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jon 24-10
solut
question 1 Answer C
nares issued — Dcemeber 31, 2020 (7,500,000 / PS par) 1,500,000
Treasury Shares — December 31, 2020 (600,000)
gpares outstanding December 31, 2020 900,000
Question 2 Answer b
share issued — December 31, 2019 (4,500,000 / PS par) 900,000
Treasury shares — December 31,2019 (400,000)
shares outstanding December 31, 2019 500,000
Question 3 Answer a
Share issued — December 31, 2020 1,500,000
Shares issued — December 31, 2019 900,000
600,000
Shares issued during 2020 600,000
Question 4 Answer a
_ December 31, 2020 December 31,2019 Increase
Share capital 7,500,000 4,500,000 3,000,000
Share premium 52,000,000 40,000,000 12,000,000
15,000,000
Total issue price in 2020
Divide by shares issued during 2020 £00,000
Average issue price )
343Problem 24-10 (IAA)
ing i ion froma
Levi Company provided the following information compere,
statement of financial position:
December 31, 2020 December 31,25,
. 7,500,000 4,500,
share premium 52,000,000 40.000 9
000 I
Retained earnings 19,500 5,500,095
Treasury shares, at cost, ee
on December 31, 2020 and 400,
shares on December 31, 2019 7,000,000 5,000,09)
1. Whatis the number of outstanding shares on December 31, 2979)
1,506,000
1,000,000
900,000
600,000
poop
2. Whatis the number of. outstanding shares on December 31, 2019?
a. 900,000
b. 500,000
c. 400,000
d. 700,000
3. How many shares were issued during 20202
600,000
300,000
200,000
500,000
aeocp
What was the average price of, additional shares issued in 2020?
a. 25
b. 20
c. 10
gL 5
342solution 24-9
Question 1 Answer a
yssued (10,000 shares x 50)
jssued (20,000 shares x 50)
share capital
Question 2 Answer a
ssued (10,000 shares x 20)
Issued (20,000 shares x 30)
Share premium
Question 3 Answer a
Share capital
Share premium
Retained earnings
Treasury shares (3,000 x 100)
Total shareholders’ equity
Net income
Dividends paid
Retained earnings
Question 4 Answer a
Share capital
Share premium
Total contributed capital
341
500,000
1,000,000
1,500,000
200,000
600,000
800,000
1,500,000
800,000
800,000
300,000)
2,800,000
1,000,000
(200,000)
800,000Problem 24-9 (IAA)
ss Company Was Organized any
ar, Gue:
feurr50 shares with P50 par value.
At the beginning 0
ty had the following transactions Felting
authorized to issue
During the current year, the enti
to shareholders’ equity:
shares at P70 per share.
Issued 20,000 shares at P80 per share.
Reported net income of P1,000,000.
Paid dividends of P200,000.
Purchased 3,000 treasury shares at P100 per share.
das share capital at year-end?
Issued 10,000
1. What amount should be reporte
a. 1,500,000
b. 3,300,000
c. 1,200,000
d. 1,800,000
What amount should be reported as share premium at year-end?
a. 800,000
b. 200,000
c. 600,000
d. (a
What oe should be reported as total shareholders’ equity at
a. 2,800,000
b. 3,000,000
c. 3,300,000
d. 2,000,000
4. What amount sh
year-end? int should be reported as contributed capital #
a. 2,300,000 .
b. 1,500,000
c. 3,000,000
d. 2,000,000
340solution 24-8
yestion I Answer a
yssuance of ordinary share:
(950,000 x 1/2 x 15)
Net income for 2019
pividend declared in 2019
Son January 1, 2019
Total shareholders’ equity — December 31, 2019
Question 2 Answer a
shareholders’ equity - December 31, 2019
Issuance of ordinary shares (100,000 x 17)
ssuance of preference shares (150,000 x 8)
Issuance of preference shares (50,000 x 9)
Net income for 2020
Dividend declared in 2020
Total shareholders’ equity — December 31, 2020
339
(
(
7,125,000
1,025,000
230,000)
7,920,000
7,920,000
1,700,000
1,200,000
450,000
1,215,000
635,000)
11,850,000Problem 24-8 (IAA) vesan speations by
Lig Penn Come Oe rdinary shares ofp)"
On January 1, 2 . half of the 950,000 ot Py i
eet ed for issue:
ae that had been authorized for!
ri7 refe :
In addition, the entity had 500,000 authorized preference hate,
n add .
of P5 par value.
During 2019, the entity had P1 02
P230,000 of dividend.
ntity had the following transactions:
5,000 of net income and declary
During 2020, the ¢1
+ {Issued 100,000 ordinary shares for P17 per share.
* Issued 150,000 preference shares for P8 per share.
* Authorized the purchase ofa custom-made machine to be delivered
in January 221. The entity restricted P300,000 of retained earings
for the purchase of the machine.
Issued additional 50,000 preference shares for P9 per share.
Reported P1,215,000 of net income and declared on December
31, 2020 a dividend of P635,000 to shareholders of record on
January 15, 2021 to be paid on February 1,2021.
What amount should be reported as total shareholders’ equity on
December 31, 2019?
7,920,000
7,125,000
8,150,000
8,380,000
pose
wv
What amount should be , ;
December 31, 2020? Teported as total shareholders’ equity"
a. 11,850,000
b. 11,550,000
© 12,485,000
a. 10,635,000
338problem 24-7 (AICPA Adapted)
ne current year, Hyatt Company issued for P110 per share.
ng tt :
pen00 convertible preference shares of P100 par value
es of
one preference share may be converted into three ordinary shar
p25 par value at the option of the preference shareholder.
At year-end, all of the preference shares were conv erted ir
ALY” The market value of the ordinary share at the convers!
shares-
was P40.
nto ordinary
on date
amount should be credited to ordinary share capital as a
|, What
result of conversion?
a, 1,125,000
b. 1,500,000
c, 1,650,000
d. 1,800,000
t should be credited to share premium as a result of
ey
What amoun
conversion?
375,000
525,000
150,000
0
aeop
Solution 24-7 Question 1 Answer a Question 2 Answer b
Torecord the issuance of preference shares:
Cash (15,000 x 110) 1,650,000
Preference share capital
Share premium — preference
1,500,000
150,000
T . . .
orecord the conversion of preference shares into ordinary shares:
qrierence share capital 1,500,000
are premium — preference 150,000
Ordinary share capital (45,000 x 25) L
Share premium — Ordinary
wn
000
5,000
mn
on
1
, 5
15,
5000 preference shares x 3 = 45,000 ordinary shares)
337Problem 24-6 (IAA) ;
On January 1, 2019, Negros Company was incorporated with the
following authorized capitalization:
Ordinary share capital, 200,000 shares, no par, 2000
P100 stated value Pen 000,009
Preference share capital, 200,000 shares, 10% f1 1000
rate, P50 par value , 000,009
i ity i dinary shares for a 1
2019, the entity issued 150,000 or on
ofl P 18,000,000 and 50,000 preference shares at P60 per share
In addition, on December 15, 2019, subscriptions for 20,009
preference shares were taken at a purchase price of P100. These
subscribed shares were paid for on January 15,2020.
Net income for 2019 was P5,000,000.
What amount should be reported as total contributed capital on
December 31, 2019?
a. 28,000,000
b. 21,000,000
c. 23,000,000
d. 26,000,000
Solution 24-6 Answer c
Ordinary share capital — 150,000 shares . 18,000,000
Preference share capital — 50,000 shares x 60 3,000,000
Subscribed preference share capital — 20,000 x 100 2,000,000
Total contributed capital 23,000,000
Observe that the subscribed preference share capital is already
included in contributed capital because the subscription receivable
is collected within one year.
Otherwise, the subscription receiy i ‘
wise, ab: from
subscribed share capital le is deducted
Contributed capital includes the a d any
. re; in
share premium but does not include retained camives.” :
The cost of treasury shares i i i
contributed capital or paid in capital, peseceelinicoL Tas
336problem 24-5 (AICPA Adapted)
poe ized with
beginning of current year, Ashe Company was organize
Aerize capital of 100,000 shares of P200 par value.
al
Jnuty 10 Issued 25,000 shares at P220 a share
March 25 Issued 1,000 shares for legal services when the fair
value was P240 a share
september 30 Issued 5,000 shares for a tract of land when the faiz
value was P260 a share
|, What amount should be reported as share capital?
a. 7,640,000
b. 6,200,000
c. 7,440,000
d. 5,000,000
2. What amount should be reported for share premium?
840,000
800,000
540,000
500,000
aesop
Solution 24-5
Question 1 Answer b
January 10 (25,000 x 200) 5,000,000
March 25 ( 1,000 x 200) 200,000
September 30 ( 5,000 x 200) 1,000,000
Share capital , 6,200,000
Question 2 Answer a
January 10 (25,000 x 20) 500,000
March 25 ( 1,000 x 40) 40,000
September 30 ( 5,000 x 60) 300,000
Total share premium 840,000
335Problem 24-4 (AICPA Adapted)
At the beginning of the current year, Cove Company, a closely-helg
entity, issued 6% bonds with a maturity value of 6,000,000, together
with 10,000 ordinary shares of P50 par value, for a combined cash
amount of P11,000,000.
Ifissued separately, the bonds would have sold for P4,000,000 on
an 8% yield to maturity basis.
1. What amount of the proceeds should be allocated to the ordinary
shares?
a. 4,000,000
b. 7,000,000
c. 8,000,000
d. 5,000,000
2. What amount should be reported for share premium on the
issuance of the ordinary shares?
7,500,000
6,500,000
5,500,000
4,500,000
BO oP
Solution 24-4
Question 1 Answer b
Question 2 Answer b
Cash received * 11,000,000
Market value of bonds payable : (4,000,000)
Residual amount allocated to ordinary shares 7,000,000
Par value of ordinary shares (10,000 x 50) (500,000)
Share premium 6,500,000
Cc ash 11,000,000
Discount on bonds payable 2,000,000
Bonds payable 6,000,000
Share capital 500,000
Share premium 6,500,000
334golution 24-3
estion 1 Answer c
question 2 Answer c
Market value Fraction
ordinary shares (10,000 x 36) 360,000 36/90
Preference shares (20,000 x 27) 540,000 54/90
900,000
Question 3 Answer c
Proceeds from preference shares
Par value of preference shares (20,000 x 20)
Share premium — preference shares
Question 4 Answer c
Proceeds from ordinary shares
Par value of ordinary shares (10,000 x 20)
Share premium — ordinary shares
’ Journal entry
Cash 800,000
Preference share capital
Share premium — preference
Ordinary share capital
Share premium — ordinary
333
Allocated
proceeds
320,000
480,000
800,000
480,000
400,000
80,000
320,000
200,000
120,000
400,000
80,000
200,000
120,000Problem 24-3 (AICPA Adapted)
At the beginning of the current ye
ordinary shares of P20 p
ar, Ria Company issued 10,009
ar value and 20,000 convertible Preferenc,
shares of P20 par value for a total of P800,000.
At this date, the ordinary share
convertible preference share was sel!
1.
. What amount should be recorded as
was selling for P36 and th.
ling for P27.
What amount of the proceeds should be allocated to the
preference shares?
a. 600,000
b. 540,000
c. 480,000
d. 440,000
. What amount of the proceeds should be allocated to the
ordinary shares?
a. 360,000
b. 200,000
c. 320,000
d. 400,000
. What amount should be recorded as share premium from the
issuance of preference shares?
a. 180,000
b. 100,000
c. 80,000
d. 0
. h F the
issuance of ordinary shares? oe
a. 200,000
b. 160,000
c. 120,000
d. 0roblem 24-2 (PHILCPA Adapted)
P
Glenn Company provided the following information at year-end
preference share capital, P100 par 3,060,000
share premium - preference share 500,000
Ordinary share capital, P10 par 6,000,000
Share premium - ordinary share 2,000,000
subscribed ordinary share capital 4,000,000
Retained earnings 2,500,000
subscription receivable - ordinary share” 1,000,000
What is the amount of legal capital?
a. 15,500,000
b. 13,000,000
c. 15,000,000
d. 12,000,000
Solution 24-2 Answer b
Preference share capital 3,000,000
Ordinary share capital 6,000,000
Subscribed ordinary share capital 4,000,000
Total legal capital 13,000,000
In case of par value share capital, legal capital is the aggregate par
value of all shares issued and subscribed.
Inthe case of no-par value share capital, /egal capital is the aggregate
Stated value of shares issued and subscribed plus any excess over
Stated value.
This is in accordance with the provision of Corporation Code of the
Republic of the Philippines.
331ys
SHAREHOLDERS’ EQUIT
Problem 24-1 (IAA) .
: -end:
i following data at pear
Mara Company provided the re
Authorized share capital 2/000,00)
Unissued share capital 1,000'009
Subscribed share cap ital 400,00)
Subscription receivable 500,009
Share premium i 600;
Retained earning unappropriated 30000
Retained earnings appropriated 200,000
Revaluation surplus 100°000
Treasury shares, at cost . , : |
What total amount should be reported as shareholders’ equity?
a. 5,100,000 :
b. 5,500,000
c. 4,900,000
d. 4,800,000
Solution 24-] 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
Retained earnings: 500,000
nappropriated 600,000
Appropriated ,
Revaluation surplus __300,000 900,000
Total 200,000
Treasury shares 5,200,000
‘ ( 100,000)
Shareholders’ equity 70
5,100,00°
The subscription receiva
ble is a deduction from the related
subscribed share capi
cri sha pital. Howe ipti i
collectible within one year is Hee as eaten receive’
nt asset.
330