EXERCISES

A. For the last three years, Tala Corporation paid the following cash dividends:
2017 – P 500,000; 2018 – P 700,000; 2019 – P 1,300,000
During the last three years, capital accounts show the following number of shares outstanding:
12% Preference Shares, P 100 par 5,000 shares
Ordinary Shares, P 10 par 25,000 shares
Dividends are in arrears for two years at the beginning of 2017.

Required: Compute the amount of dividends that will be paid in total and per share on preference shares and
ordinary shares for each year under the following independent assumptions:
1. Preference shares are non-cumulative and non-participating
2. Preference shares are cumulative and non-participating
3. Preference shares are non-cumulative but participating
4. Preference shares are cumulative and participating
5. Preference shares are non-cumulative and but participating up to 18%.

B. The statement of financial position of Isabel Inc., as of December 31, 2019 showed the following shareholders’
equity accounts:
Ordinary Share Capital, P 30 par, 75,000 shares outstanding P 2,250,000
Ordinary Share Premium 1,000,000
Retained Earnings 3,500,000

During 2019, the following dividend distributions were made:

Mar 1 Declared a cash dividend of P 5 per share payable on April 3 to shareholders of record of March 15.
Sept 1 Declared a 10% share capital dividend distributable on October 15 to shareholders of record of
September 30. Stocks are selling on this date at P 50 per share.

Required: Journalize the declaration and distribution of each of the above transactions.

C. Annakel Corporation has 600,000 shares of P 40 par Ordinary Share Capital outstanding as of June 1,2019. On
this date, the Board of Directors declared a bonus issue (share dividend) distributable on July 20, 2018 to
shareholders of record of June 30. The market price of each share is P 55 on June 1, P 53 on June 30, and P 70
on July 20.

Required: Prepare the journal entries to record the declaration and distribution of share dividend assuming:
1) The bonus issue is 15%
2) The bonus issue is 25%
3) 72,000 shares were declared as bonus issue

D. The Bucks Corp.’s shareholders’ equity section showed the following balances:
Ordinary Share Capital, P 50 par, 5,000 shares outstanding P 250,000
Ordinary Share Premium 40,000
Retained Earnings 300,000

The Board of Directors made the following dividend declarations during the year:
May 31 A cash dividend of P 10 per share payable on June 30 to shareholders of record on June 15.
Sept 30 Shares of Heat Corporation owned by Bucks Corporation were declared as dividends to
shareholders of record on October 15 to be distributed on October 31. Two shares of Heat
Corporation’s stock will be distributed for every share of Bucks Corporation’s stock owned. Heat’s
shares have a carrying value of P 40 per share. On October 15, Heat’s shares were selling at P 55.
 On October 31, market value per share is P 53.
Oct 31 A 30% bonus issue (share dividend) distributable on December 15 to shareholders of record on
November 30. Shares are selling at P 60 on this date.

Required: Journalize the declaration and distribution of each of the above transactions.

E. The adjusted trial balance of Celtics Corporation on December 31, 2019 includes the following account
balances:
Cash Dividends payable P 20,000
Income Tax Payable 50,000
Ordinary Share Capital,P 20 par value, 150,000 shares authorized 2,400,000
Ordinary Shares Subscribed, 4,000 shares 80,000
Ordinary Share Premium 240,000
10% Preference Share Capital, 50,000 shares authorized, 24,000 shares outstanding 1,200,000
Preference Share Premium 120,000
Retained Earnings Appropriated for Contingencies 100,000
Retained Earnings Appropriated for Plant Expansion 150,000
Retained Earnings-Unappropriated 600,000
Ordinary Share Dividend Distributable 350,000
Paid in Capital from Share Dividends 130,000
Pre-operating Costs 25,000

Required: Prepare the Shareholders’ Equity section as it would appear on the Statement of Financial Position

F. The Andeng Corporation was organized on January 2, 2018 with 500,000 Ordinary shares authorized with a par
value of P 20 per share. The following transactions took place during the first two years of its operations.
2018
Jan 2 Issued 125,000 shares to the incorporators at P 25.
Mar 2 Issued 62,500 shares at P 40
Mar 31 Issued 25,000 shares in exchange for land valued at P 300,000 and a building valued at P 500,000.
Dec 31 The operation of the corporation resulted in a P 950,000 profit for the year ended December 31,
2018.
31 The board of directors declared a cash dividend of P 2.50 per share payable on January 31, 2018 to
shareholders of record of January 15, 2019.
2019
Jan 31 Paid dividends declared on December 31, 2018.
Feb 14 Received subscriptions for 50,000 shares at P 50, with a down payment of 30% of total
subscriptions.
Feb 28 Collected 40% of the subscriptions balance of Feb 14.
Mar 20 Collected balance due from the Feb 14 subscriptions and issued the stock certificates.
Dec 31 The operation of the corporation resulted in a P 2,500,000 profit for the year ended December 31,
2019.
31 Declared a cash dividend of P 2.00 per share and a 15% share dividend payable on January 31, 2020
to shareholders of record of January 15, 2020. On this date shares are selling at P 35 per share.

Required: 1. Journalize the above transactions.

2. Prepare the shareholders’ equity section of the statement of financial position of Dior
Corporation as of December 31, 2019.
3. Prepare the statement of changes in shareholders’ equity for the year ended December 31, 2019.
G. Anthor Corporation’s statement of financial position shows total shareholders’ equity of P 3,000,000 as of
December 31, 2019. Compute the book value per share of each class of share capital under each of the
following independent cases:

1. The corporation has only one share class of shares outstanding: 325,000 Ordinary shares with a par
value of P 25.
2. The corporation has two classes of shares outstanding: 15,000 shares of P 100 par value Preference
share capital with a liquidation value of P 120 per share and 125,000 shares of P 20 par ordinary share
capital.

H. The Jazz Corporation has 250,000 ordinary shares authorized, P 20 par value. As of December 31, 2019, 60,000
shares are outstanding. Compute the earnings per share assuming the corporation has a profit of:
a. P 10,000 b. P 70,000 c. P 90,000 d. P 150,000 e. P 180,000

I. The shareholders' equity of Clippers Corporation as of December 31, 2019 showed the following balances:
Ordinary Share Capital, P 10 par, 150,000 shares P 1,500,000
10% Preference Share Capital, P 25 par, 5,000 shares 250,000
Preference Share Premium 150,000
Ordinary Share Premium 200,000
Retained Earnings 200,000
Total Shareholders’ Equity P 2,300,000

Compute the book value per share on the preference and ordinary shares under each of the following
assumptions.
1. Preference shares have a liquidation value of P 30 per share; there are no dividends on arrears.
2. The preference shares are cumulative with dividends in arrears for 5 years (including the current
year). Upon corporation liquidation, shares are preferred to assets up to par.
3. Using data in no. 1, compute the earnings per share assuming that the profit of the corporation is
a. P 20,000 b. P 75,000 c. P 120,000 d. P 300,000

J. The Jomel Corporation has the following information relating to its share capital

8% Preference Shares, cumulative, P 50 par value,

300,000 shares authorized, 40,000 shares outstanding P 2,000,000

Ordinary Shares, P 20 par value, 500,000 shares authorized,

150,000 shares outstanding 3,000,000

Compute the earnings per share assuming that the corporation reported a profit of P 950,000 as of December
31, 2019.