Stockholder’s Equity

Problem 1

Authorized common stock, P100 par value P4, 000,000

Cash Dividends Payable 160,000
Donated Capital 800,000
Gain on sale of Treasury Stock 80,000
Net Unrealized loss on available for sale securities 96,000
Premium on capital stock 320,000
Premium on bonds payable 240,000
Reserve for bond sinking fund 400,000
Reserve for depreciation 600,000
Revaluation increment on property 800,000
Retained Earnings- unappropriated 720,000
Subscribed Capital Stock 480,000
Stock Subscription Receivables 120,000
Stock warrants outstanding 200,000
Treasury stock, at cost 144,000
Unissued common stock 800,000
Share Dividends (small share dividends) 135,000
Excess over par- share dividends 75,000

REQUIRED:

1. Common stock issued

2. Additional-paid-in-capital
3. Appropriated Retained Earnings
4. Total shareholder’s Equity
5. Legal Capital

Problem 2

Following is the stockholders’ equity section of Tenacity Corporation’s balance sheet at

December 31, 2004:

Common stock, P10 par value; authorized 1,500,000

shares; issued and outstanding 900,000 shares P9,000,000
Additional paid-in capital 750,000
Retained earnings 2,700,000
Total stockholders’ equity P12,450,000

Transactions during 2005 and other information relating to the stockholders’ equity accounts were
as follows:

 On January 26, Tenacity reacquired 75,000 shares of its common stock for P11 per share.
 On April 4, Tenacity sold 45,000 shares of its treasury stock for P14 per share.
 On June 1, Tenacity declared a cash dividend of P1 per share, payable on July 15, 2005 to
stockholders of record on July 1, 20
  On August 15, each stockholder was issued one stock right for each share held to purchase
three additional shares of stock for P12 per share. The rights expire on October 31, 2005.
 On September 30, 150,000 stock rights were exercised when the market value of the stock
was P12.50 per share.
 On November 2, Tenacity declared a two for one stock split-up and charged the par value of
the stock from P10 to P5 per share. On November 20, shares were issued for the stock split.
 On December 5, 60,000 shares were issued in exchange for a secondhand equipment. It
originally cost P600, 000, was carried by the previous owner at a book value of P300, 000,
and was recently appraised at P390, 000.

 Net income for 2005 was P720, 000.

REQUIRED:
1. Common stock issued
2. Additional-paid-in-capital
3. Unappropriated Retained Earnings
4. Total shareholder’s Equity

Problem 3

With your representation, as Managing Partner of the Sy Pee Ey & Co., your firm was engaged in the
audit of the Fortitude Company at the close of the company’s first year of operations on December
31, 2005. The company closed its books prior to the time you began your year-end fieldwork.

Your audit and review showed the following stockholders’ equity accounts in the general ledger:
Common Stock
08/30/05 CD P550,000 01/02/05 CR P6,000,000
12/29/05 J 545,000

Retained Earnings
12/29/05 J P545,000 12/01/05 CR P287,500
12/31/05 J 4,000,000

Income Summary
12/31/05 J P26,000,000 12/31/05 J P30,000,000
12/31/05 J 4,000,000

Based on the other working papers submitted by your audit staff, the following additional information
was forwarded:
From the Articles of Incorporation of Fortitude Company:

 Authorized capital stock – 150,000 shares

 Par value per share – P100

From the board of directors’ minutes of meetings, the following resolutions were extracted:

 01/02/05 – authorized the issuance of 50,000 shares at P120 per share.

 08/30/05 – authorized the acquisition of 5,000 shares at P110 per share.
 12/01/05 – authorized the re-issuance of 2,500 treasury shares at P115 per share.
 12/29/05 – Declared a 20% stock dividend, stockholders on record as of January 15,
2006, payable January 31, 2006, to The market value of the stock on December 29,
2005 was P130 per share.

REQUIRED:
1. Prepare adjusting entries as of December 31, 2005.
 2. Based on the above and the result of your audit, determine the adjusted balances of
the following as of December 31, 2005.

 Capital Stock
 APIC
 Total Retained Earnings
 Treasury Stock
 Total Shareholder’s Equity

Problem 4

Resolve Corporation began operations on January 1, 2005. The company was authorized
to issue 60,000 shares of P10 par value common stock and 120,000 shares of 10%, P100
par value convertible preferred stock.

In connection with your audit of the company’s financial statements, you noted the following
transactions involving stockholders’ equity during 2005:

Jan. 1 Issued 1,500 shares of common stock to the corporation promoters in

exchange for property valued at P510,000 and services valued at
P210,000. The property costs P270,000 3 years ago and was carried on
the promoters’ books at P150,000.

Jan. 31 Issued 30,000 shares of convertible preferred stock at P150 per share.
Each share can be converted to five shares of common stock. The
corporation paid P225,000 to an agent for selling the shares.

Feb. 15 Sold 9,000 shares of common stock at P390 per share. The corporation
paid issue costs of P75,000.

May 30 Received subscriptions for 12,000 shares of common stock at P450 per
share.

Aug. 30 Issued 2,100 shares of common stock and 4,200 shares of preferred
stock in exchanged for a building with a fair market value of P1,200,000.
The building was originally purchased for P1,140,000 by the investors
and has a book value of P660,000. In addition, 1,800 shares of common
stock were sold for P720,000 cash.

Nov. 15 Payments in full for half of the subscriptions and partial payments for the
rest of the subscriptions were received. Total cash received was
P4,200,000. Shares of stock were issued for the fully paid subscriptions.

Dec. 1 Declared a cash dividend of P10 per share on preferred stock, payable
on December 31 to stockholders of record on December 15, and P20
per share cash dividend on common stock, payable on January 15, 2006
to stockholders of record on December 15.

Dec. 31 Paid the preferred stock dividend.

Net income for the first year of operations was P1,800,000.

REQUIRED:

1. Common Stock
2. APIC- preferred Stock
3. APIC-common stock
4. Retained Earnings
5. Total Shareholder’s Equity

Problem 5

The stockholders equity of Willpower Corporation showed the following data on

December 31, 2004:

12% preferred stock, P30 par, 135,000 shares issued and outstanding P4,050,000
Common stock, P50 par, 180,000 shares issued and outstanding 9,000,000
Premium on preferred stock 1,080,000
Premium on common stock 3,240,000
Retained earnings 1,395,000

The 2005 transactions of the company affecting its stockholders’ equity are summarized
chronologically as follows:

1. Issued 27,000 shares of preferred stock at P40.

2. Issued 64,500 shares of common stock at P70.
3. Retired 5,400 shares of preferred stock at P45.
4. Purchased 13,500 shares of its common stock at P80.
5. Reissued 13,500 shares of treasury stock – common at P50.
6. Split common stock two for one (par value reduce to P25).
7. Stockholders donated to the company 9,000 shares of common stock when shares
had a market price of P52. One half of these shares were subsequently issued for
P54.
8. Dividends were paid at the end of the calendar year on the common stock at P2 per
share and on the preferred stock at the preferred rate.
9. Net income for the year was P2, 520,000.
REQUIRED:

1. Preferred Stock
2. Common Stock
3. APIC
4. Total Retained Earnings
5. Total SHE

Problem 6

Grit Corp., organized on June 1, 2004, was authorized to issue stock as follows:

 800,000 shares of 9% preferred stock, convertible, P100 par

 2,500,000 shares of common stock, P24 stated value

During the remainder of the fiscal year ended May 31, 2005, the following transactions were
completed in the order given:
  300,000 shares of preferred stock were subscribed for at P105, and 900,000 shares
of common stock were subscribed for at P26. Both subscriptions were payable 30%
upon subscription, the balance in one payment.

 The second subscription payment was received, except one subscriber for 60,000
shares of common stock defaulted on payment. The full amount paid by this
subscriber was returned, and all of the fully paid stock was issued.

 150,000 shares of common stock were reacquired by purchase at P28.

 Each share of preferred was converted into four shares of common stock.

 The treasury stock was exchanged for machinery with a fair market value of P4,
300,000.

 There was a 3-for-1 stock split,

 Net income was P830,000.

REQUIRED:
1. Common Stock
2. Total APIC
3. Total Contributed Capital
4. Total Shareholder’s Equity