Corporation PDF

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Corporation - ....
Accounting (Far Eastern University)
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PROBLEM 2. ACCOUNTING FOR SHARE CAPITAL

Far East Corporation, a newly registered corporation had the following transactions during the year:
a) On January 2, Philippine SEC authorized the entity to issue 500,000 shares with par value of ten peso per
share.
b) The entity received subscription to 150,000 shares at par.
c) The entity collected 30% on the above subscription.
d) Received full payment for 90,000 shares originally subscribed.
e) The entity then issued the share certificates for 90,000 shares which were fully paid.
f) Received a cash subscription for 6,000 shares at par.
Memorandum Entry Method – IF THE PROBLEM IS SILENT, USE MEMO METHOD

a) The corporation was authorized to issue 500,000 shares with P10 par value.
b) Subscription Receivable 1,500,000
Subscribed Share Capital 1,500,000
(150,000 x P10)
c) Cash (1,500,000 x 30%) 450,000 initially paid
Subscription Receivable 450,000
d) Cash 630,000 eto pa yung babayaran niya kasi 270,000
Subscription Receivable 630,000 (30% na yung nabayaran out of 900,000)
e) Subscribed Share Capital 900,000
d) 90,000 shares + 60,000 shares = 150,000
Share Capital 900,000 x P10 x P10
f) Cash (6,000 x P10) 60,000 P900,000 + P600,000 = 1,500,000
Share Capital 60,000 x 30% x 30%
270,000 + 180,000 = 450,000
Journal Entry Method
a) Unissued Share Capital P5,000,000
Authorized Share Capital P5,000,000
(500,000 X P10)
b) Subscription Receivable 1,500,000
Subscription Share Capital 1,500,000
c) Cash 450,000
d) Cash 630,000
e) Subscribed Share Capital 900,000
UNISSUED SHARE CAPITAL 900,000
f) Cash 60,000
UNISSUED SHARE CAPITAL 60,000

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PROBLEM 3. ISSUANCE OF SHARE CAPITAL FOR CASH
1. With Par Value

Avalanche Corporation sold 20,000 ordinary shares of P100 par value for P130 per share.
Cash (20,000 x P130) 2,600,000

Ordinary Shares 2,000,000
Share Premium 600,000
2. Without Par Value
Vague Company sold 40,000 ordinary shares with stated value of P80 for P120 each.
Cash (40,000 x P120) 4,800,000

Share Premium 1,600,000
3. No Par, No Stated Value - walang share premium
Cash 4,800,000

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PROBLEM 4. ISSUANCE OF SHARES FOR NONCASH CONSIDERATION – hindi pera, but, land and
bldg. pinambayad.
a. Algeria Corp. issued 15,000 ordinary shares of P100 par value in exchange of for land and building with
total fair value of P2,000,000 of which 25% is attributable to the land.
2,000,000
x 25%
500,000 – Land
Land 500,000
Bldg 1,500,000
b. Nortek Corporation exchanged 25,000 shares of its P100 par value share for a land. A few months ago, the
land was appraised by an independent appraiser at P4,000,000. Nortek is currently trading at the Philippine
Stock Exchange (PSE) at P140 per share.
Land (25,000 x P140) 3,500,000

Ordinary Shares (25,000 X P100) 2,500,000
c. Atty. Pao received 1,000 ordinary shares of P100 par value from Secador Cop. after rendering legal
services in getting the corporation organized. The fair value of such services is reliably determined to be
P125,000.
Professional Fee/Organization Cost 125,000

Ordinary Shares (1,000 x P100) 100,000
d. Dientes Corp. issued 5,000 shares of its P100 par ordinary share to Atty. Harvey as compensation for 1,200
hours of legal services performed. Atty. Harvey usually bills P500 per hour for legal services. On this date of
issuance, the share was selling at a public trading at P140 per share.
Professional Fee 700,000

Ordinary Shares 500,000

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PROBLEM 5A. INCORPORATON OF A PROPRIETORSHIP
The December 31, 2013 condensed statement of financial position of Django Services, an individual
proprietorship, follows:
Current Assets P 150,000

Equipment (net) 140,000
P 290,000
Liabilities P 90,000
Djangco, Capital 200,000
P 290,000
Fair Values at December 31, 2013 are as follows:
Current Assets P 170,000 If given yung FMV, ‘yun yung

Equipment 200,000 gagamitin
Liabilities 90,000
On January 2, 2014, Djangco Services was incorporated with 5,500, P10 par value, ordinary shares issued.
To convert into corporation type:
Current Assets P 170,000

Equipment 200,000
Liability P 90,000
Share Capital 55,000

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PROBLEM 5B. ISSUANCE OF TWO CLASSES OF SHARES
2 FMV given
Hologram Corporation issued 20,000 shares of its P10 par value ordinary shares and 40,000 shares of its P10
par value preference share for a total amount of P1,800,000. At this date, Hologram’s ordinary shares was
selling P20 per share and the preference share was selling for P30 per share.
OS (20,000 x P20) 400,000 4/16 x P1,800,000 = 450,000
PS (40,000 x P30) 1,200,000 12/16 x P1,800,000 = 1,350,000

P 1,600,000 P 1,800,000
Cash 1,800,000
SP-OS (450,000 – 200,000) 250,000
Preference Shares (40,000 x P10) 400,000
SP-PS (1,350,000 – 400,000) 950,000
1 FMV given (OS only)

Preference Shares (40,000 x P30) 1,200,000
P1,800,000
Cash 1,800,000
SP-OS (20,000 x P30 – 200,000) 400,000
Preference Shares (40,000 x P10) 400,000
SP-PS (40,000 x P30 – 400,000) 800,000

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PROBLEM 6. ORGANIZATION COST – organizing a corporation

Harlem Corporation issued 50,000 ordinary shares with par value of P100 for P150 per share. Costs incurred
related to the issuance which were paid cash are as follows:
Org Cost Cost of drafting articles of incorporation and by laws P25,000

Org Cost Other legal costs 5,000 45,000
Org Cost Incorporation fees 15,000
Share Issuance Cost of printing share certificate 10,000
Share Issuance Other share issuance cost (cost of stock and 25,000 35,000
transfer book, seal of corporation, underwriting
fees and legal fees related to share issuance)
REMEMBER:
issued – fully paid = CASH
received subscription = Subscription Receivable
Subscribed Share Capital
a) Issuance of shares
Cash (50,000 x P150) 7,500,000

Ordinary Shares (50,000 x P100) 5,000,000
b) Incurrence of organization cost
Organization 45,000
Organization Cost – treated as Outright EXPENSE
Cash 45,000
SP-OS 35,000
Cash 35,000
c) IF Share Issuance = 35,000

IF SP-OS = 25,000
1) Cash 5,025,000
SP-OS 25,000
25,000 lang yung SP-OS mo, so need
2) Organization Cost 45,000 mong i-record sa RE yung remaining
Cash 45,000
SP-OS 25,000
Retained Earnings 10,000 RE = OTHER TERM = Accumulated P/L
Cash 35,000

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d) IF Ordinary Shares ONLY

IF Par ONLY
NO Share Premium
1) Cash (50,000 x P100) 5,000,000

2) Organization Cost 45,000

Cash 45,000
Retained Earnings 35,000
Cash 35,000

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PROBLEM 7. COMPUTATION OF LEGAL CAPITAL
w/ Par Value No Par Value, w/ Stated Value

Ordinary Share Ordinary Share
Preference Share Preference Share
Share Capital Share Capital
Subscribed – OS Share Premium – OS
Subscribed – PS Share Premium – PS
Subscribed – Share Capital Subscribed – OS
Subscribed – PS
Subscribed – Share Capital
CASE A – with Par Value

The shareholder’s equity of Lovely Company revealed the ff. information on December 31, 2012:
Preference share (P100 par), P2,500,000; share premium in excess of par-preference, P750,000; Ordinary
share (P10 par), P5,000,000; share premium in excess of par-ordinary, P2,800,000; Subscribed ordinary
share, P65,000; Accumulated P/L, P2,000,000; and Subscription receivable-ordinary, P350,000.
Preference Share 2,500,000

Ordinary Share 5,000,000
Subscribed Ordinary Share 65,000
P 7,565,000
CASE B – No Par, with Stated Value

The shareholder’s equity of Aranque Inc. revealed the ff. information on December 31, 2012:
Preference share (P80 stated value), P1,200,000; share premium in excess of stated value-preference,
P900,000; Ordinary share (P15 stated value), P3,000,000; share premium in excess of stated value-ordinary,
P2,800,000; Subscribed ordinary share, P80,000; Accumulated profits and losses, P1,950,000; and
Subscription receivable-ordinary, P200,000.
Preference Share 1,200,000

SP-PS 900,000
Ordinary share 3,000,000
SP-OS 2,800,000
Subscribed Ordinary Share 80,000
7,980,000

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PROBLEM 8. DELINQUENT SUBSCRIPTION AND HIGHES BIDDER
- Sa Subscription Contract nakalagay to what extent babayaran (eg. 1 year). If hindi nakabayad, ide-
declare niya yung share sa delinquent; iooffer yung share sa auction (bidding)
Macchiato Corp. had the following transactions with one of its subscribers during the year:
a) On January 2, Olive subscribes for 25,000 shares at par P50 to be paid within 60 days from the date
of subscription.
b) On February 28, Olive pays P750,000 of her subscription to the corporation.
c) On March 5, the corporation called Olive’s subscription balance but she defaulted. Consequently, the
subscription was declared to be delinquent. NO ENTRY if declared delinquent.
d) Macchiato paid P38,000 for expenses incurred in connection with the auction of the delinquent
shares. The offer price was P560,000 which includes the balance still due on the subscription, interest and
costs of the sale.
e) Three bidders offered to pay the offer price in exchange for the following shares: Rey 4,000 shares;
Paul 5,500 shares; and Joven 6,000 shares. Accordingly, the auction was awarded to the highest bidder. The
corporation then received cash representing the offer price on March 15. Offer price is still 560,000
f) Macchiato issued the shares to the subscribers on March 18.
A. Journalize
Jan 2 Subscribed Receivable (25,000 x P50) 1,250,000
Subscribed Share Capital 1,250,000
Feb 28 Cash 750,000
Mar 5 No Entry
d) Receivable from Highest Bidder/Due from Highest Bidder 38,000
Cash 38,000
e) Cash 560,000
Subscription Receivable (1,250,000 – 750,000) 500,000
Receivable from Highest Bidder 38,000
Interest Income 22,000
f) Subscribed Share Capital 1,250,000
Share Capital 1,250,000
B. Who was the highest bidder?

Rey
C. How many shares were actually issued to (a) Olive and to the (b) highest bidder?
Olive 21,000 share

Rey 4,000
25,000 – Olive originally subscribes

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PROBLEM 9. TREASURY SHARES

- nire-acquire yung sarili mong share of stocks
- CONTRA-EQUITY ACCOUNT
- DEBIT
On August 10, Cultura Corporation reacquired 8,000 shares of its P100 par value ordinary shares at P134. The
share was originally issued at P110. The shares were resold on November 21 at P145.
Provide the entries required to record the reacquisition and the subsequent resale of the share using
the:
1) Par Value method of accounting for treasury share. (NO. Kasi hindi na ito ginagamit.)
2) Cost Method of accounting for treasury share. (COST NOT PAR; sa OS lang kasi yung credit up to
the extent of Par Value)
August 10 Treasury share (8,000 x P134) 1,072,000

Cash 1,072,000
Nov 21 Cash (8,000 x P145) 1,160,000

Treasury share 1,072,000
SP-TS 88,000

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PROBLEM 10. TREASURY SHARES – COST METHOD
Medley Inc. had the ff. information during the year:

a) Medley issued 10,000 ordinary shares (P100 par) for P120 per share.
b) Medley reacquired 3,000 ordinary shares at P150 per share.
c) The corporation then reissued 1,000 of the treasury shares for P170 per share.
d) Finally, the remaining treasury shares were issued at P100 per share.
a) Cash (10,000 x P120) 1,200,000

Ordinary Share 1,000,000
SP-OS 200,000
b) Treasury Share (3,000 x P150) 450,000

Cash 450,000
c) Cash (1,000 x P170) 170,000

Treasury Share (1,000 x P150) 150,000
SP-TS 20,000
d) Cash (2,000 x P100) 200,000

3,000 – reacquire
SP-TS 20,000
-1,000 – reissued
RE 80,000
2000
If no SP-TS, ilagay lahat sa RE

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PROBLEM 11. TREASURY SHARE PRESENTATION
Bucks Corp. have the ff. information as of December 31, 2012:
Ordinary share capital, 60,000 shares, P100 par; Share premium, P60,000; Retained Earnings, 2,000,000; and
Treasury shares, 5,000 at cost of P140 each.
Present the shareholder’s equity portion to be shown on the entity’s statement of fin’l position.
Shareholders’ Equity
CONTRIBUTED CAPITAL (including Legal Capital)
Ordinary Shares (60,000 x P100) 6,000,000

Retained Earnings 2,000,000
Treasury Shares (5,000 x P140) (700,000)
7,360,000

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PROBLEM 12. DONATED CAPITAL

- ginagamit lang kapag ang nag-donate ay shareholder
- OTHER INCOME : not a shareholder ang nag-donate
Cash Non-Cash
Cash Land
Donated Capital Donated Capital
Pashmina Inc. is a corporation incorporated in the Philippines, during the year, certain shareholder donated to
the entity an aggregate of 10,000 ordinary shares with par value of P100. Subsequently, the 10,000 donated
shares were sold for P130 per share.
1. Prepare the journal entries to record:

a. The receipt of the donated shares
The company received 10,000 ordinary shares with par value of P100 from its shareholders.
(Memo entry : Statement only)
b. The subsequent sale of the donated shares

Cash (10,000 x P130) 1,300,000
SP-Donated Capital (treated as EXCESS lang) 1,300,000
2. How would the donated capital be accounted for in the shareholder’s equity of Pashmina?
Shareholders’ Equity
CONTRIBUTED CAPITAL (including Legal Capital)
Ordinary Shares (10,000 x P100)
Share Premium
Retained Earnings
Treasury Shares (5,000 x P140)
Donated Capital

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PROBLEM 13. CONTRIBUTED CAPITAL
Nathaniel Corporation is authorized to issue 100,000 ordinary shares, P17 par value. At the beginning of 2012,
18,000 ordinary shares were issued and outstanding. These shares had been issued at P24. During 2012, the
company entered into the ff. transactions:
Jan 16 – Issued 1,300 ordinary shares at P25 per share. issued = fully paid
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 P26 per share to be held in treasury.
Jul 1 – Accepted subscriptions to 1,000 ordinary shares at P28 per share. The contract called for 10% down
payment with the balance due on December 1.
Sep 20 – Sold 500 treasury shares at P29 per share.
Dec 1 – Collected the balance due on July 1 subscriptions and issued the shares.
COMPOSITION OF CONTRIBUTED CAPITAL

Share Capital
OS
PS
Share Premium
Treasury Shares (deducted from RE)
Subscribed Share Capital
Subscription Receivable
w/in 1 year beyond 1 year
do not present in the Contri Cap. - present at Subscription Receivable
CURRENT ASSET - deducted in Contributed Capital
Jan 16 Cash (1,300 x P25) 32,500

SP-OS 10,400
Mar 21 Building (12,000 x P27) 324,000

SP-OS 120,000
May 7 Treasury Shares (500 x P26) 13,000

Cash 13,000
Jul 1 Cash (1,000 x 10%) 2,800 1,000 x P28 = 28,000

X 10% SR = 25,200
Subscribed OS (1,000 x P17) 17,000
Cash 2,800
SP-OS 11,000
Sep 20 Cash (500 x P29) 14,500

Treasury Shares (500 x P26) 13,000
SP-TS 1,500

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Dec 1 Cash 25,200

Subscribed OS 17,000
OS 17,000
Ordinary Shares SP-OS SP-TS

306,000 126,000 1,500
(18,000 x P17) (7 x 18,000)
22,100 10,400
204,000 120,000
17,000 11,000
549,100 267,400
IP = 24
PV = 17
SP = 7 x 18,000 = 126,000
CONTRIBUTED CAPITAL
w/ PAR Ordinary Shares P 549,000
w/out PAR SP-OS 267,400
SP-TS 1,500
818,000

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PROBLEM 14. RETIREMENT OF TREASURY SHARES
a) The corporation holds as treasury, 30,000 ordinary shares with P10 par value per share, at cost amounting
P250,000. The shares were subsequently retired.
If you retire TS, you also retire OS kasi yung TS is

part din naman ng OS
TS – normal is DEBIT OS – normal is CREDIT

- to remove is CREDIT - to remove is DEBIT

Treasury Share 250,000
SP-TS retirement 50,000
b) West Corporation has the ff. information: Retirement at a loss

Ordinary share capital, 200,000 shares, P10 par, P2,000,000; Share premium – original issuance,
P400,000; Share premium – Treasury, P80,000; Retained earnings P500,000; Treasury shares, 20,000
shares, at cost P350,000.
Kapag may SP-Orig Issuance, tanggalin
OS
SP-OS if kulang pa then proceed to
SP-TS if kulang pa rin then RE na
RE
(amount to be retired)
Ordinary Share (20,000 x P10) 200,000

SP-OS (20,000 x P400,000) 40,000
200,000 (total share issued) or;
SP-TS 80,000
RE (minus lahat then iminus to) 30,000 OS 2,000,000
Treasury Share 350,000 SP 400,000
2,400,000
/ 200,000
12
10
2 2 x 20,000 = 40,000

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PROBLEM 15. SHARE PREMIUM
Hello Corporation was organized on January 1, 2013, with an authorization of 1,000,000 ordinary shares with a
par value of P5 per share.
During 2013, the corporation had the ff. equity transactions:
Jan 4 – Issued 200,000 shares @ P5 per share. (same as Par Value)

Apr 8 – Issued 100,000 shares @ P7 per share.
Jun 9 – Issued 30,000 shares @ P10 per share.
Jul 29 – Purchased 50,000 shares @ P4 per share. (Treasury share kasi may subsequent issuance sa
Dec 31)
Dec 31 – Sold 50,000 shares held in treasury @ P8 per share.
What should be the total Share Premium as of Dec. 31, 2012?
Jan 4 P5 – P5 = 0 -----
Apr 8 (100,000 x P2) 200,000
Jun 9 (30,000 x P5) 150,000
Minus the current per
Jul 9 P4-P5 = Null -----
share from the original
Dec 31 (50,000 x P4) 200,000
per share
550,000

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PROBLEM 16. COMPREHENSIVE

The ff. transactions relate to the stockholders’ equity transactions of Monique Corporation for its first year of
existence.
Jan 7 Articles of incorporation are filed with the Philippine SEC. SEC authorized the issuance
of 10,000 shares of P50 par value preferred stock and 200,000 shares of P10 par value
common stock.
Jan 28 40,000 shares of common stock are issued for P14 per share.
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. (clearly determinable kasi may
date)
Feb 24 2,000 shares of common stock are issued to Specter and Ross, 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.
Sep 12 Received subscriptions for 10,000 shares of preferred stock at P53 per share. A 40%
down payment accompanied the subscriptions.
Oct 1 Reacquired 5,000 ordinary shares for a total cost of 80,000.
Nov 5 Reissued 3,000 ordinary shares at P18 per share.
Dec 10 Shareholders holding an aggregate of 5,000 shares donated their shares to Monique.
The company was able to reissue them at P12 per share.
Dec 31 Profit and loss summary to be closed to retained earnings amounted to P300,000
(credit).
1. Prepare the journal entries.
Jan 7 The company was authorized to issue 10,000 preferred stock, P50 par value and
200,000 common stock, P10 par value.
Jan 28 Cash (40,000 x P14) 560,000

Common Stock (40,000 x P10) 400,000
SP-CS 160,000
Feb 3 Land 240,000

Building 960,000
Common Stock (80,000 x P10) 800,000
SP-CS 400,000
80,000 x P15 = 1,200,000
Land 250,000 250/1,250 x 1,200,000 = 240,000

Bldg 1,000,000 1,000/1,250 x 1,200,000 = 960,000
1,250,000 1,200,000

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Feb 24 Organization Cost (2,000 x P16) 32,000

Common Stock (2,000 x P10) 20,000
SP-CS 12,000
Sep 12 Cash 212,000

Subscribed Preferred Stock (10,000 x P50) 500,000
SP-PS 30,000
10,000 x P53 = 530,000

x 40% SR = 318,000
Cash 212,000
Oct 1 Treasury Share (5,000 x P16) 80,000

Cash 80,000
Nov 5 Cash (3,000 x P18) 54,000

SP-TS 6,000
Dec 10 Cash (5,000 x P12) 60,000

SP-Donated Capital 60,000
(part of contri cap)
Dec 31 P/L Summary / Inc. and Exp. Summary 300,000 Result: Net Income
Retained Earnings 300,000 because of RE
Common Stock SP-CS SP-Preferred Stock

400,000 160,000 30,000
800,000 400,000
20,000 12,000
1,220,000 572,000
Treasury Shares SP-TS SP-DC
80,000 48,000 6,000 60,000

32,000

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Retained Earnings
300,000
2. How much is the contributed capital?

P2,388,000
CONTRIBUTED CAPITAL
3. How much is the share premium as of December 31?

P668,000
4. How much is the total shareholder’s equity as of December 31?

P2,656,000
5. How much is the legal capital?

P1,720,000

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PROBLEM 17. COMPREHENSIVE

Casio Corp. registered with SEC and was authorized to issue 120,000 ordinary shares at P15 par value per
share. During the first year of operations, 40,000 shares were sold at P28 per share. 600 shares were issued
in payment of a current operating debt of P18,600. In the first year, the net income was P142,000.
During the year, dividends of P36,000 were paid to shareholders. At the end of the year, total liabilities were
P82,000. Use the given data to compute the ff. items at the end of the first year.
1. Total liabilities and shareholders’ equity

82,000 + 1,244,600 = 11,326,600
2. Shareholders’ equity
40,000 x 28 + 18600 = 1,244,600
3. Contributed capital
1,138,600
4. Issued share capital

609,000
5. Outstanding share capital (par)

609,000
6. Unissued share capital (number of shares)

79,400 shares
7. Share premium
529,600

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PROBLEM 18. BOOK VALUE PER SHARE

The shareholder equity of Dancing Queen Co. in the statement of financial position on December 31, 2014 is
as follows:
Share capital, P10 par, 100,000 shares P1,000,000

Share premium 500,000
Retained earnings 250,000
Treasury shares, 10,000 shares, cost – 50,000 50,000
Total Shareholder’s Equity / No. of shares outstanding = Book value
Share capital 1,000,000

RE 250,000 100,000 – issued share
Treasury shares (50,000) -10,000 – TS (issued)
1,700,000 - SHE 90,000 – outstanding share
/ 90,000 - outstanding shares
Book Value = P18.89

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PROBLEM 19. DIVIDENDS
For a company to declare Dividends, it must have Retained Earnings

RE- cinclose and income/expense ng corporation
Result: Income – RE (credit balance)

Loss – RE (debit balance); no longer called RE; DEFICIT instead
Unappropriated – all amounts are free for dividend declaration

Appropriation / Appropriated – setting aside portion of your income for a purpose
not free for dividend declaration / cannot declare as dividends
REASON:
1. Voluntary – the company itself, and the Board of Directors, set aside RE not to declare as dividends.
Expansion
2. Contractual
Loan agreement – they have contract na you cannot declare dividend unless you pay us
3. Legal
Treasury shares (deducted from RE)
EXAMPLE:
RE – P300,000 declare voluntary expansion, P100,000
RE 100,000
RE-appropriated 100,000
SHE (Shareholder’s Equity)

Contributed Capital
RE – unappropriated 200,000 – only amount that a company can declare dividend
RE – appropriated 100,000
300,000
TYPES OF DIVIDENDS
1. Cash - Cash Dividend Payable
2. Property (inventory - Property Dividend Payable
3. Share Dividends (Bonus issue) – Share/Stock Dividend Distributable with Share Capital & Share Premium (credit)
4. Scrip Dividend - Notes Payable with Interest Expense (debit)

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DATES
1. Date of Declaration – date when BOD approved the payment of dividend
- LIABILITY arises
- may entry ka na kaagad
Example: Approves 200,000 dividends on 3/1/18
RE 200,000
Cash Dividend Payable 200,000 - depende kung anong klaseng dividend
2. Date of Record – lahat ng shareholder mo na makakareceive ng dividend until 4/1/18

- summarize who will receive dividend
- NO ENTRY
3. Date of Payment – paying all the liability on 5/1/18
Cash Dividend Payable 200,000 type of dividend ; current liability

Cash 200,000 kung ano yung given na word
Can be declared as
Peso value or
P5/share = 5,000
Percentage
10% x Par value
P100 - Par Value

x 10% - Percent
P10 / share dividend

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Journalize each transaction below independently:
1. During the May 31, 2014, the Board of Directors of Cashew Corporation declared a dividend of P5 per
share, payable September 20, 2014, to shareholders of record July 31, 2014. The entity has 10,000 shares
issued and outstanding with par value of P100. Give the journal entries on (a) May 31, (b) July 31, and (c)
September 30.
a. May 31 RE 50,000
Cash Dividend Payable 50,000
b. Jul 31 No entry
c. Sept 30 Cash Dividend Payable 50,000
Cash 50,000
2. During the May 31, 2014, the Board of Directors of Cool Corporation declared a dividend of 10% dividend,
payable September 20, 2014, to shareholders of record July 31, 2014. The entity has 10,000 shares issued
(outstanding) and outstanding with par value of P100. Give the journal entries on (a) May 31, (b) July 31, and
(c) September 30.
P100 - Par Value

x 10% - Percent
10 - Dividend per share
x 10,000 Outstanding
P100,000
a. May 31 RE 100,000
Cash Dividend Payable 100,000
b. July 31 No entry
c. Sept 30 Cash Dividend Payable 100,000
Cash 100,000
3. Libra Co.’s board of directors decided to declare a dividend on June 30, 2014 to be distributed on August 1,
2014. The company will give inventories worth P1,500,000 to its shareholders of record July 10, 2014. Give the
journal entries on (a) June 30, (b) July 10, (c) August 1
a. Jun 30 RE 1,500,000
Property Dividend Payable 1,500,000
b. July 10 No entry
c. Aug 1 Property Dividend Payable 1,500,000
Inventories 1,500,000

lOMoARcPSD|5437160
4. Twins Corporation declared on July 1, 2014 dividends to its stockholders of record as of September 1, 2014.
However, due to shortage of cash, the corporation issued scrip dividends at the time of declaration amounting
to P100,000 (RE) with 12% interest payable on December 31, 2014. Give the journal entries on (a) July 1, (b)
September 1, and (c) December 31.
a. Jul 1 RE 100,000
Notes Payable 100,000
b. Sept 1 No entry
July 1 – Dec 31 (6 mos)
c. Dec 31 Notes Payable 100,000
Interest Expense 6,000
100,000 x 12% x 6/12 = 6,000
Cash 106,000
5. Consider the ff. information:
If Bonus Issue – find first the percentage if large

find the no. of shares outstanding
Bonus Issue – need to know the percentage na dineclare

20% more - LARGE - use PAR VALUE only
less than 20% - SMALL - use FMV
Share capital, P10 par, 100,000 shares authorized, 50,000 shares issued P500,000
Retained earnings 300,000
The BOD declared a “bonus issue” on March 1, 2014 to be distributed on April 1, 2014. Fair value of
shares is P14 per share.
Prepare the entries on March 1, 2014 and April 1, 2014 assuming the company declared (a) 20% issue
and (b) 10% issue.
A. 20% @ PAR VALUE

50,000 - share issued (outstanding)
x 20%
10,000 - company will give new shares of 10,000 as dividends
a) RE (10,000 x P10) 100,000

Share/Stock Dividend Distributable 100,000
b) No Entry
c) Share/Stock Dividend Distributable 100,000

lOMoARcPSD|5437160
B. 10% @ FMV
50,000 - share issued
x 10%
5,000
a) RE (5,000 x P14) 70,000

Share/Stock Dividend Distributable 70,000
b) No Entry
c) Share/Stock Dividend Distributable 70,000
Share Capital (5,000 x P10) 50,000
Note: OS, PS, Share Capital = PAR VALUE
6. The company holds 15,000 shares in treasury costing P7.00 each with market value of P12 per share. The
BOD declared such treasury shares as dividend on February 14, 2014 to be issued on May 1, 2014. Prepare
the journal entries to record the foregoing transactions.
If treasury share and dineclare, ALWAYS COST METHOD
a) RE (15,000 x P7) 105,000

Stock/Share Dividend Distributable 105,000
b) No entry
c) Stock/Share Dividend Distributable 105,000
SHARE SPLIT
- kapag hindi na siya marketable, para mas mapababa yung value
- NO ENTRY ; Memo entry only
- NO EFFECT AT SHE
2-for-1 if may share of stock ka, yung isa mo gagawing dalawa.

dumarami lang yung par value
REVERSED – NO ENTRY
The comp. declare a 2-for-1 share split, the total number of share now is 2.
1-for-2 yung dalawa mo, magiging isa

tumataas yung par value

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Accounting (Far Eastern University)

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PROBLEM 2. ACCOUNTING FOR SHARE CAPITAL

Memorandum Entry Method – IF THE PROBLEM IS SILENT, USE MEMO METHOD

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PROBLEM 3. ISSUANCE OF SHARE CAPITAL FOR CASH

1. With Par Value

Cash (20,000 x P130) 2,600,000

Cash (40,000 x P120) 4,800,000

3. No Par, No Stated Value - walang share premium

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Land (25,000 x P140) 3,500,000

Professional Fee/Organization Cost 125,000

Professional Fee 700,000

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PROBLEM 5A. INCORPORATON OF A PROPRIETORSHIP

Current Assets P 150,000

Fair Values at December 31, 2013 are as follows:

Current Assets P 170,000 If given yung FMV, ‘yun yung

To convert into corporation type:

Current Assets P 170,000

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PROBLEM 5B. ISSUANCE OF TWO CLASSES OF SHARES

OS (20,000 x P20) 400,000 4/16 x P1,800,000 = 450,000

PS (40,000 x P30) 1,200,000 12/16 x P1,800,000 = 1,350,000

1 FMV given (OS only)

Ordinary Shares (20,000 x P30) 600,000

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PROBLEM 6. ORGANIZATION COST – organizing a corporation

Org Cost Cost of drafting articles of incorporation and by laws P25,000

Cash (50,000 x P150) 7,500,000

b) Incurrence of organization cost

c) IF Share Issuance = 35,000

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d) IF Ordinary Shares ONLY

1) Cash (50,000 x P100) 5,000,000

2) Organization Cost 45,000

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PROBLEM 7. COMPUTATION OF LEGAL CAPITAL

w/ Par Value No Par Value, w/ Stated Value

CASE A – with Par Value

Preference Share 2,500,000

CASE B – No Par, with Stated Value

Preference Share 1,200,000

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PROBLEM 8. DELINQUENT SUBSCRIPTION AND HIGHES BIDDER

B. Who was the highest bidder?

Olive 21,000 share

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PROBLEM 9. TREASURY SHARES

August 10 Treasury share (8,000 x P134) 1,072,000

Nov 21 Cash (8,000 x P145) 1,160,000

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PROBLEM 10. TREASURY SHARES – COST METHOD

Medley Inc. had the ff. information during the year:

a) Cash (10,000 x P120) 1,200,000

b) Treasury Share (3,000 x P150) 450,000

c) Cash (1,000 x P170) 170,000

d) Cash (2,000 x P100) 200,000

If no SP-TS, ilagay lahat sa RE

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PROBLEM 11. TREASURY SHARE PRESENTATION