Discussion Problems and Solutions On Module 3, Part 1

Problem 1
Required: Journal entries to record the foregoing transactions.
Cash
Ordinary Share Capital
Legal Expenses
Share Premium - Ordinary
Land
Building
Cash
Cash
Subscription Receivable
Subscribed Ordinary Share Capital
Cash
g transactions.
10,000,000.00
10,000,000.00
180,000.00
150,000.00
30,000.00
5,000,000.00
3,000,000.00
6,250,000.00
1,750,000.00
3,575,000.00
3,250,000.00
325,000.00
2,750,000.00
8,250,000.00
10,000,000.00
1,000,000.00
4,950,000.00
6,000,000.00
4,950,000.00
6,000,000.00
Problem 2
Requirement: Journal entries to record the foregoing transactions.
a
Cash
Share Premium - Odinary

Indirect Expenses
Cash
b
Land
c
Cash
Preference Share Capital
Share Premium - Preference
Allocation of Issue Price:

Preference Shares
Ordinary Shares
Total
d
Cash
e
Land
Share Premium - Donated Capital
Cash
ansactions.
2,000,000.00
1,500,000.00
500,000.00
60,000.00
25,000.00
85,000.00
1,960,000.00
700,000.00
1,260,000.00
18,000,000.00
2,500,000.00
2,000,000.00
10,000,000.00
3,500,000.00
4,000,000.00 4,500,000.00
12,000,000.00 13,500,000.00
16,000,000.00 18,000,000.00
150,000.00
450,000.00
500,000.00
100,000.00
5,000,000.00
4,960,000.00
40,000.00
Problem 3
Requirement: Total Shareholders equity of Blazing Red Corporation as at December 31, 2020
Journal Entries
Cash 380,000.00
Equipment 1,500,000.00
Share Premium - Preference
Cash 64,000.00
Subscription Receivable 96,000.00
Treasury Shares 18,000.00

Cash
Cash 76,800.00
Subscribed Ordinary Share Capital 80,000.00
Receivable from Highest Bidder 21,200.00

Cash
Cash 21,200.00
Subscribed Ordinary Share Capital 20,000.00
Receivable from Highest Bidder
Shareholders' Equity of Blazing Red Corporation

As at December 31, 2020

Share Premium
Preference 300,000.00
Ordinary 140,000.00
Retained Earnings
Less: Treasury Shares
Shareholders' Equity
at December 31, 2020.
1,200,000.00
300,000.00
300,000.00
80,000.00
100,000.00
60,000.00
18,000.00
76,800.00
80,000.00
19,200.00
2,000.00
21,200.00
20,000.00
1,200,000.00
400,000.00
440,000.00
350,000.00
(18,000.00)
2,372,000.00
Problem 4
a Prepare the entries in the books of Millenium Company to record the foregoing tra
1
Treasury Shares 140,000.00
Cash
2
Cash 60,000.00
Treasury Shares
Share Premium - Treasury Shares
3
Cash 65,000.00
Share Premium - Treasury Shares 4,000.00
Retained Earnings 1,000.00
Treasury Shares
4
Ordinary Share Capital 10,000.00
Share Premium - Ordinary 3,000.00
Treasury Shares
b Determine the total shareholders' equity at December 31, 2020, assuming that profit for
dividends declared were P200,000.
Shareholders' Equity of Millenium Company

As at December 31, 2020

Share Premium
Ordinary 297,000.00
Treasury -
Retained Earnings
Shareholders' Equity
cord the foregoing transactions.
140,000.00
56,000.00
4,000.00
70,000.00
14,000.00
assuming that profit for the year was P280,000 and cash
990,000.00
297,000.00
978,000.00
2,265,000.00
Problem 5
Journalize the retirement of 4,000 preference shares, assuming that the retirement price is
a P21 per share
Book Value of the Preference Shares Retired:

Par Value 80,000.00
Share Premium 6,400.00
Total 86,400.00
Divided by the number of shares retired 4,000.00
Book Value per Share 21.60
Preference Share Capital 80,000.00

Share Premium - Preference 6,400.00
Cash
Share Premium - Retirement of Preference Shares
a P26 per share
Book Value of the Preference Shares Retired:

Par Value 80,000.00
Share Premium 6,400.00
Total 86,400.00
Divided by the number of shares retired 4,000.00
Book Value per Share 21.60
Retirement Price 26.00
Loss on Retirement - Retained Earnings (debit) (4.40)

Cash
e retirement price is
84,000.00
2,400.00
104,000.00
Problem 6
Journalize the conversion of 10,000 preference shares under each of the following independ
a Preference share is convertible into ordinary share on a share for share basis.
Par Value
Share Premium
Total
Divided by the number of shares converted
Book Value per Share
Par Value of Ordinary Shares
Loss on Conversion - Retained Earnings (debit)

b 2 shares of preference are convertible into one ordinary share.
Par Value
Share Premium
Total
Divided by the number of shares converted
Book Value per Share
Par Value of Ordinary Shares
Gain on Conversion - Credit to Share Premium

each of the following independent assumptions:
e on a share for share basis.
200,000.00
16,000.00
216,000.00
10,000.00
21.60
30.00
(8.40)
300,000.00
inary share.
200,000.00
16,000.00
216,000.00
10,000.00
21.60
15.00
6.60
150,000.00
66,000.00
Problem 7
Required:
Entries to record the following independent transactions:
a A 10% bonus issue is declared and issued.

Share Dividends Distributable
b A 30% bonus issue is declared and issued.

c A 2-for-1 share split is declared and issued.
Memo Entry:
Effected a 2-for-1 share split, reducing the par value to P5 and increase the number of shares issue
100,000.00
100,000.00
300,000.00
crease the number of shares issue to 200,000.

Problem 8
Required:
Compute the amount of total dividends and dividends per share at the end of 2018, 2019 and
under each of the following assumptions:
a Preference share is non-cumulative and non-participating.
Number of shares outstanding

Total par value
2018
Current Preference Dividends
Dividend per share
2019
Dividend per share
2020
Dividend per share
b Preference share is cumulative and non-participating.

Total par value
2018
Dividend per share
2020
Add: Dividends in arrears
Total Dividends
Dividend per share
2020
Dividend per share
c Preference share is cumulative and fully participating.

Total par value
2018
Dividend per share
2019
Add: Dividends in arrears
To ordinary, initial limit (2,500,000 x 9% = 225,000),
but the remaining is
Total Dividends
Dividends per Share
2020
Current Ordinary Dividends
Excess of the dividends: 135,000.00
Allocated to Preference
Allocated to Ordinary
Total Dividends
Dividends per Share
are at the end of 2018, 2019 and 2020, on both preference and ordinary shares
Preference Ordinary
20,000.00 250,000.00
2,000,000.00 2,500,000.00
Preference Ordinary
150,000.00 -
7.50 -
Preference Ordinary
180,000.00 80,000.00
9.00 0.32
Preference Ordinary
180,000.00 360,000.00
9.00 1.44
Preference Ordinary
20,000.00 250,000.00
2,000,000.00 2,500,000.00
Preference Ordinary
150,000.00 -
7.50 -
Preference Ordinary
180,000.00 50,000.00
30,000.00
210,000.00 50,000.00
10.50 0.20
Preference Ordinary
180,000.00 360,000.00
9.00 1.44
Preference Ordinary
20,000.00 250,000.00
2,000,000.00 2,500,000.00
Preference Ordinary
150,000.00 -
7.50 -
Preference Ordinary
180,000.00
30,000.00
50,000.00
210,000.00 50,000.00
10.50 0.20
Preference Ordinary
180,000.00
225,000.00
60,000.00
75,000.00
240,000.00 300,000.00
12.00 1.20
Problem 9
Required:
Compute the amount of total dividends on both preference share capital and ordinary share
a Preference is participating up to 14%

Preference
Number of shares 20,000.00
Total Par Value 2,000,000.00
Current Preference Dividend 180,000.00

Current Ordinary Dividend
Dividend in arrears 50,000.00
Excess Dividends (610000-180000-225000-50000)
3.44%
Allocate the excess fully
Allocated to preference 68,888.89
Allocated to ordinary
Total Dividends 298,888.89
Dividend per share 14.94
b Preference is participating up to 12%

Preference
Number of shares 20,000.00
Total Par Value 2,000,000.00
Current Preference Dividend 180,000.00

Current Ordinary Dividend
Dividend in arrears 50,000.00
Excess Dividends (610000-180000-225000-50000)
3.44%
Allocated to Preference 60,000.00
Allocated to Ordinary
Total Dividends 290,000.00
Dividend per share 14.50
hare capital and ordinary share capital, assuming
Ordinary
250,000.00
2,500,000.00
225,000.00
86,111.11
311,111.11
1.24
Ordinary
250,000.00
2,500,000.00
225,000.00
95,000.00
320,000.00
1.28
Problem 10
Required:
Journal entries to record the foregoing.

Share Dividends Distributable 500,000.00

Fractional Share Warrants Outstanding
Fractional Share Warrants Outstanding 50,000.00

Share Premium - Unexercised Share Warrants
500,000.00
450,000.00
50,000.00
40,000.00
10,000.00
Problem 11
Required:
10/31/2020
Financial Assets at Fair Value through Profit or Loss 10,000.00
Unrealized Gain - Profit or Loss

Property Dividends Payable
12/31/2020
Financial Assets at Fair Value through Profit or Loss 20,000.00
Unrealized Gain - Profit or Loss

2/28/2021
Property Dividends Payable 200,000.00

Financial Assets at Fair Value through Profit or Loss
Gain on Disposal of Financial Assets at FVPL
10,000.00
150,000.00
20,000.00
20,000.00
30,000.00
170,000.00
30,000.00
Problem 12
Required:
10/1/2020
Depreciation Expense 33,750.00
Accumulated Depreciation - Equipment

Assets Held for Distribution 180,000.00

Accumulated Depreciation - Equipment 270,000.00
Equipment
Cost of the Equipment

Less: Accumulated Depreciation
Carrying Value, 10/1/2020
12/31/2020
Impairment Loss 20,000.00
Assets Held for Distribution

Retained Earnings
1/31/2021

Assets Held for Distribution
Gain on Disposal of Assets
33,750.00
190,000.00
450,000.00
450,000.00
(270,000.00)
180,000.00
20,000.00
30,000.00
15,000.00
160,000.00
15,000.00

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Discussion Problems and Solutions On Module 3, Part 1

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Problem 1

Required: Journal entries to record the foregoing transactions.

Requirement: Journal entries to record the foregoing transactions.

Share Premium - Odinary

Allocation of Issue Price:

Treasury Shares 18,000.00

Receivable from Highest Bidder 21,200.00

Shareholders' Equity of Blazing Red Corporation

Preference Share Capital

Shareholders' Equity of Millenium Company

Ordinary Share Capital

Book Value of the Preference Shares Retired:

Preference Share Capital 80,000.00

a P26 per share

Book Value of the Preference Shares Retired:

Preference Share Capital 80,000.00

Preference Share Capital 200,000.00

b 2 shares of preference are convertible into one ordinary share.

Preference Share Capital 200,000.00

Retained Earnings 200,000.00

b A 30% bonus issue is declared and issued.

Retained Earnings 300,000.00

c A 2-for-1 share split is declared and issued.

crease the number of shares issue to 200,000.

a Preference share is non-cumulative and non-participating.

Number of shares outstanding

b Preference share is cumulative and non-participating.

Number of shares outstanding

c Preference share is cumulative and fully participating.

a Preference is participating up to 14%

Current Preference Dividend 180,000.00

b Preference is participating up to 12%

Current Preference Dividend 180,000.00

Retained Earnings 500,000.00

Share Dividends Distributable 500,000.00

Fractional Share Warrants Outstanding 50,000.00

Retained Earnings 150,000.00

Retained Earnings 20,000.00

Property Dividends Payable 200,000.00

Retained Earnings 190,000.00

Assets Held for Distribution 180,000.00

Cost of the Equipment

Property Dividends Payable 30,000.00

Property Dividends Payable 175,000.00

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