Shareholders Equity- Problems

FAR-SHAREHOLDERSEQUITY

The following data were compiled prior to preparing the statement of financial position of the Conviction Corporation. Authorized share capital, 100 par value 4,000,000 Unissued share capital 800,000 Subscribe share capital 480,000 Subscriptions Receivable 120,000 Premium on share capital 320,000 Premium on bonds payable 240,000 Gain on sale of Treasury shares 80,000 Donated capital 800,000 Share warrants outstanding 200,000 Reserve for bond sinking fund 400,000 Reserve for Treasury shares 144,000 Reserve for depreciation 600,000 Treasury Shares, at cost 144,000 Retained earnings, unappropriated 576,000 Cash dividend payable 160,000 Revaluation increment on property 800,000 Net unrealized loss on available for sale 96,000 Securities REQUIRED: Compute for the Following: 1. 2. 3. 4. 5.

Total Share premium Contributed capital Appropriated retained earnings Total shareholders’ equity Legal Capital

MULTIPLE CHOICE PROBLEMS 1. Helu Corporation was organized on January 1, with an authorization of 1,000,000 ordinary shares with a par value of P5 per share. During the year, the corporation had the following equity transactions: Jan. 4 - issued 200,000 shares @ P5 per share. Apr 8 - Issued 100,000 shares @ P7 per share. June 9 - Issued 30,000 shares @ P10 per share. July 29 - Purchased 50,000 shares @ P4 per share. Dec 31 - Sold 50,000 shares held in treasury @ P8 per share

What should be the total Share premium as of December 31? a. P400, 000 c. P500,000 b. P450, 000 d. P550,000 2. The December 31, 2019 condensed balance sheet of Ambani Services, an individual proprietorship, follows: Current assets P140, 000 Equipment (net) P130, 000 P270, 000 Liabilities Ambani, Capital

P 70, 000 P200, 000 P270, 000 Fair values at December 31, 2019 are as follows: Current assets P160, 000 Equipment P210, 000 Liabilities P70, 000 On Jan 2, 2020, Ambani services was incorporated with 5,000, P10 par value, ordinary shares issued. How much should be credited share premium? a. P320, 000 c. P230,000 b. P250, 000 d. P200,000 3. 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. 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

4. Cove Corp. issued 6% bonds with a maturity value of P6,000,000, together with 100,000 shares of its P5 par value ordinary shares, for a combined cash amount of P11,000,000. The market value of Coves shares cannot be ascertained. If the bonds were issued separately, they would have sold for P4,000,000 on an 8% yield to maturity basis. What amount should Cove report for share premium on the issuance of the shares? a. P7,000,000 c. P5,000,000 b. P6,500,000 d. P4,500,000

Retained earnings Total 5. 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 proceeds to be allocated to the preference shares is a. P25,000,000 c. P21,000,000 b. P22,000,000 d. P20,000,000 6. Gates Corp. received a donation of 2,000 shares of its P5 par value ordinary shares from a shareholder. On that date, the shares 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 7. The N corporation is authorized to issue 100,000 ordinary shares, P17 par value. At the beginning of the year, 18,000 ordinary shares were issued and outstanding. These shares had been issued at P24. During the year, 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 P25 per share to held in treasury. July 1 - Accepted subscription to 1,000 ordinary shares at P28 per share. The contract called for 10% down payment with the balance due on june 30 next year. Sept. 20 – Sold 500 treasury shares at P29 per share. Total contributed capital at December 31 is a. P615,000 c. P613,500 b. P818,000 d. P816,500 8. The following balances are shown in the shareholders equity of tamarind company on Dec 31 2018: Preference share capital, P10 par, 100,000 shares P1,000,000 Ordinary share capital, P10 par, 500,000 shares, 5,000,000 Share premium -preference 50,000 Share premium –ordinary 200,000

100,000 P6,350,000

During 2019, 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 to be held as treasury shares.  Share split, ordinary, 2 for 1  Reissue of 2,000 treasury shares at P8 per share.  Profit for 2019, P3,000,000 The total shareholders’ equity on December 31, 2019 a. P6,556,000 c. P6,350,000 b. P6,551,000 d. P6,251,000 9. The equity of Buffet Company revealed the following information on December 31, 2019: Preference share capital, P100 par P5,000,000 Share premium-Preference shares 2,000,000 Ordinary share capital, P50 3,200,000 Share premium – ordinary shares 500,000 Subscribed ordinary share capital 800,000 Retained earnings –appropriated 250,000 Unrealized loss on available for sale Securities 600,000 Subscription receivable- ordinary 400,000 Retained earnings –unappropriated 3,500,000 Treasury shares-ordinary 1,000,000 How much is the contributed capital of Buffet Company as of December 31, 2019 a. P10,100,000 c. P11,100,000 b. P11,500,000 d. P10,500,000 10. ATC Company issued all of its outstanding shares for P150 in 2017. On January 10, 2019, ATC acquired 100,000 treasury shares at P120 per share. ATC reissued 50,000 treasury shares for P7,500,000 on June 30, 2019 and retired the rest on December 31, 2019. ATC equity accounts as at December 31, 2019 follow: Share capital, P100 par value Share premium Retained earnings Total

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

What shall be the balance of share capital account on December 31, 2019 a. b.

P140,000,000 P144,000,000

c. P145,000,000 d. P150,000,000

11. Open Sesame Company undertakes an IPO for the listing and issuance of 700,000 new shares and 300,000 existing shares. In relation to this, the company incurred the following costs: Documentary stamp tax P25,000 Fairness opinion and valuation report 125,000 Tax opinion 75,000 Newspaper publication 200,000 Listing fee 300,000 Other joint costs 275,000 P1,000,000 How much should be recognize as Joint cost a. P475,000 c. P775,000 b. P1,000,000 d. P525,000 12. How much should be recognized in shareholders’ Equity a. P142,500 c. P442,500 b. P300,000 d.P557,500 13. How much should be recognized immediately in profit or loss in accordance with PIC Q&A 2011-4? a. P300,000 c. P525,000 b. P442,500 d. P557,500 14. On Jan. 1 2019 ABC Corp issued 10,000 callable preference shares with par value of P100 at P120 per share. On Dec. 31, 2019 preference shares are called in at P150 per share. How much is debited to retained earnings on December 31, 2019? a. P500,000 c. P200,000 b. P300,000 d. P 0 15. AB Corporation revealed the following information on Jan 1, 2019 Ordinary share capital, 10,000 shares, P100 par P1,000,000 Share premium-original issuance 200,000 Share premium-treasury shares 20,000 Retained earnings 500,000 Treasury shares, 2,000 shares at cost 300,000 On December 31, 2019 the treasury shares are reissued at P100 per share How much is charged to retained earnings? a. P20,000 c. P100,000 b. P80,000 d. P 0

16.

XYZ Corp had the following information Ordinary share capital, 50,000 shares at P100 par P5,000,000 Share premium-original issuance 500,000 Share premium- treasury shares 100,000 Retained earnings 1,000,000 Treasury shares. 5,000 shares at cost 750,000 Subsequently all treasury shares are retired. How much is the share premium from original issuance debited? a. P50,000 c. P150,000 b. P250,000 d. P 0