Chapter 7

Exercise 1
1-a) Memorandum Method 1-b) Journal Entry Method
2021
Mar 1 Russ Corp. is authorized to isuue ordinary share capital of P10,000,000 Unissued Ordinary Share Capital ( 10,000,000)
divided into 500,000 shares with par value of P20. Authorized Ordinary Share Capital ( 10,000,000)
500,000 x 20

1 Cash ( 6,000,000) Cash ( 6,000,000)

Ordinary share capital ( 6,000,000) Unissued Ordinary share capital ( 6,000,000)
300,000 x 20

5 Legal Expenses ( 90,000) Legal Expenses ( 90,000)

Ordinary Share Capital ( 90,000) Unissued Ordinary Share Capital ( 90,000)
FV 90,000
4,500 x 20

25 Cash ( 210,000) Cash ( 210,000)

Ordinary Share Capital ( 200,000) Unissued Ordinary Share Capital ( 200,000)
Share Premium ( 10,000) Share Premium ( 10,000)
10,000 x 21
10,000 x 20
10,000 x 1

30 Cash ( 4,081,000) Cash ( 4,081,000)

Ordinary Share Capital ( 3,710,000) Unissued Ordinary Share Capital ( 3,710,000)
Share Premium ( 371,000) Share Premium ( 371,000)
185,500 x 22
185, 500 x 20 2-a) Total Legal Capital ( 10,000,000) (6,000,000 + 90,000 + 200,000 + 3,710,000)
185,500 x 2 3-a) Total share preimum ( 381,000) (10,000 + 371,000)

Authorized ( 500,000)
Issued ( (300,000)
( (4,500)
( (10,000)
Remaining ( 185,500)
Exercise 2
1-a) Memorandum Method
2021
Jan 1 Bright Corp is authorized to issue preference share capital of P1,000,000 May 2 Cash ( 6,656,000)
divided into 100,000 shares with par value P10. Ordinary Share Capital ( 6,400,000)
Share Premium ( 256,000)
Bright Corp is authorized to issue ordinary share capital of P10,000,000 128,000 x 52
divided into 200,000 shares with par value P50. 128,000 x 50
128,000 x 2
2 Cash ( 2,500,000)
Ordinary Share Capital ( 2,500,000) Jun 2 Cash ( 275,000)
200,000 x 25% x 50 Preference Share Capital ( 250,000)
Share Premium ( 25,000)
Cash ( 250,000) 25,000 x 11
Preference Share Capital ( 250,000) 25,000 x 10
100,000 x 25% x 10 25,000 x 1

10 Cash ( 1,020,000) 2. Compute for the balances of the following accounts

Ordinary Share Capital ( 1,000,000)
Share Premium ( 20,000) a. Ordinary Share Capital
20,000 x 51 2,500,000 + 1,000,000 + 100,000 + 6,400,000 = 10,000,000
20,000 x 50
20,000 x 1 b. Preference Share Capital
250,000 + 500,000 + 250,000 = 1,000,000
12 Cash ( 2,600,000)
Preference Share Capital ( 500,000) c. Share Premium- ordinary
Share Premium ( 2,100,000) 20,000 + 25,000 + 256,000 = 301,000
100,000 x 50% x 52
100,000 x 50% x 10 d. Share Premium- preference
100,000 x 50% x 42 2,100,000 + 25,000 = 2,125,000

Feb 3 Store Furniture ( 125,000) LEGAL CAPITAL

Ordinary Share Capital ( 100,000) 10,0000 + 1,000,000 = 11,000,000
Share Premium ( 25,000)
Store Furniture valued at
2,000 x 50
125,000 - 100,000
Exercise 3 Exercise 4 Journal Entry Method
1-a) Cheers Corp is authorized to issue ordinary share capital of 2020
P 375,000 divided into 25,000 shares with par value P15. May 1 Unissued preference share capital ( 1,000,000)
Authorized preference share capital ( 1,000,000)
Cash ( 450,000) 100,000 x 10
Ordinary Share Capital ( 375,000)
Share Premium ( 75,000) Unissued ordinary share capital ( 1,800,000)
25,000 X 18 Authorized ordinary share capital ( 1,800,000)
25,000 X 15 120,000 x 15
25,000 X 3
2 Subscription Receivable - preference ( 250,000)
1-b) Cheers Corp is authorized to issue ordinary share capital of Subscribed preference share capital ( 250,000)
P275,000 divided into 25,000 shares with statead value of P11. 100,000 x 25% x 10

Cash ( 450,000) Subscription Receivable - ordinary ( 450,000)

Ordinary Share Capital ( 275,000) Subscribed ordinary share capital ( 450,000)
Share Premium ( 175,000) 120,000 x 25% x 15
25,000 X 18
25,000 X 11 Cash ( 62,500)
725,000 X 18 Subscription Receivable - preference ( 62,500)
250,000 x 25%
2-a) Ordinary Share Capital ( 375,000)
Share Premium ( 75,000) Cash ( 112,500)
Total Shareholders' Equity ( 450,000) Subscription Receivable - ordinary ( 112,500)
450,000 x 25%
2-b) Ordinary Share Capital ( 275,000)
Share Premium ( 175,000) 10 Cash ( 11,000)
Total Shareholders' Equity ( 450,000) Unissued Preference Share Capital ( 10,000)
Share Premium ( 1,000)
1,000 x 11
1,000 x 10
1,000 x 1

21 Cash ( 93,750)
Subscription Receivable - preference ( 93,750)
(250,000 x 75%) / 2
Exercise 5 Cash ( 168,750)
Subscription Receivable - ordinary ( 168,750)
a) Monice Corp is authorized to issue ordinary share capital of (450,000 x 75%0 / 2
P800,000 divided into 100,000 shares with par value P8.
31 Cash ( 93,750)
Cash ( 400,000) Subscription Receivable - preference ( 93,750)
Ordinary share capital ( 320,000) (250,000 x 75%) / 2
Share premium ( 80,000)
40,000 x 10 Cash ( 168,750)
40,000 x 8 Subscription Receivable - ordinary ( 168,750)
40,000 x 2 (450,000 x 75%0 / 2

Subscription Receivable - ordinary ( 120,000) Subsribed preference share capital ( 250,000)

Subscribed ordinary share capital ( 80,000) Unissued Preference share capital ( 250,000)
Share preimum ( 40,000)
10,000 x 12 Subscribed ordinary share capital ( 450,000)
10,000 x 8 Unissued Ordinary share capital ( 450,000)
10,000 x 4
31 Inventory ( 25,000)
Cash ( 30,000) Unissued Ordinary Share Capital ( 21,000)
Subscription Receivable - ordinary ( 30,000) Share Premium ( 4,000)
120,000 x 25% Fair Value
1,400 x 15
ba) Monice Corp is authorized to issue ordinary share capital of 25,000 - 21,000
P700,000 divided into 100,000 shares with stated value of P7.
Exercise 6
Cash ( 400,000) 1)
Ordinary share capital ( 280,000) Oct 1 Subscription Receivable - ordinary ( 10,000,000)
Share premium ( 120,000) Subscribed ordinary share capital ( 8,000,000)
40,000 x 10 Share premium ( 2,000,000)
40,000 x 7 400,000 x 25
40,000 x 3 400,000 x 20
400,000 x 5
Subscription Receivable - ordinary ( 120,000)
Subscribed ordinary share capital ( 70,000) 1 Cash ( 2,500,000)
Share premium ( 50,000) Subscription Receivable - ordinary ( 2,500,000)
10,000 x 12 10,000,000 x 25%
10,000 x 7
10,000 x 5 10 Merchandise ( 140,000)
Machineries ( 400,000)
Cash ( 30,000) Land ( 1,400,000)
Subscription Receivable - ordinary ( 30,000) Preference Share Capital ( 1,800,000)
120,000 x 25% Share Premium-Preference ( 140,000)
Fair Value of Assets
Exercise 7 90,000 x 20
CASE 1 Subscription Receivable - 80,000- 1,940,000 - 1,800,000
Subscribed Ordinary Share Capital - 80,000-
(800 shares x P100) 15 Cash ( 1,875,000)
Subscription Receivable - ordinary ( 1,875,000)
Cash (10,000,000 x 75%)/4
Subscription Receivable - 50,000- - 50,000-
30 Cash ( 1,875,000)
No entry to record the default Subscription Receivable - ordinary ( 1,875,000)
(10,000,000 x 75%)/4
Advances on deliquency sale - 10,000-
Cash - 10,000- Nov 15 Cash ( 1,875,000)
Subscription Receivable - ordinary ( 1,875,000)
Joy is the highert bidder. (10,000,000 x 75%)/4

Cash - 40,000- 30 Cash ( 10,000)

Subscription Receivable - 30,000- Preference Share Capital ( 10,000)
Advances on deliquency sale - 10,000- 500 x 20

Subscribed Ordinary Share Capital - 80,000- 30 Cash ( 1,875,000)

Ordinary Share Capital - 80,000- Subscription Receivable - ordinary ( 1,875,000)
(10,000,000 x 75%)/4
Joy 245
Ali 555 Subscribed ordinary share capital ( 8,000,000)
800 shares Ordinary Share Capital ( 8,000,000)
CASE 2
Treasury Shares - 40,000- 2)
Subscription Receivable - 30,000- a Ordinary Share Capital ( 8,000,000)
Advances on deliquency sale - 10,000- b Share Premium-ordinary ( 2,000,000)
c Preference Share Capital ( 1,810,000) (1,800,000 + 10,000)
Subscribed Ordinary Share Capital - 80,000- d Share Premium-preference ( 140,000)
Ordinary Share Capital - 80,000-

WIX 800 shares

Exercise 8

a) Number of preference shares issued ( 360,000) = 7,200 shares

( 50)

b) Number of ordinary shares issued ( 500,000) = 10,000 shares

( 50)

c) Number of preference shares subscribed ( 180,000) = 3,600 shares

( 50)

d) Number of ordinary shares subscribed ( 70,000) = 1,400 shares

( 50)

e) Total legal capital

Preference ( 540,000)
Ordinary ( 570,000)
( 1,110,000)

f) Total share premium ( 136,000)

g) Total stockholders' equity ( 1,446,000)

Share Capital:
12% Preference shares capital P 50 par value
authorized 20,000 shares
Issued ( 360,000)
Subscribed ( 180,000)
Receivable ( 60,000) ( 120,000)
Ordinary share capital, P50 par value stock
Authorized 40,000 shares
Issued ( 500,000)
Subscribed ( 70,000)
Receivable ( 30,000) ( 40,000)
Reserves:
Share premium -preference ( 54,000)
Share premium-ordinary 82,000 ( 136,00082,000) ( 136,000)

Retained Earnings) ( 200,000)

Total shareholders’ equity ( 1,356,000)
Exercise 9
Memorandum Method
June 1 Gold Corp. is authorized to issue ordinary share capital of P12,000,000 20 Subscription Receivable ( 66,000)
divided into 600,000 shares with par value of P20. Subscribed Ordinary Share Capital ( 60,000)
Share Premium ( 6,000)
1 Subscription Receivable ( 3,000,000) Received 3,000 shares subscriptions
Subscribed Ordinary Share Capital ( 3,000,000) 3,000 x 22
Received 25% subscription. 3,000 x 20
600,000 x 25% x 20 3,000 x 2

1 Cash ( 750,000) 20 Cash ( 19,800)

Subscription Receivable ( 750,000) Subscription Receivable ( 19,800)
Received 25% down payment. Received 30% downpayment
3,000,000 x 25% 66,000 x 30%

2 Cash ( 520,000) 20 Equipment ( 20,000)

Notes Payable ( 520,000) Accounts Payable ( 20,000)
Issued a note for cash. Purchased equipment on account

10 Furniture ( 45,000) Jul 10 Cash ( 44,000)

Ordinary Share Capital ( 40,000) Subscription Receivable ( 44,000)
Share Premium ( 5,000) Received the balance due of 2,000 from June 20
Issued 2,000 shares for Furniture. 2,000 x 22
FV = 45,000
2,000 x 20 Subscribed Ordinary Share Capital ( 40,000)
45,000 - 40,000 Ordinary Share Capital ( 40,000)
2,000 x 20
11 Legal Fees ( 2,200)
Ordinary Share Capital ( 2,000) Aug 12 no entry
Share Premium ( 200)
Issued 100 shares for Legal Fees 15 Notes Payable ( 520,000)
FV= 2,200 Interest Expense ( 5,000)
100 x 20 Loss on Extinguishment of Debt ( 25,000)
2,200 - 2000 Ordinary Share Capital ( 500,000)
Share Premium ( 50,000)
16 Accounts Payable ( 20,000) EXERCISE 11 -SHORT PROBLEMS
Ordinary Share Capital ( 20,000) 1) 5,000 shares x P20 = P100,000
Issued 1,000 shares to settle June 20 transaction
1,000 x 20 2) 50,000 x P10 = P500,000 x 30% = 150,000

16 Advances on Delinquency sale ( 300) 3) Ordinary shares P3,000,000/P50 = 60,000 shares

Cash ( 300)
Preference shares P2,550,000/P15 = 170,000 shares
30 Advances on Delinquency sale ( 500)
Cash ( 500) 4) a) Total shareholders' equity = P18,150,000

30 Cash ( 16,200) b) Legal capital

Subscription Receivable ( 15,400) Preference SC - 5,000,000-
Advances on Delinquency sale ( 800) Ordinary SC - 10,000,000-
Subscribed Ordinary - 300,000-
30 Subscribed ordinary share capital ( 20,000) - 15,300,000-
Ordinary Share Capital ( 20,000)
c) Average Selling Price
31 Cash ( 2,250,000) of preference shares
Subscription Receivable ( 2,250,000)
3,000,000 x 75% Preference SC - 5,000,000-
Share premium - PS - 500,000-
31 Subscribed ordinary share capital ( 3,000,000) Total - 5,500,000-
Ordinary Share Capital ( 3,000,000)
= P5,500,000/50,000 shares 5M/P100
= P110

5) Preference
2,250,000/15
= - 150,000- shares

Ordinary
3,000,000/50
= - 60,000- shares

Total Shareholders' equity = P5,500,000