The stockholders equity of Cordova Corporation showed the following data

on December 31, 2005:

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 2006 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 94,500 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. Split common stock two for one (par value reduce to P25).
6. Reissued 13,500 shares of treasury stock – common at P50.
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.

QUESTIONS:

Based on the above and the result of your audit, determine the following as
of December 31, 2006:

1. Preferred stock
a. P4,617,000 c. P4,968,000
b. P4,698,000 d. P4,860,000

2. Common stock
a. P15,615,000 c. P13,968,000
b. P13,500,000 d. P13,725,000

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3. Additional paid-in capital
a. P6,777,000 c. P6,679,800
b. P6,858,000 d. P6,814,800

4. Unappropriated retained earnings

a. P1,749,240 c. P1,711,440
b. P2,251,440 d. P1,684,440

5. Total stockholders’ equity

a. P26,949,240 c. P26,958,960
b. P26,922,240 d. P26,940,240

Suggested Solution:

Questions No. 1 to 5
Preferred stock P 4,698,000 (1)
Common stock 13,725,000 (2)
Additional paid in capital 6,814,800 (3)
Retained earnings - Appropriated 540,000
Retained earnings - Unappropriated 1,711,440 (4)
Treasury stock ( 540,000)
Total SHE, 12/31/06 P26,949,240 (5)

Journal entries affecting the stockholders equity accounts during 2006:

1) Cash (27,000 shares x P40) P1,080,000
Preferred stock (27,000 shares x P30) P 810,000
APIC - premium on preferred stock 270,000

2) Cash (94,500 shares x P70) P6,615,000

Common stock (94,500 shares x P50) P4,725,000
APIC - premium on common stock 1,890,000

3) Preferred stock (5,400 shares x P30) P 162,000

APIC - premium on PS (P1,080,000x5.4/135) 43,200
Retained earnings 37,800
Cash (5,400 shares x P45) P 243,000

4) Treasury stock-CS (13,500 shares x P80) P1,080,000

Cash P1,080,000

5) Memo entry.

6) Cash (13,500 shares x P50) P 675,000

Treasury stock (P1,080,000 x 1/2) P 540,000

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 APIC - from treasury stock transactions 135,000

7) Memo entry.

Cash (9,000 shares x 1/2 x P54) P 243,000

APIC - Donated capital P 243,000

8) Retained earnings P1,625,760

Cash P1,625,760
Common shares issued and outstanding, 1/1/06 180,000
2) Shares issued 94,500
4) Purchase of treasury shares (13,500)
261,000
5) Stock split 261,000
6) Reissuance of treasury shares 13,500
7) Donated shares ( 9,000)
Reissuance of donated shares 4,500
Common shares issued and outstanding,12/31/06 531,000
x Dividend per share P 2
Dividends to common P1,062,000
Dividends to preferred (P4,698,000 x 12%) 563,760
Total P1,625,760

9) Income summary P2,520,000

Retained earnings P2,520,000

10) Retained earnings P 540,000

Retained earnings - appropriated (cost of TS) P 540,000