CHAPTER 21

Problem 21-1
1. Journal Entries
a. Treasury shares 800,000
Cash 800,000

b. Cash 1,000,000
Treasury shares 800,000
Share premium 200,000

c. Cash 700,000
Retained earnings 100,000
Treasury shares 800,000

2. Ordinary share capital 500,000

Share premium (5,000 x 4) 20,000
Retained earnings 280,000
Treasury share 800,000

Problem 21-2

a. 1. Cash 4,000,00
0
Share capital (200,000 x 15) 3,000,000
Share premium 1,000,000

2. Cash 6,250,00
0
Share capital (250,000 x 15) 3,750,000
Share premium 2,500,000

3. Treasury shares 1,000,00

0
Cash 1,000,000

4. Cash 1,250,00
0
Treasury shares 1,000,000
Share premium 250,000

b. 1. Cash 4,000,000
Share capital (200,000 x 20) 4,000,000
2. Cash 6,250,000
Share capital (250,000x 20) 5,000,000
Share premium 1,250,000

3. Treasury shares 1,000,00

0
Cash 1,000,000

4. Cash 1,250,00
0
Treasury shares 1,000,000
Share premium 250,000

Problem 21-3
a. Cash 4,200,00
0
Preference share capital 3,000,000
Share premium- PS 1,200,000

b. Cash 5,500,00
0
Ordinary share capital 5,000,000
Share premium-ordinary share 500,000

c. Preference share (10,000 x 100) 1,000,00

0
Share premium- PS 400,000
Cash (10,000 x 120) 1,200,000
Share premium -retirement 200,000

d. Treasury shares (15,000 x 52) 780,000

Cash 780,000

e. Cash (10,000 x 60) 600,000

Treasury shares (10,000 x 52) 520,000
Share premium - treasury share 80,000

f. Cash (10,000 x 65) 650,000

Donated capital 650,000

g. Profit and loss 3,000,00

0
Retained earnings 3,000,000
h. Retained earnings 260,000
Retained earnings appropriated for treasury shares 260,000

Preference share capital, 12% P100 par 2,000,000

Ordinary share capital, P50, 100,000 shares issued, of which
5,000 shares are in treasury and 10,000 shares are donated
5,000,000
Share premium:
Preference share 800,000
Retirement of preference share 200,000
Ordinary share 500,000
Treasury share 80,000
Donated capital 650,000 2,230,000
Retained earnings:
Unappropriated 2,740,000
Appropriated for treasury shares 260,000 3,000,000
Treasury shares, at cost ( 260,000)
Shareholders’' equity 11,970,000

Problem 21-4
a. Share capital 3,000,00
0
Share premium 200,000
Share capital (40,000 x 50) 2,000,000
Share premium - recapitalization 1,200,000

b. Memo Issued 100,000 new shares with par of P30 as a

result of 5 for 1 split of 20,000 original shares with par of
P150.

c. Share capital (20,000 x 50) 1,000,00

0
Share premium - recapitalization 1,000,000

d. Share capital 3,000,00

0
Share premium 200,000
Retained earnings 800,000
Share capital (80,000 x 50) 4,000,000
Problem 21-5
a. Cash 1,000,00
0
Ordinary share capital 1,000,000

2. Treasury shares 300,000

Cash 300,000

3. Memo

4. Cash 120,000
Treasury shares (3,000/ 10,000 x 300,000) 90,000
Share premium- treasury shares 30,000

5. Memo- Received 15,000 ordinary shares by way of

donation.

Cash (10,000 x 40) 400,000

Donated capital 400,000

6. Profit and loss 500,000

Retained earnings 500,000

7. Retained earnings 210,000

Retained earnings appropriated for treasury shares 210,000

2. Preference share capital 500,000

Ordinary share capital 3,500,000
Share premium:
Preference share 200,000
Ordinary share 500,000
Treasury share 30,000
Donated capital 400,000 1,130,000
Retained earnings:
Unappropriated 2,290,000
Appropriated for treasury shares 210,000 2,500,000
Treasury shares, at cost (210,000)
Shareholders’ equity 7,420,000

Problem 21-6
a. Share capital 500,000
Donated capital (5,000,000 x 10) 500,000
 Donated capital 500,000
Retained earnings 500,000

b. Share capital (50,000 x 50) 2,500,00

0
Share premium 2,500,000

Share premium 500,000

Retained earnings 500,000

c. Share capital 5,000,00

0
Share premium 1,000,00
0
Share capital (100,000 x 55) 5,500,000
Retained earnings 500,000

d. Share capital 5,000,000

Share premium 1,000,000
Share capital (150,000x 20) 3,000,000
Share premium recapitalization 3,000,000

Share premium- recapitalization 500,000

Retained earnings 500,000

Problem 21-7
1. Cash (4,000 x 60) 240,000
Ordinary share capital (20,.000 rights/5-4,000 shares) 200,000
Share premium 40,000

2. Cash 2,500,00
0
Preference share capital 2,000,000
Share premium- PS 300,000
Share warrants outstanding 200,000

Cash (9,000 x 60) 540,000

Share warrants outstanding (18,000/ 20,000 x 200,000) 180,000
Ordinary share capital 450,000
Share premium-ordinary shares 270,000

Share warrants outstanding 20,000

Share premium-unexercised warrants 20,000
3. Cash 6,000,00
0
Preference share capital 5,000,000
Share premium PS 500,000
Share warrants outstanding 500,000

Cash (25,000 x 60) 1,500,00

0
Share warrants outstanding 500,000
Ordinary share capital (25,000 x 50) 1,250,000
Share premium -ordinary share 750,000

Problem 21-8
1. 2020
May 31 Cash 6,000,000
Bonds payable 5,000,000
Premium on bonds payable 250,000
Share warrants outstanding 750,000

Dec. 31 Cash 1,200,000

Share warrants outstanding 500,000
Ordinary share capital 1,000,000
Share premium 700,000

31 Profit and loss 2,000,000

Retained earnings 2,000,000

. 2021
July 15 Memo-Issued 60,000 rights permitting shareholders
to acquire I share at PI30 for every 5 rights.

Dec. 31 Cash (60,000/5-12,000 x 130) 1,560,000

Ordinary share capital (12,000 x 100) 1,200,000
Share premium - issuance 360,000

31 Share warrants outstanding 250,000

Share premium - unexercised share warrants 250,000
 31 Profit and loss 3,000,000
Retained earnings 3,000,000

2. Ordinary share capital, P100 par

Authorized-200,000 shares
Issued and outstanding-72,000 shares 7,200,000
Share premium 2,310,000
Retained earnings 8,000,000
Shareholders’ equity 17,510,000

Problem 21-9 Answer A. 3,290,000

Issuance (200,000 x 15) 3,000,000
Net income 750,000
Cash dividends ( 380,000)
Treasury shares (12,000 x 12) ( 144,000)
Reissue of treasury (8,000 x 8) 64,000
Shareholders’ equity 3,290,000

Problem 21-10 Answer C. 1,083,000

Per book 980,000
Treasury shares:
1,000 x 28 (28,000)
900 x 30 (27,000)
Reissuance of treasury (1,500 x 32) 48,000
Net income 110,000
Shareholders’ equity 1,083,000

Problem 21-11 Answer C

Problem 21-12 Answer A. 3,330,000

675,000 x 4 (10-6) 2,700,000
90,000 x 7 (18-11) 630,000
Share premium 3,330,000

Problem 21-13 Answer C. 50 (10 x 5)

Problem 21-14 Answer D. 225,000

Total ordinary shares issued (200,000+100,000) 300,000
Ordinary shares outstanding (75,000)
Ordinary shares outstanding 225,000

Problem 21-15 Answer A. 40,000

80,000 x 2 160,000
10,000 x 2 (20,000)
Ordinary shares outstanding 40,000

Problem 21-16 Answer A

Problem 21-17 Answer A

Problem 21-18 Answer C

Problem 21-19 Answer B

Problem 21-20 Answer B

Problem 21-21
Question 1 Answer A. 2,250,000 (2,500,000 – 250,000)
Question 2 Answer B. 1,125,000 (1,250,000 – 125,000)
Question 3 Answer C. 775,000 (1,000,000 – 225,000)

Problem 21-22
Question 1 Answer C. 1,540,000
Question 2 Answer A. 2,250,000
Question 3 Answer A. 2,250,000

Problem 21-23
Question 1 Answer A. 1,500,000
Question 2 Answer A. 800,000
Question 3 Answer A. 2,800,000
Question 4 Answer A. 3,300,000

Problem 21-24

Question 1 Answer C. 900,000

Question 2 Answer B. 500,000
Question 3 Answer A. 600,000
Question 4 Answer A. 25

Problem 21-25

Question 1 Answer C. 4,200,000

Question 2 Answer B. 3,150,000
Question 3 Answer A. 8,750,000
Question 3 Answer C. 74,000
Problem 21-26 Problem 21-27 Problem 21-28
1. A 1. C 1. B
2. A 2. B 2. C
3. B 3. B 3. C
4. C 4. D 4. C
5. C 5. D 5. C
6. D 6. C
7. A 7. B
8. C 8. B
9. D
10. C