Solutions to Chapter 7

Solutions to Chapter 7 Exercise 1 a) Aug. 1

Aug. 5

Aug. 10

Aug. 12

Aug. 30

Sept. 1

Sept. 30

Authorized to issue 100,000 8% preference shares at P100 par and 100,000 ordinary shares at P50 par. Subscription Receivable-Ordinary share Subscribed Ordinary Share Capital

3,000,000

Cash Subscription Receivable-Ordinary Share

1,000,000

Subscription Receivable-Preference Share Subscribed Preference Share Capital Cash Subscription Receivable-Preference Share

4,000,000

Cash Ordinary Share Capital Ordinary Share Premium

1,060,000

3,000,000

1,000,000

4,000,000 2,000,000 2,000,000

1,000,000 60,000

Equipment Preference Share Capital Preference Share Premium

700,000 500,000 200,000

Cash Subscription Receivable-Preference Share

2,000,000

Subscribed Preference Share Capital Preference Share Capital

4,000,000

Cash Subscription Receivable-Ordinary Share Capital

1,000,000

2,000,000

4,000,000

1,000,000

Cash Subscription Receivable-Ordinary Share

958,333 958,333

Subscribed Ordinary Share Capital Ordinary Share Capital

2,875,000 2,875,000

b) Preference Shares: Authorized to issue 100,000 preference shares par P100 Issued 90,000 shares Ordinary Shares: Authorized to issue 100,000 ordinary shares par P50 Issued 38,750 shares Subscribed 2,500 shares Additional Paid In Preference Share Premium Ordinary Share Premium Total Paid In

P4,500,000

3,875,000 125,000 200,000 60,000 P4,260,000

Ex .2 a) 2012 May1

Authorized to issue 50,000, 18% Cumulative Preference shares at P100 per share Authorized to issue 200,000 ordinary shares At P50 per share Subscription Receivable-Preference Shares (2,500 xP100 x 6) Subscribed Preference Share Capital To record common stock subscription of incorporators.

1,500,000

Subscription Receivable- Ordinary Shares (10,000 x P50 x 6) Subscribed Ordinary Share Capital To record common stock subscription of incorporators.

3,000,000

43

1,500,000

3,000,000

Cash Subscription Receivable-Preference Share(1,500,000 x .25) Subscription Receivable-Ordinary Share (3,000,000 x .25) To record downpayment of incorporators. June 15

17

30

July 1

15

18

20

30

375,000 750,000

Subscription Receivable-Preference Share(5,000 x P110) Subscribed preference share capital (5,000 x P100) Preference share Premium To record subscription of various investors.

550,000

Cash (550,000 x .25) Subscription Receivable-Preference share To record downpayment of various investors.

137,500

500,000 50,000

137,500

Subscription Receivable-Ordinary Share(30,000 x P52) Subscribed Ordinary Share Capital Ordinary Share Premium

1,560,000 1,500,000 60,000

Cash (1,560,000 x .25) Subscription receivable-Ordinary Share To record downpayment of common stock subscription. Cash Subscription receivable-Preference Share Subscription Receivable-Ordinary Share To record first installment of incorporators.

390,000 390,000 1,687,500 562,500 1,125,000

Cash Subscription Receivable-Ordinary Share

1,170,000

Subscribed Ordinary Share Ordinary Share Capital

1,500,000

1,170,000

1,500,000

Cash Subscription Receivable-Preference Share

137,500 137,500

Land Ordinary Share Capital Ordinary Share Premium

75,000 70,000 5,000

Cash Subscription Receivable-Preference Share Subscription Receivable-Ordinary Share

562,500 187,500 375,000

Subscribed Preference Share Subscribed Ordinary Share Preference Share Capital Ordinary Share Capital

500,000 1,000,000

Cash Subscription Receivable-Preference Share Subscription Receivable-Ordinary Share

1,125,000

Subscribed Preference Share Capital Subscribed Ordinary Share Capital Preference Share Capital Ordinary Share Capital

1,000,000 2,000,000

Preference Share 5/1 6/15 6/17 7/1 7/18 7/20 7/30

1,125,000

500,000 1,000,000

Subscribed Preference 1,500,000 500,000

Pref Share Premium

0

375,000 750,000

1,000,000 2,000,000

Ordinary Share

Subscribed Ordinary Shares 3,000,000

Ordinary Share Premium

50,000 1,500,000 70,000 1,000,000 2,000,000

(500,000) (1,000,000)

P1,500,000

500,000 1,000,000

P50,000

P4,570,00 0

Legal Capital P6,070,000

44

1,500,000 (1,500,000)

60,000 5,000

(1,000,000) (2,000,000) P65,000

Shareholders’ Equity| Paid In Capital Authorized 50,000 18% cumulative preference shares, at P100 par Issued and Outstanding Preference Share, 1,500

P1,500,000

Authorized 200,000 common shares, at P50 par Issued and Outstanding Ordinary Shares, 45,700

4,570,000

Additional Paid In Capital: Premium on Preference Shares Premium on Ordinary Shares Total Paid In Capital

50,000 65,000

Ex. 3. a) Journal entries: Jan 15 Unissued preference share (20,000 x P100) Authorized Preference share capital

2,000,000 2,000,000

Unissued Ordinary Share (50,000 x P50) Authorized Ordinary Share 20

30

Feb 21

25

Mar 1

10

28

31

115,000 P6,185,000

2,500,000 2,500,000

Cash (13,000 x P60) Unissued Ordinary Share (13,000 x P50) Paid in Capital in excess of stated value-ordinary share

780,000

Subscription Receivable – preference share (5,000xP100) Subscribed preference share

500,000

Cash Subscription Receivable – preference share

250,000

650,000 130,000

500,000

250,000

Cash (750 x P105) Unissued preference share (750 x P1000 Preference Share Premium

78,750 75,000 3,750

Land (P50,000 x 2.20) Unissued preference share (1,100 x P100)

110,000 110,000

Organization Expense Cash

75,000 75,000

Subscription Receivable – Ordinary Share (2,000 x P62) Subscribed Ordinary Share (2,000 x P50) Paid in capital in excess of stated value-ordinary share

124,000 100,000 24,000

Cash (124,000 x .25) Subscription Receivable – ordinary share

31,000

Cash Subscription Receivable – ordinary share

70,400

Subscribed ordinary share (1,200 x P50) Unissued ordinary share

60,000

Cash Subscription Receivable – ordinary share

22,600

Subscribed ordinary share (800 x P50) Unissued ordinary share

40,000

Income & expense summary Retained earnings

81,000

31,000

70,400

60,000

22,600

40,000

81,000

b) Shareholders Equity Section: Paid In Capital Authorized preference share, 2,000 shares at P100 par Less Unissued Issued and Outstanding Preference Share, 1,750 Subscribed Preference Share

45

P2,000,000 185,000 P1,815,000 P500,000

Less: Subscription Receivable – Preference Share

250,000

Authorized Ordinary Share, 50,000 at P50 stated value Less: Unissued Ordinary shares, 35,000 shares Issued and Outstanding Ordinary Shares, 15,000 Additional Paid In Capital: Preference Share Premium Paid In Capital in excess of Stated Value –Ordinary Total Paid In Capital Retained Earnings Total Shareholders’ Equity c) Legal Capital: Preference Share, issued and outstanding Subscribed Preference Share Ordinary shares issued and outstanding Paid in Capital in excess of stated value Total Legal Capital Ex 4. Subscription Receivable – ordinary share (5,000 x P58) Subscribed ordinary share (5,000 x P50) Paid in capital in excess of stated value-ordinary

250,000

P2,065,000

P2,500,000 1,750,000 P 750,000 3,750 154,000

167,750 P2,982,750 81,000 P3,063,750

P 1,815,000 500,000 750,000 154,000 P3,219,000 290,000 250,000 40,000

Cash (290,000 x .25) Subscription Receivable – ordinary share

72,500

Cash Subscription Receivable-ordinary shares

108,750

Cash Subscription Receivable-ordinary shares

54,375

72,500

108,750

54,375

Subscribed Ordinary Shares Ordinary Share Capital

125,000 125,000

Due from Highest Bidder Subscription Receivable-Ordinary Shares Cash 54,375 +.18 x 2.5/12) Cash Due from Highest Bidder Interest Income

59,375 54,375 5,000 61,414 59,375 2,039

Subscribed Ordinary Shares Ordinary Share Capital

125,000 125,000

Two Certificates: Jose Villa for 1,000 shares and Adela for 1,500 shares Ex. 5. Ordinary Treasury Shares Due form Highest Bidder

59,375 59,375

Subscribed Ordinary Shares Ordinary Shares

125,000 125,000

6. Journal Entries: 2012 Jan 1 Authorized to issue 50,000 common shares at P100 par value Subscription Receivable-Ordinary Subscribed Ordinary Share Capital Ordinary Share Premium

31

1,250,000 1,000,000 250,000

Cash Subscription Receivable- Ordinary Shares

312,500

Cash Subscription Receivable-Ordinary Shares

890,625

Subscribed Ordinary Share Capital

950,000

46

312,500

890,625

Ordinary Share Capital

7. a) June 10

15

20

25

950,000

Due from Highest Bidder Subscription Receivable – Ordinary Cash

48,250

Cash Due from Highest Bidder

48,250

Subscribed Ordinary Share Capital Ordinary Share Capital

50,000

Treasury Shares Cost (500 x P80) Cash Reacquired 500 shares.

40,000

Cash Treasury Shares (100 x P80) Additional Paid In Capital – Treasury Shares

10,000

46,875 1,375

48,250

50,000

40,000

8,000 2,000

Cash (150 x P60) Additional Paid In Capital-treasury shares Retained Earnings Treasury Shares (150 x P80)

9,000 2,000 1,000 12,000

Ordinary Share Capital (175 x P100) Treasury Shares (175 x P80) Additional Paid In Capital – Stock retirement

17,500 14,000 3,500

Shareholders’ Equity Ordinary Shares, par 100, issued 9,825 of which 100 shares are in the treasury Paid In Capital from Stock Retirement Retained Earnings Free P1,193,000 Appropriated for Treasury Shares 6,000 Total Less Treasury Shares (75 shares) Ex. 8. Aug 12

Aug 20

Aug 31

Cash (1,500 x 55) Retained Earnings Treasury Shares (1,500 x 60)

82,500 7,500

Cash (1,500 x 62) Paid In Capital from Treasury Shares Treasury Shares (1500x P60)

93,000

Ordinary Shares (500 x 50) Share Premium Paid in Capital from Treasury Shares Treasury Shares

25,000 3,378 1,622

P982,500 3,500

1,199,000 2,185,000 (6,000) P2,179,000

90,000

3,000 90,000

30,000

Shareholders’ Equity: Ordinary Shares, 18,000 issued Share Premium Paid in capital from treasury shares Retained Earnings

P900,000 121,622 1,378 4,492,500

Ex. 9. June 5

30

Preference Share Capital Paid In Capital in Excess of Par Retained earnings Cash

50,000 5,000 20,000

Preference Share Capital Cash Paid In Capital from Stock Retirement

50,000

75,000

47

45,000 5,000

Shareholders’ Equity Redeemable Preference Share, P100 par, 4,000 issued and outstanding Preference Share Premium Paid In Capital from Stock Retirement Retained Earnings Total Shareholders’ Equity 10. NOVA Corp. Journal Entries: a) July 1 Ordinary Share Capital (5,000 x P15) Cash (5,000 x P15) b) Dec. 1

Ordinary Share Capital Cash (4,000 x P8.50)

June 12

75,000

34,000

24,000 24,000

Cash (P14 x 1000) Treasury Shares (1000 x P12) Paid In Capital from Treasury Shares Cash (P11 x 500) Paid in capital – Treasury Shares Treasury Shares (500 x P12)

14,000 12,000 2,000 5,500 500 6,000

July 25

Memorandum entry: received from Shareholders 100 shares as donated stock.

Aug. 1

Cash (P15 x 1000) Paid in Capital from Donated Shares

15,000

Treasury Shares Merchandise Inventory

20,000

Nov. 1

Dec. 5

10

b)

75,000

34,000

11. NINA Corporation: a) journal Entries Mar 10 Treasury Shares Cash (2000 x 12) May 15

P 400,000 45,000 5,000 80,000 P530,000

15,000 20,000

Cash (P15 x 500) Treasury Shares Paid In Capital from Treasury Shares

7,500

Ordinary Shares (P10 x 500) Share Premium Capital (5,00/200,000 x 100,000) Treasury Shares Paid In Capital – Stock Retirement

5,000 2,500

Retained Earnings Appropriated for Treasury Shares

15,000

Retained Earnings Income and Expense Summary

50,000

5,000 2,500

6,000 1,500

15,000

50,000

NINA Corp. Shareholders’ Equity Section As of Dec. 31, _ Capital stock. Par P10,issued 199,500 of which1,500 are in the treasury Additional paid In Capital Share Premium Donated Capital Paid In From treasury Shares Paid in From Stock Retirement Retained Earnings Appropriated for Treasury Shares Unappropriated Total Less Treasury Shares ( 1,500 at cost )

48

P1,995,000

P 97,500 15,000 4,000 1,500 15,000 535,000

118,000

550,000 2,663,000 15,000 P2,648,000

12.

PINOY CORP SHAREHOLDERS’ EQUITY SECTION Dec. 31, 2012 Paid In Capital 18% Preference Share Capital, par value of P100 authorized 10,000 shares, issued and outstanding, 8,000 shares Subscribed Preference Share Capital Less Subscription Receivable, Preference Share

P 800,000 P100,000 40,000

Ordinary Share Capital, no par, authorized 25,000 shares Stated value of P100, issued 15,000 shares of which 1,000 shares are in the treasury Subscribed Ordinary Share Capital P50,000 Less Subscription Receivable, Ordinary share 20,000 Total Additional Paid in Capital Premium on Preference Shares Paid In Capital in Excess of Stated Value Donated Capital

60,000

P1,500,000 30,000

P 10,000 15,000 75,000

Retained Earnings Unappropriated Retained Earnings Appropriated Retained earnings for Treasury Shares Total Less Treasury Shares (at Cost) 1,000 ordinary shares Total Shareholders’ Equity 13.

P 45,000 120,000

Preference Shares 50,000 shares 17,000 shares 33,000 shares 17,000 shares 2,000 shares 31,000 shares*

Authorized number of shares Issued Shares Unissued Shares Issued and outstanding shares Subscribed Shares Still available for subscription Unissued Subscribed

P 860,000

1,530,000 P2,390,000

100,000

165,000 P2,655,000 120,000 P2,535,000

Ordinary Shares 10,000 shares 5,000 shares 5,000 shares 4,500 shares 0 5,000 shares

33,000 2,000 31,000

Legal Capital Preferred Stock, issued Preferred Stock, Subscribed Common Stock, issued Paid in capital in excess of stated value Total

P1,700,000 200,000 500,000 55,000 P2,455,000

14. 1) Journal Entries 2014 Jan. 10

Cash Subscription Receivable-Preference Shares Subscribed Preference Share Redeemable preference Share

20

31

Feb 8

75,000 100,000 100,000

Due from highest Bidder Subscription Receivable

75,000 75,000

Due from Highest Bidder Cash 25

75,000

5,500 5,500

Cash Interest Income Due from highest Bidder

81,250 750 80,500

Subscribed Preference Shares Redeemable Preference shars

100,000

Land Redeemable Pref Shares (2,000 x P100) Premium on Preference Shares

250,000

100,000

Cash Treasury Shares Paid In Capital from sale of Treasury Shares

49

200,000 50,000 45,000 36,000 9,000

20

28

March 1

Cash Unissued Ordinary Shares (500 x P100) Paid In Capital In Excess of Stated Value Redeemable Preference Share Capital Premium on Preference share(5/22 x 150,000) Retained Earnings Cash (5,000 x P120) Cash Paid In Capital from Treasury Shares Treasury Shares (100 x P120)

70,000 50,000 20,000 500,000 34,091 65,909 600,000 10,000 2,000 12,000

2) Shareholders’ Equity Section Paid In Capital Redeemable Preferred Stock, par P100, authorized 50,000 shares Authorized Common Stock, P100 stated value Less: Unissued Common Stock Total Additional Paid In Capital Premium on Preferred Stock Paid In Capital in Excess of Stated value Paid In Capital from Treasury Stock Total Less: Treasury Stocks (200 common shares) Total Stockholders’ Equity 3)

P1,600,000 P1,000,000 450,000

P315,909 75,000 7,000

Preference Share 50,000 16,000 34,000 16,000 34,000

Authorized number of shares Issued Shares Unissued shares Issued and outstanding Still available for subscription Legal Capital Preferred Stock, issued Common Stock, issued Paid In Capital in Excess of Stated Value Total

__550,000 P2,150,000

397,909 2,547,909 12,000 P2,535,909

Ordinary Share 10,000 5,500 4,500 5,000 5,000

P1,600,000 550,000 75,000 P2,225,000

CASE PROBLEM 1) Your right over the corporation will decrease 5,000/100,000 or 5% to 5,000/300,000 or 1.67% 2) You have to buy 5% of 200,000 or 10,000 shares. Total shares will be 15,000/300,000 will still be 5%. 3) Option price of P1,250 x 10,000 shares in P12,500,000.

50