FINANCIAL ACCOUNTING AND REPORTING
SOLUTION MANUAL
WEEK 6
TEXTBOOK
CHAPTER 20 TRUE OR FALSE
1. T
2. T
3. T
4. T
5. T
6. T
7. T
8. T
9. T
10. T
11. F
12. T
13. F
14. T
15. F
16. T
17. F
18. T
19. T
20. T
21. F
22. T
23. T
24. T
25. T
26. F
27. T
28. T
29. F
30. T
31. T
32. T
33. T
CHAPTER 20 MULTIPLE CHOICE
1. D
2. C
3. B
4. A
5. D
6. A
7. A
8. C
9. B
10. A
11. B
12. A
13. D
14. D
15. B
16. B
PROBLEM 21-1
Journal Entry Method Memorandum Entry Method
July 2 Unissued Ordinary Share 1,000,000 Sarangani Marketing Corporation is authorized to issue
Authorized Ordinary Share 1,000,000 10,000 of its ordinary shares at P100 par value per share.
Subscription Receivable 300,000 Subscription Receivable 300,000
Subscribed Ordinary Share 300,000 Subscribed Ordinary Share 300,000
Cash 150,000 Cash 150,000
Subscription Receivable 150,000 Subscription Receivable 150,000
15 Organization Cost 15,000 Organization Cost 15,000
Cash 15,000 Cash 15,000
16 Subscription Receivable 73,500 Subscription Receivable 73,500
Subscribed Ordinary Share 70,000 Subscribed Ordinary Share 70,000
Share Premium 3,500 Share Premium 3,500
Cash 4,500 Cash 4,500
Subscription Receivable 4,500 Subscription Receivable 4,500
18 Subscription Receivable 44,000 Subscription Receivable 44,000
Subscribed Ordinary Share 40,000 Subscribed Ordinary Share 40,000
Share Premium 4,000 Share Premium 4,000
20 Cash 95,000 Cash 95,000
Unissued Ordinary Share 95,000 Ordinary Share Capital 95,000
25 Cash 45,000 Cash 45,000
Subscription Receivable 45,000 Subscription Receivable 45,000
Subscribes Ordinary Share 60,000 Subscribed Ordinary Share 60,000
Unissued Ordinary Share 60,000 Ordinary Share Capital 60,000
27 Land 40,000 Land 40,000
Unissued Ordinary Share 30,000 Ordinary Share Capital 30,000
Share Premium 10,000 Share Premium 10,000
29 Organization Expense 35,000 Organization Expense 35,000
Unissued Ordinary Share 10,000 Ordinary Share Capital 10,000
Share Premium 25,000 Share Premium 25,000
30 Cash 70,000 Cash 70,000
Subscription Receivable 70,000 Subscription Receivable 70,000
31 Cash 69,000 Cash 69,000
Subscription Receivable 69,000 Subscription Receivable 69,000
Subscribed Ordinary Share 70,000 Subscribed Ordinary Share 70,000
Unissued Ordinary Share 70,000 Ordinary Share Capital 70,000
PROBLEM 21-I
Q-1 B
8% Preference Share 400,000
Ordinary Share 700,000
Subscribed Share Capital – Preference 300,000
Subscribed Share Capital – Ordinary 100,000
Legal Capital 1,500,000
Q-2 A
Q-3 D
The “trust fund doctrine” is a legal principle that prohibits a private corporation to distribute its legal capital to the
shareholders for the protection of corporate creditors during the lifetime of a corporation.
PROBLEM 21-II
Memorandum Entry Method Cash in Bank
May 1 The company is authorized to issue 20,000 of its ordinary (1) 190,000
shares at P50 par value per share. (15) 39,000 10,000 (3)
(17) 50,000
Cash in Bank 190,000
Subscription Receivable 310,000 (24) 91,000
Subscribed Share Capital 500,000 360,000
3 Organization Expense 10,000
Cash in Bank 10,000 Share Premium
30,000 (15)
15 Cash in Bank 39,000
Subscription Receivable 91,000
Subscribed Share Capital 100,000
Share Premium 30,000 Share Capital
50,000 (17)
17 Cash in Bank 50,000 100,000 (24)
Share Capital 50,000 150,000
24 Cash in Bank 91,000
Subscription Receivable 91,000
May 17 1,000 Shares issued
Subscribed Share Capital 100,000 24 2,000 Shares issued
Share Capital 100,000 3,000 Shares issues &
outstanding
ANSWERS:
Q-4. B – P360,000
Q-5. A – P30,000
Q-6. B – P150,000
Q-7. B – 3,000 shares
PROBLEM 21-V Q-13
PROBLEM 21-V Q-14
PROBLEM 22-1
PROBLEM 22-3
PROBLEM 22-5
PROBLEM 22-7
