Bonds

SHAREHOLDERS' EQUITY PROBLEMS STRAIGHT PROBLEM

2010, 18,000 ordinary shares were issued and outstanding. These shares had been issued at P24. During 2010, the company entered into the following transactions: Jan. 16 - Issued 1,300 ordinary shares at P25 per share. Mar. 21 - Exchanged 12,000 ordinary shares for a building. The ordinary shares were selling at P27 per share. May 7 - Reacquired 500 ordinary shares at P26 per share to be held in treasury. July 1 - Accepted subscriptions to 1,000 ordinary shares at P28 per share. The contract called for 10% down payment with the balance due on December 1. Sept. 20 - Sold 500 treasury shares at P29 per share. Dec. 1 - Collected the balance due on July 1 subscriptions and issued the shares.

The following data were compiled prior to preparing the statement of financial position of the Conviction Corporation. Authorized share capital, P100 par value Cash dividends payable Donated capital Gain on sale of treasury shares Net unrealized loss on available for sale securities Premium on share capital Premium on bonds payable Reserve for bond sinking fund Reserve for depreciation Revaluation increment on property Retained earnings, unappropriated Subscribe share capital Subscriptions receivables Share warrants outstanding Treasury shares, at cost Unissued share capital

P4,000,000 160,000 800,000 80,000 96,000 320,000 240,000 400,000 600,000 800,000 720,000 480,000 120,000 200,000 144,000 800,000

Total contributed capital for December 31, 2010 is a. P615,000 c. P613,500 b. P818,000 d. P816,500 4.

REQUIRED: Compute for the following: 1. Total share premium 3,200,000 2. Contributed capital 4,960,000 3. Appropriated retained earnings 544,000 576,000 unapp 4. Total shareholders’ equity 6,640,000 5. Legal capital 3,680,000

Preference share capital, P10 par, 100,000 shares Ordinary share capital, P10 par, 500,000 shares, Share premium - preference Share premium – ordinary Retained earnings

2.

Dayron Co. had 8,000 ordinary shares outstanding in January 2010. The company distributed a 15% share dividend in March and a 10% share dividend in June 2010. After acquiring 1,000 treasury shares in July 1, the company split its shares 4 for 1 in December 2010. How many ordinary shares are outstanding as of December 31, 2010? a. 36,480 c. 49,800 b. 48,800 d. 35,480 Helu Corporation was organized on January 1, 2010, with an authorization of 1,000,000 ordinary shares with a par value of P5 per share. During 2010, the corporation had the following equity transactions: Jan. 4 April 8 June 9 July 29 Dec. 31

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Issued 200,000 shares @ P5 per share. Issued 100,000 shares @ P7 per share. Issued 30,000 shares @ P10 per share Purchased 50,000 shares @ P4 per share. - Sold 50,000 shares held in treasury @ P8 per share.

What should be the total Share Premium as of December 31, 2010? a. P400,000 c. P500,000 b. P450,000 d. P550,000 3.

The N Corporation is authorized to issue 100,000 ordinary shares, P17 par value. At the beginning of

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P1,000,000 5,000,000 50,000 200,000 100,000

During 2010, the following transactions pertaining to the shareholders' equity were completed:  Retirement of 5,000 preference shares at P11 per share.  Purchase of 5,000 ordinary shares at P12 per share.  Share split, ordinary, 2 for 1.  Reissue of 2,000 treasury shares at P8 per share.  Profit for 2010, P300,000.

MULTIPLE CHOICE PROBLEMS 1.

The following balances are shown in the shareholders' equity of tamarind company on December 31, 2009:

The total shareholders' equity on December 31, 2010 is a. P6,556,000 c. P6,350,000 b. P6,551,000 d. P6,251,000 5.

The December 31, 2009 condensed balance sheet of Ambani Services, an individual proprietorship, follows: Current assets Equipment (net)

P140,000 130,000 P270,000

Liabilities Mukesh Ambani, Capital

P 70,000 200,000 P270,000

Fair values at December 31, 2009 are as follows: Current assets Equipment Liabilities

P160,000 210,000 70,000

On January 2, 2010, Ambani Services was incorporated with 5,000, P10 par value, ordinary shares issued. How much should be credited to share premium? a. P320,000 c. P230,000 b. P250,000 d. P200,000

6.

On December 1, 2010, Gates Corp. received a donation of 2,000 shares of its P5 par value ordinary shares from a shareholder. On that date, the share’s fair value was P35 per share. The share was originally issued for P25 per share. By what amount would this donation cause total shareholders’ equity to decrease? a. P70,000 c. P20,000 b. P50,000 d. P 0

Use the following information for the next two questions. On March 1, 2010, Mall Company issued 60,000, P50 par value, ordinary shares and 20,000, P100 par value, preference shares for a total consideration of P7,500,000. At this date, the ordinary share was selling for P100 per share and the preference share was selling for P150 per share. 7.

What amount of the proceeds should be allocated to the preference shares? a. P2,000,000 c. P1,875,000 b. P2,500,000 d. P3,000,000

8.

What amount of the proceeds should be allocated to the preference shares, if the shares are redeemable at the option of the holder after 5 years? a. P2,000,000 c. P1,875,000 b. P2,500,000 d. P3,000,000

9.

On December 31, 2010, Palau Company issued 200,000 shares of P100 par, 10% cumulative preference shares for P25,000,000. One detachable warrant was attached to each preference share issued. Each warrant gives the holder the right to purchase one ordinary share, P50 par value, for P100. The market value of the warrant after the preference

shares were issued was P15. The warrants expire on December 31, 2011. The proceeds to be allocated to the preference shares on December 31, 2010 is a. P25,000,000 c. P21,000,000 b. P22,000,000 d. P20,000,000 10. Entity B issued (written) a call option that gives holder the right to purchase 10,000 shares of entity for a fixed price of P100 per share. If proceeds from issuing the call option is P90,000, entity’s equity should increase by a. P1,000,000 c. P90,000 b. P1,090,000 d. P 0

the the the the

11. Entity C purchased a call option that gives the entity the right to repurchase 1,000 shares of the entity for a fixed price of P100 per share. If the price for purchasing the call option is P9,000, the entity’s equity should decrease by a. P100,000 c. P9,000 b. P190,000 d. P 0 12. On January 1, 2010, Entity D enters into a forward contract that requires the entity to repurchase 1,000 shares for P60,000 on December 31, 2010. No consideration is paid or received at the inception of the contract. The market interest rate is 10% on January 1, 2010 and 12% on December 31, 2010. The forward contract decreased Entity D’s equity on January 1, 2010 by a. P60,000 c. P53,574 b. P54,546 d. P 0 - now do the DIY drill -

DO-IT-YOURSELF (DIY) DRILL 1.

The equity section of Buffett Company revealed the following information on December 31, 2010: Preference share capital, P100 par Share premium-preference shares Ordinary share capital, P50 Share premium-ordinary shares Subscribed ordinary share capital Retained earnings-appropriated Unrealized loss on available for sale securities Subscription receivable-ordinary shares Retained earnings- unappropriated Treasury shares-ordinary

On July 15, 2009, it issued 10,000 shares at P23 per share. On October 15, 2009, the Beauty Corp. paid to the majority shareholder the sum of P80,000 for a certain parcel of land; and issued 5,000 ordinary shares for the building on the land. The land was appraised at P130,000. The building has a cost of P150,000 and its depreciated value is P90,000. It was appraised at P120,000.

P5,000,000 2,000,000 3,200,000 500,000 800,000 250,000

On April 15, 2010, the corporation purchased 5,000 of its own ordinary shares for P100,000. On June 15, 2010, 2,000 of the treasury shares were sold at P24 per share.

600,000 400,000 3,500,000 1,000,000

How much is the total share premium of Beauty Corp. on June 30, 2010? a. P108,000 c. P 58,000 b. P 88,000 d. P100,000

How much is the contributed capital of Buffett Company as of December 31, 2010? a. P10,100,000 c. P11,100,000 b. P11,500,000 d. P10,500,000

3.

2.

On July 1, 2009, the Beauty Corporation was registered with the SEC. Its authorized share capital consists of 100,000 ordinary shares with par value P20.00 per share.

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ATC Company issued all of its outstanding shares for P150 in 2008. On January 10, 2009, ATC acquired 100,000 treasury shares at P120 per share. ATC reissued 50,000 treasury shares for P7,500,000 on June 30, 2010 and retired the rest on December 31, 2010. ATC’s equity accounts as at December 31, 2009 follow:

Share capital, P100 par value Share premium Retained earnings Total

P150,000,000 75,000,000 25,000,000 P250,000,000

5.

Anil Company was organized on January 1, 2008. On that date it issued 500,000, P10 par value, ordinary shares at P15 per share. During the period January 1, 2008 through December 31, 2010, Anil reported profit of P3,000,000 and paid cash dividends of P500,000. On January 5, 2010, Anil purchased 50,000 ordinary shares at P20 per share. On December 31, 2010, 45,000 treasury shares were sold at P30 per share and retired the remaining treasury shares. What is the total shareholders’ equity on December 31, 2010? a. P10,350,000 c. P10,250,000 b. P10,850,000 d. P10,500,000

6.

Pudtol Corporation was organized on January 3, 2010. Pudtol was authorized to issue 50,000 ordinary shares with a par value of P10 per share. On January 4, Pudtol issued 30,000 ordinary shares at P25 per share. On July 15, Pudtol issued an additional 10,000 shares at P20 per share. Pudtol reported income of P33,000 during 2010. In addition, Pudtol declared a dividend of P.50 per share on December 31, 2010. The amount reported on Pudtol Corporation's December 31, 2010, balance sheet as shareholders' equity was a. P400,000 c. P550,000 b. P950,000 d. P963,000

7.

Tekka Corporation was incorporated on June 1, 2010 with an authorized 200,000, no-par, ordinary shares, stated value P10 and 10,000, 9% par value P30, preference shares. Transactions affecting company’s equity as of July 31, 2010 were as follows:

What shall be the balance of share capital account on December 31, 2010? a. P140,000,000 c. P145,000,000 b. P144,000,000 d. P150,000,000 4.

The capital accounts of Kamprad, Inc. on December 31, 2009, were as follows: Preference share capital, 20,000 shares, P20 par Share premium - preference Ordinary share capital, 50,000 shares, P80 par Share premium – ordinary Retained earnings

P 400,000 160,000 4,000,000 600,000 360,000

During the year ending December 31, 2010, the following summarizes the transactions affecting the shareholders’ equity April 30 - 1,000 preference shares were retired at P25 per share. June 15 - 2,000 treasury shares, ordinary, were purchased at P85 per share June 30 - A two-for-one ordinary share split was declared. July 31 - 800 treasury shares were reissued at P50 per share. Dec. 31 – Profit for 2010 was P300,000. What was the total share premium on December 31, 2010? a. P760,000 c. P755,000 b. P766,000 d. P761,000

June 1 June 5 June 15 June 25

50,000 ordinary shares were issued at P10. Assets with a total appraised value of P600,000 were acquired in exchange for 50,000 ordinary shares. Subscriptions were received for 100,000 ordinary shares at P15 and for 5,000 preference shares at P35. Payments in full for the ordinary and preference shares subscribed June 15 were received and the corresponding shares were issued.

The total shareholders’ equity as of July 31, 2010 is a. P2,875,000 c. P2,750,000 b. P2,300,000 d. P2,775,000

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