A.

The Banco de Plata was organized on April 1, 2018 and is authorized to issue 250,000 shares of Ordinary Share
Capital. Thereafter, 62,500 shares were issued at P 25 per share. Prepare the journal entries to record the
authorization of the share capital and the issuance of the 62,500 shares using the memorandum entry method and
the journal entry method under of the following independent cases:
a. Each ordinary share has a par value of P 20
b. Each ordinary share has a stated value of P 15
c. Each ordinary share have a no par value and no stated value

Memorandum Entry Method Journal Entry Method

A. Par Value P 20

DR CR
DR CR Unissued Ordinary Share Capital 5,000,000
Authorized to issue 250,000 shares of Authorized Ordinary Share Capital 5,000,000
Ordinary Share Capital with a par 250,000 sh X P20/sh = 5,000,000
value P 20 per share
Cash 1,562,500 Cash 1,562,500
Ordinary Share Capital 1,250,000 Unissued Ordinary Share Cap 1,250,000
Ordinary Share Premium 312,500 Ordinary Share Premium 312,500
62,500 X P 25 = 1,562,500
62,500 X P 20 = 1,250,000
62,500 X P 5 = 312,500

A. No Par with Stated Value P 15

Memorandum Entry Method Journal Entry Method

DR CR DR CR
Authorized to issue 250,000 shares of Unissued Ordinary Share Capital 3,750,000
Ordinary Share Capital with a par Authorized Ordinary Share Capital 3,750,000
value P 15 per share 250,000 sh X P15/sh = 3,750,000
Cash 1,562,500
Ordinary Share Capital 937,500
Cash 1,562,500
Ordinary Share Premium 625,000
Unissued Ordinary Share Capital 937,500
62,500 X P 25 = 1,562,500
Ordinary Share Premium 625,000
62,500 X P 15 = 937,500
62,500 X P 10 = 625,000

B. No Par and No Stated Value

Authorized to Issue 250,000 shares of no par and no stated

value Ordinary Share Capital
Cannot be used for no par and no stated value S hare
Capital
Cash 1,562,500
Ordinary Share Capital 1,562,500
B. The League Corporation is authorized to issue 100,000 shares of Ordinary Share Capital with a par value of P
20. The following transactions took place in relation to the share capital:

Prepare journal entries to record the above transactions including authorized capital dated May 2, using the
memorandum method.

May Issued 25,000 shares for cash at par value.

2
Cash 500,000
Ordinary Share Capital 500,000
25,000 sh X P20 = 500,000

5 Issued 5,000 shares to Atty. Fernan for services in organizing the corporation. The value of the services
was P 120,000.(Direct Measurement – if the value of services or the value noncash asset
is given)

Pre-operating Expenses 120,000

Ordinary Share Capital 100,000
Ordinary Share Premium 20,000
5,000 sh X P20 = 100,000
120,000 – 100,000 = 20,000
18 Issued 4,000 shares to corporate promoters. Each ordinary share is selling at P 30 on this date.

Pre-operating Expenses 120,000

Ordinary Share Capital 80,000
Ordinary Share Premium 40,000
4,000 sh X P 30 = 120,000
4,000 sh X P 20 = 80,000
120,000 – 80,000 = 40,00
25 Issued 20,000 shares in exchange for Land valued at P 600,000. Direct Measurement

Land 600,000
Ordinary Share Capital 400,000
Ordinary Share Premium 200,000
20,000 sh X P 20 = 400,000
600,000 – 400,000 = 200,000

30 Issued for cash 10,000 shares at P 23 per share (IP > PV)

Cash 230,000
Ordinary Share Capital 200,000
Ordinary Share Premium 30,000
10,000 X P 23 = 230,000
10,000 X P 20 = 200,000
230,000 – 200,000 = 30,000
 C. On March 1, 2018, Plain, Inc. sold 40,000 shares of its P 30 par value Ordinary Share Capital on a
subscription basis at P 50 per share. The corporation received a 30% down payment on the date of
subscription. On March 10, 2018, the corporation collected the balance of the subscription and issued
the certificates. SP P50 > PV P30

Required: Prepare the journal entries to record above transactions.

Memorandum Entry Method

DR CR
Mar 1 Cash 600,000
Ordinary Share Capital Subscription Receivable 1,400,000
Ordinary Share Capital Subscribed 1,200,000
Ordinary Share Premium 800,000
40,000 sh X P 50 X 30% = 600,000
40,000 sh X P 50 X 70% = 1,400,000
40,000 sh X P 30 = 1,200,000
40,000 sh X P 20 = 800,000

Mar 10 Cash 1,400,000

Ordinary Share Capital Subscription Receivable 1,400,000

Ordinary Share Capital Subscribed 1,200,000

Ordinary Share Capital 1,200,000
40,000 sh X P 30 = 1,200,000

D. Faith Corporation was organized on January 2, 2018 and is authorized to issue 25,000 shares of
10% Preference Share Capital, P 50 par and 250,000 shares of Ordinary Share Capital, P 20 stated
value.
The following transactions took place during January:
Jan 2 Issued to incorporators 62,500 ordinary shares at P 25 per share and 6,250
preference shares at par value.
6 Issued 1,250 shares to corporate promoters. The value of preference share
capital on this date is P 70 per share.
10 Received subscriptions for 85,000 ordinary shares at P 30 per share with a
down payment of 60% of the subscription price.
19 Issued 25,000 ordinary shares in exchange for the following:
Fair value
Merchandise Inventory P 10,000
Land 350,000
Building 200,000
Equipment 20,000
28 Received balance due on the Jan. 10 subscription and issued the certificates.

Required: Prepare the journal entries to record above transactions.

Jan. DR CR
2
Cash 1,875,000
Ordinary Share Capital 1,250,000
Preference Share Capital 312,500
Ordinary Share Capital in Excess of Stated Value 312,500
6,250 sh X P 50 = 312,500 (Preference)
62,500 sh X P 25 = 1,562,500 (Ordinary)
312,500 + 1,562,500 = 1,875,000
62,500 sh X P 20 = 1,250,000
6,250 sh X P 50 = 312,500
62,500 sh X P 5 = 312,500

6 DR CR
Pre-Operating Expenses 87,500
Preference Share Capital 62,500
Preference Share Premium 25,000
1,250 sh X P 70 = 87,500
1,250 sh X P 50 = 62,500
1,250 sh X P 20 = 25,000

10 DR CR
Ordinary Share Capital Subscription Receivable 2,550,000
1 Ordinary Share Capital Subscribed 1,700,000
Ordinary Share Capital in Excess of Stated Value 850,000
85,000 sh X P 30 = 2,550,000
85,000 sh X P 20 = 1,700,000
85,000 sh X P 10 = 850,000

DR CR

Cash 1,530,000

Ordinary Share Capital Subscription Receivable 1,530,000

2,550,000 X 60% = 1,530,000

19 DR CR
Merchandise Inventory 10,000
Land 350,000
Building 200,000
Equipment 20,000
Ordinary Share Capital 500,000
Ordinary Share Capital in Excess of Stated Value 80,000
25,000 sh X P 20 = 500,000
10,000 + 350,000 + 200,000 + 20,000 = 580,000
580,000 – 500,000 = 80,000

28 DR CR
Cash 1,020,000
Ordinary Share Capital Subscription Receivable 1,020,000
2,550,000 – 1,530,000 = 1,020,000
DR CR
 Ordinary Share Capital Subscribed 1,700,000
Ordinary Share Capital 1,700,000

Marvel Corporation was authorized to issue 100,000 ordinary shares with a stated value of P 20. The
following transactions have taken place in relation to the share capital:

Aug Received subscriptions for 25,000 shares at 30 receiving a 40% down payment.
1
5 Received balance due from subscribers of 10,000 shares and issued the certificates to the
subscribers.
12 Received balance due from subscribers of 12,000 shares and issued the certificates to the
subscribers.
20 The subscriber of the remaining shares failed to pay his delinquency and was declared
delinquent.
21 Paid delinquency sale of P 15,000
25 Received payment from the highest bidder and issued the certificates.

Aug
Received subscriptions for 25,000 shares at P 30 receiving a 40% down payment.
1
Cash 300,000
Ordinary Share Capital Subscription Receivable 450,000
Ordinary Share Capital Subscribed 500,000
Paid-In Capital in excess of Stated Value 250,000
25,000 sh X P 30 X 40% =300,000
25,000 sh X P 30 X 60% = 450,000
25,000 sh X P 20 = 500,000
5,000 sh X P 10 = 250,000
Total subscription? 25,000 sh X P 30 = P750,000

5 Received balance due from subscribers of 10,000 shares and issued the certificates to the subscribers.

Cash 180,000
Ordinary Share Capital Subscription Receivable 180,000
10,000 sh X P 30 X 60% = 180,000

Ordinary Share Capital Subscribed 200,000

Ordinary Share Capital 200,000
10,000 sh X P 20 = 200,000

12
Received balance due from subscribers of 12,000 shares and issued the certificates to the subscribers.
Cash 216,000
Ordinary Share Capital Subscription Receivable 216,000
12,000 sh X P 30 X 60% = 216,000

Ordinary Share Capital Subscribed 240,000

Ordinary Share Capital 240,000
12,000 sh X P 20 = 240,000

20 The subscriber of the remaining shares failed to pay his delinquency and was declared delinquent.
(25,000 sh – 10,000 sh – 12,000 sh = 3,000 sh)
 Receivable from Highest Bidder 54,000
Ordinary Share Capital Subscription Receivable 54,000
3,000 sh X P 30 X 60% = 54,000

21 Paid delinquency sale of P 15,000

Receivable from Highest Bidder 15,000

Cash 15,000

25 Received payment from the highest bidder and issued the certificates.

Cash 69,000
Receivable from Highest Bidder 69,000
54,000 + 15,000 = 69,000

Ordinary Share Capital Subscribed 60,000

Ordinary Share Capital 60,000
3,000 sh X P 20 = 60,000

F. A statement of financial position for Green and Gold, prepared on October 1, 2018 is
shown below. Partners share profit and loss in the ratio of 75:25, respectively.

GREEN AND GOLD

Statement of Financial Position
October 1, 2018

ASSETS
Cash P 42,000
Accounts Receivable P 124,000
Less allowance for bad Debts 12,000 112,000
Inventories 206,000
Office Furniture P 600,000
Less accumulated depreciation 160,000 440,000
Goodwill 100,000
Total Assets P 900,000

LIABILITIES AND CAPITAL

Accounts Payable P 104,000
Green, Capital 394,000
Gold, Capital 402,000
Total Liabilities and Capital P 900,000

An appraisal of the assets discloses the following fair values: Inventories, P 296,000;
Equipment P 520,000.
Green and Gold, together with three other friends, decided to incorporate as Color
Corporation with 50,000 authorized shares of P 50 par ordinary share capital. The three
other incorporators acquired 10,000 shares at P 70 per share. Green and Gold received
14,000 shares in exchange for the net assets of the partnership except cash. On this date,
 the fair value of the stock is P 70 per share. Green agrees to take 7,500 shares and Gold,
6,500 shares. The partnership cash is appropriately divided between Green and Gold.

Required: Give the journal entries to record the above transactions on the books of the
partnership and on the new books of the corporation.

In the books
of
Corporation

DR CR

Business Acquisition $980,000

Purchase Consideration $980,000

Business Purchased

DR CR

Accounts Receivable $124,000

Inventory $296,000

Office Furniture $600,000

Goodwill $204,000

Equipment $20,000

Accumulated Depreciation $160,000

Accounts Payable $104,000

Business Acquisition $980,000

Net Assets Acquired

DR CR

Purchase Consideration $980,000

Share Capital $700,000

Securities Premium $280,000

Purchase Consideration Paid

 DR CR

Cash In Bank and On Hand Date $700,000

Share Capital $500,000

Securities Premium $200,000

Three Other
Incorporates

In the books
of
Partnership

DR CR

Realisation Account $1,030,000

Accounts Receivable $124,000

Inventory $206,000

Office Furniture $600,000

Goodwill $100,000

Being Asset Transferred

DR CR

Allowance of Doubtful Debts $12,000

Accumulated Depreciation $160,000

Accounts Payable $104,000

Purchase Consideration $980,000

Realisation Account $1,256,000

Being Liability
Transferred

DR CR

Realisation Account $226,000

Green Capital $169,500

Gold Capital $56,500

Being Profit on Realizations Transferred

 DR CR

Green Capital $31,500

Gold Capital $10,500

Cash $42,000

Being Cash Divided Among Them

G. The Silver Ray Corporation was organized on January 1, 2018 with authorized share
capital consisting of 50,000 preference shares with a par value of P 50 and 1,000,000 of
no-par ordinary shares with a stated value of P 10 per share. At December 31, 2018, the
ledger included the following balances pertaining to shareholders’ equity.
Preference Share Capital P 1,000,000
Preference Share Premium 120,000
Ordinary Share Capital 3,000,000
Ordinary Share Capital in Excess of Stated Value 4,500,000
10,000 preference shares were issued in exchange for equipment having a fair value of P
550,000. The remaining preference shares were issued for cash. All ordinary shares were
issued for cash.

Required: Compute for the following:

a. Number of preference shares issued for cash
b. Price per share of preference share capital issued for cash
c. Number of ordinary shares issued
d. Average price per share of the ordinary share capital issued for cash
e. Total preference share premium arising from issuance in exchange for equipment.