SOLUTION MANUAL

Unit 6

DELINQUENT SUBSCRIPTIONS

Exercise 6 1 Review Questions

1. A stock subscription is considered delinquent when a subscriber fails to pay his obligations after the corporation has sent several notices to him.
2. If a subscription is declared delinquent, the corporation can
a. Sue the delinquent subscriber , or
b. Sell the delinquent subscription in a public auction
3. The account Receivable from Highest Bidder is used to record related costs paid by the corporation in relation to the public sale.
4. The highest bidder is the one who is willing to pay the unpaid subscription plus any expenses incurred in connection with the delinquency sale and is willing to
receive the least number of shares.
5. If the corporation re-acquires the delinquent shares, the account Treasury Share is debited to record this transaction. Such shares are considered treasury
shares. All the delinquent shares will be issued in the name of the corporation.

Exercise 6- 2 True or False

1 True 6 False-lowest no. of shares

2 False-entitled to vote 7 False-only the shares he bided on
3 False-highest bidder 8 True
4 False- also include expenses 9 False- payment is forfeited
incurred in the bidding
5 False-Receivable from Highest 10 True
Bidder

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Journal Entries Short Method

A. Exercise 6 -4
1 Subscription receivable 20,000
Subscribed Share Capital 20,000

2 Cash 5,000
Subscription receivable 5,000

4 Receivable from Highest Bidder 2,500

Cash 2,500

6 Cash 17,500
Subscription receivable 15,000
Receivable from Highest Bidder 2,500

7 Subscribed Share Capital 20,000

Share Capital 20,000
Issued the following shares:
Gloria- 2,400 shares
Corazon 7,600 shares

B. Exercise 6 -4

1 Subscription receivable 20,000

Subscribed Share Capital 20,000

2 Cash 5,000
Subscription receivable 5,000

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 4 Receivable from Highest Bidder 2,500
Cash 2,500

6 Treasury Shares 17,500

Subscription receivable 15,000
Receivable from Highest Bidder 2,500

7 Subscribed Share Capital 20,000

Share Capital 20,000
Issued the 10,000 shares to the corporation.

Case analysis

Case 6-1
a. Carlo
b. P9,500
c. 25 shares
d. 75 shares

Case 6 - 2
a. zero

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b. 200 shares
c. P6,200