Review Materials:
I During its first year of operations, X Corporation had the following transactions relating to 10%
preference with authorized issue of 200,000 shares and a par value of P60 and ordinary no-par with
authorized issue of 100,000 shares and a stated value of P25.
Issued for cash 50,000 preference shares @ P75 per share.
Issued 1,500 ordinary no-par to lawyers in payment of bill valued at P45,000 for drafting the
incorporation papers to register the corporation.
In exchange for building and machinery with fair value of P2,500,000 and P1,500,000, respectively, X
Corporation issued 60,000 preference shares. Cash of P300,000 was received by X Corporation from
the shareholders for the difference in fair value of the building and machinery and the fair value of
preference shares issued.
Received subscription for 30,000 ordinary shares no-par at P50 per share receiving 30% down payment
and the balance to be collected three months after.
Required:
Q1 What is the balance of preference share capital?
Q2 What is the balance of ordinary share capital-no-par?
Q3 How much is the additional contributed capital or additional paid in capital?
Q4 How much is the total legal capital of G Corporation?
Q5 How much is the total shareholders’ equity?
II Pack Corporation received authorization to issue 100,000 shares of P20 par value ordinary share capital.
It completed the following selected transactions during the year:
Received subscription from Sha for 15,000 shares at P40 per share, receiving 40% down
payment.
On due date, Sha failed to pay the balance of the subscription. The shares were declared
delinquent and were advertised for sale at a public auction, Pack Corporation paying P2,500
advertising costs.
Required:
Q6 How much was the amount collectible from the Highest Bidder if the unpaid subscription is
subject to accrued interest amounting to P3,500?
Q7 Assume that Pack Corporation received the following bids: Carlo, 10,000 shares; Gabri, 12,000
shares; and Babe, 13,000 shares, Who is the highest bidder?
Q8 In relation to your answer to Q7, how many shares should Sha receive?
III Steel Corporation’s records included the following shareholders’ equity accounts:
Preference share capital, P20 par. Authorized issue, 200,000 shares of
which. ?, shares are issued & outstanding 2,400,000
Share premium-preference 360.000
Ordinary share capital, no-par, P15 stated value. Authorized issue of
50,000 shares of which ? shares are issued & outstanding 375,000
Subscribed ordinary share capital, no-par 225,000
Paid in capital in excess of stated value 150,000
Required:
Q9 How many preference shares are issued?
Q10 What was the average issue price of the preference share?
Q11 How many ordinary shares are issued?
Q12 What was the average issue price of the ordinary shares assuming that the subscribed ordinary
shares are subscribed at stated value hence the entire paid in capital in excess of stated value-
ordinary originated from the issuance of ordinary shares for cash?
Q13 How many preference shares are still available for subscription?
Q14 How many ordinary shares are still available for subscription?
IV The shareholders’ equity of Ace Corporation as of January 1, 2021 is as follows:
Ordinary share capital, P25 par, authorized issue of 100,000 share of which
50,000 shares are issued and outstanding 1,250,000
Share premium-ordinary 600,000
Retained earnings 2,500,000
Ace recorded the following transactions during 2021:
Acquired back 3,000 ordinary shares to be held in the treasury for P150,000.
Sold 1,000 treasury shares-ordinary at P60 per share.
Sold 500 treasury shares-ordinary at P40 per share.
Retired 1,000 treasury shares-ordinary.
Q15 What amount of share premium from treasury shares-ordinary will arise from the sale of 1,000
treasury shares ordinary at P60 per share.
Q16 For how much would retained earnings be debited or charged as a result of the sale of 500
treasury shares-ordinary at P40 per share.
Q17 For how much would retained earnings be debited or charged as a result of the retirement of
500 treasury shares-ordinary?
Q18 By how much did the shareholders’ equity increase or decrease as a result of the foregoing
transactions?
Q19 What is the balance of treasury shares-ordinary?
Q20 What amount of retained earnings must be appropriated to support the balance existing in.
the treasury shares-ordinary account?
B. Supply the answer Problems. Answer the requirements for each of the ff. unrelated problems.. Show
supporting computations in good form No supporting computations no credit.
I Savi Company exchanges a piece of equipment for 10,000 shares of Asia Corporation’s ordinary share
capital that has a 100 par value. The machinery cost Salve Company 1,800,000 when purchased five
years ago, and currently has a fair value of P1,300,000. The machinery’s carrying value at the time of
exchange is 1,100,000. Shares of Asia is being traded in the market at P130 per share.
Required:
Q1. At what would the equipment be recognized in the books of Asia Corporation as a result of
the issuance of 5,000 ordinary shares in exchange for the machinery of Salve Company?
Q2 At what amount would ordinary share capital be credited in the books of Asia Corporation as a
result of the exchange?
Q3 What amount of share premium-ordinary will arise from the exchange?
Q4 What if in the above, the fair value of the shares of Asia Corporation is at P120 per share, what
amount of cash shall be paid by Asia Corporation in the above exchange to equalize the
exchange:
Q5 In relation to No 4, what amount of share premium-ordinary will arise from the exchange”
II On July 1, 2021, Tac Corporation issued 2,000, P100 par value ordinary shares and 4,000, P50
par value convertible preference shares for a lump sum price of P420,000. At this date, Tac’s
ordinary and
Q6 What is the amount credited to share premium-ordinary?
Q7 What is the amount credited to share premium-preference?
III The following selected accounts are found in the trial balance of Dick Trading Corporation at December
31, 2021:
Authorized ordinary share capital, P50 par 2,000,000
Subscription receivable-collectible, January 31, 2022 200,000
Unissued ordinary share capital 800,000
Subscribed ordinary share capital 400,000
Share premium-ordinary 300,000
Q8 What is the total number of authorized shares?
Q9 What is the total number of ordinary shares issued?
Q10 What is the total number of shares available for subscription?
Q11 What is the total contributed capital?
Q12 What if in the above, the corporation reported net income of P1,500,000 during the year, how
much is total shareholders’ equity?
A P3,400,000
IV The ff. equity accounts are shown in the equity section of the statement of financial position of Dick
Corporation:
Ordinary share capital, P100 par, 4,000 shares issued and
outstanding 400,000
Share premium-ordinary 80,000
Share premium-treasury shares 12,000
Retained earnings 500,000
Treasury shares at cost, 800 shares at P125 acquisition cost per share
(100,000)
Q13 What if in the above, the entire treasury shares are sold for P80,000, what amount if any is
charged to retained earnings as a result of the sale?
Q14 What if in the above, the entire treasury shares are sold for P60,000, what amount is
credited to share premium from treasury shares as a result of the sale?
Q15 What if in the above, the entire treasury shares were retired, for how much would retained
earnings be debited/charged as a result of the retirement of treasury shares?