Professional Documents
Culture Documents
THEORIES
PROBLEMS
Problem 1: (Equity components) The following data were compiled prior to preparing the statement of financial position of Conviction
Corporation.
Problem 2: (Lump sum issuance of shares) Parker Corporation has issued 2,000 ordinary shares and 400 preference shares for a lumpsum of
P72,000 cash.
Instructions
(a) Give the entry for the issuance assuming the par value of the ordinary shares was P5 and the fair value P30, and the par value of the
preference shares was P40 and the fair value P50. (Each valuation is on a per share basis and there are ready markets for each class of
shares.)
(b) Give the entry for the issuance assuming the same facts as (a) above except the preference shares have no ready market and the ordinary
shares have a fair value of P25 per share.
Problem 3: (Equity transactions) The following transactions relate to the stockholders’ equity transactions of Lindsay Corporation for its initial year
of existence.
a. Jan. 7 Articles of incorporation are filed with the state. The state authorized the issuance of 10,000 shares of P50 par value
preferred stock and 200,000 shares of P10 par value common stock.
b. Jan. 28 40,000 shares of common stock are issued for P14 per share.
c. Feb. 3 80,000 shares of common stock are issued in exchange for land and buildings that have an appraised value of P250,000
and P1,000,000, respectively. The stock traded at P15 per share on that date on the over-the-counter market.
d. Feb. 24 2,000 shares of common stock are issued to Shane and Winston, Attorneys-at-Law, in payment for legal services
rendered in connection with incorporation. The company charged the amount to organization costs. The market value of
the stock was P16 per share.
e. Sept. 12 Received subscriptions for 10,000 shares of preferred stock at P53 per share. A 40% down payment accompanied the
subscriptions. The balance is due on October 1.
f. Oct. 1 Received the final payment for 10,000 shares of preferred stock.
Required: Prepare journal entries to record the foregoing transactions. Identify the entries by letter (a-f).
Problem 4: (Conversion from preference share to ordinary share) The Policarpio Enterprises, Inc. had the following shareholders equity balances
at December 31, 2017:
REQUIRED: Journalize the conversion of 3,000 preference shares under each of the following independent assumptions:
1) Preference share is convertible into ordinary share on a share for share basis.
2) 2 shares of preference are convertible into one ordinary share.
Problem 5: (Watered Stocks) An entity issues 1,000 shares with par value per share of P100 for land with fair value of P80,000.
Problem 6: (Treasury share transactions): The original sale of the P50 par value ordinary shares of Gray Company was recorded as follows:
Cash------------------------------------------------------------------------------------------- 290,000
Instructions Record the treasury share transactions (given below) under the cost method:
Transactions:
Problem 7: The data below are from the December 31, 2008, balance sheet of the Handi Corner Corporation:
Retained earnings-------------------------------------------------------------------------------------------75,000
During 2009, the following transactions affecting corporate capital were recorded:
Required : Assuming the cost method is used for treasury stock and that retained earnings are to be reduced minimally in stock reacquisition
transactions, provide the entries required to record the above transactions.
Problem 8: (PIC Q and A 2011-4): ABC 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:
Problem 9: (Delinquent Subscription) You subscribed 1,000 shares of ABC Co. with par value of P100 per share for a total subscription price of
P120,000. After paying only P50,000, you defaulted on the remaining balance of the subscription on call date. Consequently, ABC declared your
subscription as delinquent.
After due consideration for cost, the board of directors of ABC declared by resolution an “offer price” of P80,000 comprising the unpaid balance of
P70,000, accrued interest of P2,000, and estimated selling costs of P8,000. The following are the bidders in the public auction with respective bids:
A 700 shares
B 650 shares
C 600 shares
Question 2: What if there are no bidders and ABC Co. is precluded under the Corporation Code from purchasing the shares due insufficiency of
retained earnings?
Case 1 : ABC Company received from a shareholder cash of P100,000 and land with fair value of P500,000 and historical cost of P300,000. No
conditions attached to the donation.
Case 2: ABC Company received 1,000 shares with par value of P100 and fair value of P120 per share from a shareholder as donation. Subsequently,
ABC Company reissues the 1,000 donated shares at P130 per share.
Case 3: ABC Company has 1,000 shares outstanding. The shareholders vote to provide P130 additional capital per share held.