
Cash (5,000 x 120)

Preference share capital

Share premium- PS
Cash (5,000 x 80)
Share premium -redemption

PROBLEM 20-9
2020
JAN 1 Cash 5,000,000
Redeemable preference shares 5,000,000

DEC 31 Interest expense 500,000

Accrued interest payable (10% x 5,000,000) 500,000

2021
DEC 31 Interest expense 550,000
Accrued interest payable (10% x 5,500,000) 550,000
2022
JAN 1 Redeemable preference shares 5,000,000
Accrued interest payable 1,050,000
Cash 6,050,000

PROBLEM 20-10 ANSWER (A)

Authorized share capital 5,000,000

Unissued share capital (2,000,000)
Issued share capital 3,000,000
Subscribed share capital 1,000,000
 Subscription receivable (400,000) 600,000
Share premium 500,000
Retained earmings:
Unappropriated 600,000
Appropriated 300,000 900,000
Revaluation surplus 200,000
Total shareholders' equity 5,200,000

PROBLEM 20-11 ANSWER (B)

Share capital 5,000,000

Subscribed share capital 3,000,000
Subscription receivable (2,000,000)
Share premium 1,500,000
Contributed capital 7,500,000

PROBLEM 20-12 ANSWER (C)

Ordinary share capital - 150,000 shares 18,000,000

Preference share capital-50,000 shares x 60 3,000,000
Subseribed preference share capital-20,000 x 100 2,000,000
Total contributed capital 23,000,000

PROBLEM 20-13 ANSWER (A)

JAN 10 (25,000 x 20) 500,000

MAR 25 (1,000 x 40) 40,000
SEPT 30 (5,000 x 60) 300,000
Total share premium 840,000

PROBLEM 20-14 ANSWER (A)

Preference share capital 2,300,000

Ordinary share capital 5,250,000
Subscribed share capital 500,000
Total legal capital 8,050,000

PROBLEM 20-15 ANSWER (A)

Legal expenses (1,000 x 140) 140,000

Share capital (1,000 x 5) 5,000
Share premium 135,000

The normal billing rate is not necessarily the fair value of the services because this amount is likely to be
negotiable.

PROBLEM 20-16 ANSWER (B)

 Cash received 11,000,000
Less: Market value of bonds payable 4,000,000
Residual amount allocated to ordinary shares 7,000,000
Less: Par value of ordinary shares (10,00 x 50) 500,000
Share premium 6,500,000

PROBLEM 20-17

QUESTION 1- C
QUESTION 2- C
Market value Fraction
Ordinary (10,000 x 360) 3,600,000 36 / 90
Preference (20,00 x 270) 5,400,000 54/90
9,000,000
QUESTION 3- C

Proceeds firom preference shares 4,800,000

Par value of preference shares (20,000 x 200) 4,000,000
Share premium - preference shares 800,000

QUESTION 4- C

Proceeds from ordinary shares 3,200,000

Par value of ordinary shares (10,000 x 200) 2,000,000
Share premium-ordinary shares 1,200,000

PROBLEM 20-18

QUESTION 1- A
QUESTION 2- A

Issuance of ordinary shares on 1/1/2020 (950,000 x 1/2x 15) 7,125,000

Net income for 2020 1,025,000
Dividend declared in 2020 (230,000)
Shareholders equity-12/31/2020 7,920,000
Issuance of ordinary shares (100,000 x 17) 1,700,000
Issuance of preference shares (150,000 x 8) 1,200,000
Issuance of preference shares (50,000 x 9) 450,000
Net income for 2021 1,215,000
Dividend declared in 2021 (635,000)
Shareholders' equity 12/31/2021 11,850,000

PROBLEM 20-19 ANSWER (B)

Issue price of preference shares (8,000 x 105) 840,000

Par value of ordinary shares (8,000 x 3-24,000 x 25) 600,000
Share premum 240,000
 PROBLEM 20-20

QUESTION 1- A
QUESTION 2- B

To record the issuance of preference shares:

Cash (15,000x 110) 1,650,000

Preference share capital 1,500,000
Share premium PS 150,000

To record the conversion of preference shares into ordinary shares:

Preference share capital 1,500,000

Share premium-PS 150,000
Ordinary share capital (45,000 x 25) 1,125,000
Share premium -Ordinary 525,000

(15,000 preference shares x3-45,000 ordinary shares)

PROBLEM 20-21

1B
2C
3B
4B
5A

PROBLEM 20-22

1C
2C
3C
4A
5B
6D
7A
8D
9C
10 B

PROBLEM 20-23

1C
2C
3C
4D
5C
6D
7D
 8D
9D
10 B

PROBLEM 20-24

1D
2A
3C
4B
5D
6B
7D
8D
9C
10 B

PROBLEM 20-25

1A
2D
3B
4B
5B
Allocated proceeds
3,200,000
4,800,000
8,000,000