Performance Tasks on
Shareholders’ Equity
Problem 1:
Bmax Company presents their Shareholders’ Equity below:
Ordinary Shares capital, 50,000 shares, P100 par P5,000,000
Share Premium 200,000
Retained Earnings 2,000,000
Subsequently, the following transactions among others occurred:
1. Treasury shares 5,000 were acquired at P160/share
2. Assuming the treasury shares were reissued for P1,000,000.
3. Assuming the treasury shares were reissued for P700,000
Tasks:
1. Prepare the journal entries to record the transactions
1. Treasury shares 5,000 were acquired at P160/share
Debit Credit
Treasury Share 800,000
Cash 800,000
5,000 * P 160 = 800,000
2. Assuming the treasury shares were reissued for P1,000,000. (Above Cost)
Debit Credit
Cash 1,000,000
Treasury Share 800,000
Share Premium – Treasury Share 200,000
Share Premium – T/S: Bought: 800,000
Sold: 1,000,000
Gain: 200,000
3. Assuming the treasury shares were reissued for P700,000. (Below Cost)
Debit Credit
Cash 700,000
Retained Earnings 100,000
Treasury Share 800,000
Retained Earnings: Bought: 800,000
Sold: 700,000
Loss: 100,000
Problem 2:
At the beginning of current year, Laptop Factory Company reported the following issues of share capital:
200,000 shares at P20 P4,000,000
250,000 shares at P25 6,250,000
During the current year, the entity reacquired 50,000 shares at P20, and these were reissued at year-end
at P25/share
Tasks:
Prepare the journal entries to record the foregoing transactions assuming, the share has P15 par value.
Debit Credit
Cash 4,000,000
Share Capital (200,000 * P 15) 3,000,000
Share Premium 1,000,000
Solutions:
Share Capital: 200,000 * P 15 = 3,000,000
Share Premium:
4,000,000 – 3,000,000 = 1,000,000
Cash 6,250,000
Share Capital (250,000 * P 15) 3,750,000
Share Premium 2,500,000
Solutions:
Share Capital: 250,000 * P 15 = 3,750,000
Share Premium:
6,250,000 – 3,750,000 = 2,500,000
Treasury Share 1,000,000
Cash 1,000,000
50,000 shares * P 20 = 1,000,000
Cash 1,250,000
Treasury Share 1,000,000
Share Premium – Treasury Share 250,000
Cash: 50,000 shares * P 25 = 1,250,000
Share Premium – Treasury Share:
1,250,000 – 1,000,000 = 250,000
Problem 3:
Tech Tablets Company reported share capital P3,000,000, 20,000 shares, P150 par, share premium
P200,000 and retained earning P1,500,000.
Tasks:
Prepare the entry for each of the following cases, where recapitalization was done:
1. A share split down of 5 to 1
Shares Par Value Cost
Outstanding Shares 20,000 P 150 3,000,000
Split down 5 to 1 4,000 P 750 3,000,000
Solution:
20,000 / 5 shares = 4,000 shares
3,000,000 / 4,000 = P 750 per share
Memo Entry:
Issued 4,000 new shares with a par value of P 750, split share of 5 to 1 of the 20,000 old shares with a
par value of P 150.
2. A share split up of 10 for 1
Shares Par Value Cost
Outstanding Shares 20,000 P 150 3,000,000
Split up 10 for 1 200,000 P 15 3,000,000
Solutions:
20,000 * 10 shares = 200,000 shares
3,000,000 / 200,000 = P 15 per share
Memo Entry:
Issued 200,000 new shares with a par value of P 15, split share of 10 for 1 of the 20,000 old shares with a
par value of P 150.
3. All outstanding shares were called and cancelled, and each shareholder receiving 1 share for
new P100 no-par value stated value for each share owned.
Shares P 150, 20,000 shares P 3,000,000
Share Premium 200,000
Retained Earnings 1,500,000
Debit Credit
Share Capital 3,000,000
Share Premium 200,000
Share Capital (20,000 * P 100) 2,000,000
Share Premium (new shares) 1,200,000
Solutions:
Share Capital: 20,000 * P 100 = 2,000,000
Share Premium (new shares) = 3,200,000 – 2,000,000 = 1,200,00
4. All outstanding shares were called and cancelled, and each shareholder receiving 1 share for
new P200 par value for each share owned.
Share P 150, 20,000 shares P 3,000,000
Share Premium 200,000
Retained Earnings 1,500,000
Debit Credit
Share Capital 3,000,000
Share Premium 200,000 Solutions:
Retained Earnings 800,000
Share Capital (20,000 * P 200) 4,000,000 Share Capital: 20,000 * P 200
= 4,000,000
Retained Earnings: 4,000,000 – 3,200,000 = 800,000