BE12.2 (LO 2) On May 10, Chen Co.
issues 2,000 €6 par value ordinary shares for cash at €13 per share.
Journalize the issuance of the shares.
10-May Cash 26,000 (2,000*13)
Share capital_Ordinary 12,000 (2,000*6)
Share premium_Ordinary 14,000
BE12.3 (LO 2) On June 1, Federia Ltd. issues 4,500 no-par ordinary shares at a cash price of HK$600 per
share. Journalize the issuance of the shares assuming the shares have a stated value of HK$200 per
share.
1-Jun Cash 2,700,000 (4,500*600)
Share capital_Ordinary 900,000 (4,500*200)
Share premium_Ordinary 1,800,000
BE12.4 (LO 2) Alou Ltd.’s £10 par value ordinary shares are actively traded at a market price of £15 per
share. Alou issues 5,000 shares to purchase land advertised for sale at £81,000. Journalize the issuance
of the shares in acquiring the land.
Land 75,000 (5,000*15)
Share capital_Ordinary 50,000 (5,000*10)
Share premium_Ordinary 25,000
BE12.6 (LO 2) Chard Ltd. issues 5,000 £100 par value preference shares for cash at £118 per share.
Journalize the issuance of the preference shares.
Cash 590,000 (5,000*118)
Share capital_Preference 500,000 (5,000*100)
Share premium_Preference 90,000
E12.3 (LO 2) During its first year of operations, Punjab Limited had the following transactions pertaining
to its ordinary shares.
Jan. 10 Issued 70,000 shares for cash at Rs50 per share.
July 1 Issued 30,000 shares for cash at Rs70 per share.
Instructions
a. Journalize the transactions, assuming that the ordinary shares have a par value of Rs50 per share.
b. Journalize the transactions, assuming that the ordinary shares are no-par with a stated value of Rs10
per share.
a Par value 50
10-Jan Cash 3,500,000 (70,000*50)
Share capital_Ordinary 3,500,000 (70,000*50)
1-Jul Cash 2,100,000 (30,000*70)
Share capital_Ordinary 1,500,000 (30,000*50)
Share premium_Ordinary 600,000
b Stated value 10
10-Jan Cash 3,500,000 (70,000*50)
Share capital_Ordinary 700,000 (70,000*10)
Share premium_Ordinary 2,800,000
1-Jul Cash 1,500,000 (30,000*70)
Share capital_Ordinary 300,000 (30,000*10)
Share premium_Ordinary 1,200,000
E12.4 (LO 2) Luis SLU issued 1,000 ordinary shares.
Instructions
Prepare the entry for the issuance under the following assumptions.
a. The shares had a par value of €5 per share and were issued for a total of €48,000.
b. The shares had a stated value of €5 per share and were issued for a total of €48,000.
c. The shares had no par or stated value and were issued for a total of €48,000.
d. The shares had a par value of €5 per share and were issued to attorneys for services during
incorporation valued at €48,000.
e. The shares had a par value of €5 per share and were issued for land worth €48,000.
a Cash 48,000
Share capital_Ordinary 5000 (1,000*5)
Share premium_Ordinary 43,000
b Cash 48,000
Share capital_Ordinary 5000 (1,000*5)
Share premium_Ordinary 43,000
c Cash 48,000
Share capital_Ordinary 48,000
d Organization expense 48,000
Share capital_Ordinary 5000 (1,000*5)
Share premium_Ordinary 43,000
e Land 48,000
Share capital_Ordinary 5000 (1,000*5)
Share premium_Ordinary 43,000
E12.7 (LO 2) As an auditor for the firm of Gratis and Goode, you encounter the following situations in
auditing different clients.
1. JR SpA is a closely held corporation whose shares are not publicly traded. On December 5, the
corporation acquired land by issuing 5,000 €10 par value ordinary shares. The owners’ asking price
for the land was €138,000, and the fair value of the land was €124,000.
2. Novak A/S is a publicly held corporation whose ordinary shares are traded on the securities
markets. On June 1, it acquired land by issuing 20,000 €10 par value ordinary shares. At the time of
the exchange, the land was advertised for sale at €250,000. The shares were selling at €11 per
share.
Instructions
Prepare the journal entries for each of the situations above.
5-Dec Land 124,000
Share capital_Ordinary 50000 (5,000*10)
Share premium_Ordinary 74,000
1-Jun Land 220,000 (20,000*11)
Share capital_Ordinary 200,000 (20,000*10)
Share premium_Ordinary 20,000
BE12.7 (LO 3) Greenwood Enterprises has 80,000 ordinary shares outstanding. It declares a €1 per
share cash dividend on November 1 to shareholders of record on December 1. The dividend is paid on
December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the
cash dividend.
1-Nov Dividend 80,000 (80,000*1)
Dividend payable 80,000
31-Dec Dividend payable 80,000
Cash 80,000
E12.10 (LO 3, 4) On January 1, Chevon Enterprises had 95,000 no-par ordinary shares issued and
outstanding. The shares have a stated value of €5 per share. During the year, the following occurred.
Apr. 1 Issued 25,000 additional ordinary shares for €17 per share.
June 15 Declared a cash dividend of €1 per share to shareholders of record on June 30.
July 10 Paid the €1 cash dividend.
Dec. 1 Issued 2,000 additional ordinary shares for €19 per share.
15 Declared a cash dividend on outstanding shares of €1.20 per share to shareholders of record
on December 31.
Instructions
a. Prepare the entries to record these transactions.
b. How are dividends and dividends payable reported in the financial statements prepared at
December 31?
1-Apr Cash 425,000 (25,000*17)
Share capital - Ordinary 125,000 (25,000*5)
Sahre premium - Ordinary 300,000
15-Jun Dividend 120,000 (1*(95,000+25,000)
Dividend payable 120,000
10-Jul Dividend payable 120,000
Cash 120,000
1-Dec Cash 38,000 (2,000*19)
Share capital - Ordinary 10,000 (2,000*5)
Sahre premium - Ordinary 28,000
15-Dec Dividend 122,000 (1.20*(95,000+25,000+2,000)
Dividend payable 122,000
b Statement of retained earnings Dividend Reduction of Retained earning
Statement of financial position Dividend payable An element of Current liablilities
,000+25,000+2,000)
P12.1 (LO 2, 4) Gão Limited was organized on January 1, 2025. It is authorized to issue 10,000 8%,
HK$1,000 par value preference shares, and 500,000 no-par ordinary shares with a stated value of HK$20
per share. The following share transactions were completed during the first year.
Jan. 10 Issued 100,000 ordinary shares for cash at HK$48 per share.
Mar. 1 Issued 5,000 preference shares for cash at HK$1,050 per share.
Apr. 1 Issued 18,000 ordinary shares for land. The asking price of the land was HK$980,000. The
fair value of the land was HK$920,000.
May 1 Issued 80,000 ordinary shares for cash at HK$45 per share.
Aug. 1 Issued 10,000 ordinary shares to attorneys in payment of their bill of HK$320,000 for
services provided in helping the company organize.
Sept. 1 Issued 10,000 ordinary shares for cash at HK$50 per share.
Nov. 1 Issued 1,000 preference shares for cash at HK$1,060 per share.
Instructions
a. Journalize the transactions.
b. Post to the equity accounts. (Use J5 as the posting reference.)
c. Prepare the share capital section of the statement of financial position at December 31, 2025.
c. Total equity HK$16,450,000
Date Accounts DR CR Workings
10-Jan Cash 4,800,000 (100,000*48)
Share capital - Ordinary 2,000,000 (100,000*20)
Share premium - Ordinary 2,800,000
1-Mar Cash 5,250,000 (5,000*1,050)
Share capital - Preference 5,000,000 (5,000*1,000)
Share premium - Preference 250,000
1-Apr Land 920,000
Share capital - Ordinary 360,000 (18,000*20)
Share premium - Ordinary 560,000
1-May Cash 3,600,000 (80,000*45)
Share capital - Ordinary 1,600,000 (80,000*20)
Share premium - Ordinary 2,000,000
1-Aug Organization expense 320,000
Share capital - Ordinary 200,000 (10,000*20)
Share premium - Ordinary 120,000
1-Sep Cash 500,000 (10,000*50)
Share capital - Ordinary 200,000 (10,000*20)
Share premium - Ordinary 300,000
1-Nov Cash 1,060,000 (1,000*1,060)
Share capital - Preference 1,000,000 (1,000*1,000)
Share premium - Preference 60,000
Share capital - Ordinary Share capital - Preference
10-Jan 2,000,000 1-Mar 5,000,000
1-Apr 360,000 1-Nov 1,000,000
1-May 1,600,000 Balance 6,000,000
1-Aug 200,000
1-Sep 200,000
Balance 4,360,000
Share premium - Ordinary Share premium - Preference
10-Jan 2,800,000 1-Mar 250,000
1-Apr 560,000 1-Nov 60,000
1-May 2,000,000 Balance 310,000
1-Aug 120,000
1-Sep 300,000
Balance 5,780,000
Gão Limited
Statement of financial position
As at 31 December 2025
Shareholders' equity
Share capital - Preference, 8%, HK$1,000 par value,
10,000 share authorized, 6,000 shares issued and outstanding 6,000,000
Share capital - Ordinary, HK$20 stated value,
500,000 share authorized, 218,000 shares issued and outstanding 4,360,000
Share premium - Preference 310,000
Share premium - Ordinary 5,780,000
16,450,000