Problem 5-1: Supersonic Company was authorized to issue 12%, 10-year bonds with Problem 5-2: Interlink Company
nk Company was authorized to issue 10-year, 12% bonds with Problem 5-3: Marbel Company was authorized to issue 12% bonds with face amount of
face amount of P7,000,000 on April 1, 2020.
Interest on the bonds is payable semiannually on April 1 and October 1 of each year.
The bonds were sold to underwriters on April 1, 2020 at 106. The entity amortizes
discount or premium only at the end of the fiscal year, using the straight line method.
REQUIRED:
1. Prepare journal entries for 2020 and 2021 including adjustments at the end of each
year. Use memorandum approach.
2. Present the bonds payable in the statement of financial position on December 31,
2021.
Problem 5-4: On January 1, 2020, Lyka Company issued 12% bonds with face amount
of P4,000,000 for P4,200,000.
Interest is payable annually on December 31 and the bonds mature on January 1, 2025.
On December 31, 2020, bonds with face amount of P1,000,000 were redeemed at 95.
The entity used the straight line method of amortization.
REQUIRED:
1. Prepare journal entries in 2020 and 2021.
2. Present the bonds payable on December 31, 2021.
Problem 6-2: On January 1, 2020, Orange Company was authorized to issue 6% bonds
with face amount of P5,000,000 maturing on December 31, 2021. Interest is payable
semiannually on June 30 and December 31.
On January 1, 2020, the entity issued all of the bonds for P4,818,500 with an effective
rate of 8%.
The fiscal year of the entity is the calendar year and the effective interest method of
amortization is used.
REQUIRED:
1. Prepare a table of amortization for the discount.
2. Prepare journal entries for 2020 and 2021.
face amount of P8,000,000. The bonds are dated January 1, 2020, and interest is P5,000,000 on April 1, 2020.
payable semiannually on June 30 and December 31. The bonds were sold as follows:
Interest on the bonds is payable semiannually on April 1 and October 1. Bonds mature on
January 1, 2020 5,000,000 at 95 April 1, 2025.
September 1, 2021 2,000,000 at 103 plus accrued interest
REQUIRED: The entire issue was sold on April 1, 2020, at 98 less bond issue cost of P50,000.
1. Prepare journal entries relating to the bonds payable in 2020 and 2021.
Straight line amortization is used, and unissued bonds payable account is set up. On July 1, 2021, bonds of P2,000,000 face amount were purchased and retired at 99 plus
2. Show how information relative to the bond issue will be reported in the statement of accrued interest.
financial position prepared on December 31, 2021.
REQUIRED:
Problem 5-5: Anya Company disclosed the following accounts on December 31, 1 Prepare journal entries including any adjustments relating to the issuance of the bonds
2020: for 2020 and 2021.
12% Bonds Payable – due January 1, 2023 Use memorandum approach and the straight line method of amortization.
Jan. 1, 2020 Jan. 1, 2013 6,000,000 2. Present the bonds payable in the statement of financial position on December 31, 2021.
P3,000,0000 face amount
purchased at 90
and retired 2,700,000 Problem 6-1: Yellow Company received permission on January 1, 2020 to issue 12%
Discount on Bonds Payable bonds with face amount of P6,000,000 maturing on January 1, 2030.
Jan. 1, 2013 300,000 Interest is payable annually on December 31. The bonds are callable at 102 plus accrued
interest.
REQUIRED:
1. Compute the balance of bonds payable and discount on bonds payable on On January 1, 2020, the entity issued the bonds for P6,737,000 with an effective yield of
December 31, 2020. The straight line method of amortization is used. 10%.
2. Compute bond interest expense for the year ended December 31, 2020. Interest
is payable semiannually on January 1 and July 1. The fiscal year of the entity ends December 31. The effective interest amortization is used.
3. Prepare adjusting entries on December 31, 2020.
REQUIRED:
1. Prepare journal entries relating to the bonds payable for 2020.
Problem 20-5: Lagoon Company was organized at the beginning current year.
2. Present the bonds payable on December 31, 2020.
The entity provided the following transactions affecting shareholders' equity:
1. The corporation was authorized to issue 100,000 ordinary shares with par value Problem 20-8: Sand Company provided the following data at current year-end:
of P100.
2. Twenty-five percent of the authorized ordinary capital was subscribed for at par Preference share capital, P100 par, 50,000 shares 5,000,000
value. Share premium - PS 500,000
3. Collected twenty-five percent of the subscription. Ordinary share capital, P50 par, 100,000 shares 5,000,000
4. Full collection was received on 10,000 shares originally subscribed. Share premium - ordinary share 1,000,000
5. Issued the share certificates on the fully paid 10,000 shares. Retained earnings 2,000,000
6. Land with fair value of P800,000 and a building thereon fairly valued at
P2,500,000 were acquired for 30,000 shares. REQUIRED:
7. Issued 10,000 shares for an outstanding bank loan of P1,300,000, including 1. Prepare journal entry assuming that 5,000 preference shares are converted:
accrued interest of P200,000. On this date, shares are quoted at P120 per share. a. Preference shares are convertible into ordinary shares on a share-for-share
8. Net income for the year amounted to P3,000,000. basis.
b. Each preference share is convertible into 4 ordinary shares.
REQUIRED: 2. Prepare journal entry assuming 5,000 preference shares are callable and called in for
a. Prepare journal entries using journal entry method. payment at:
b. Present the shareholders' equity. a. 120
b. 80
Problem 20-6: Timber Company presented a statement of financial position Problem 20-7: Fullhouse Company began operations on January 1, 2020. Authorized Problem 21-1: Aroma Company reported the following shareholders' equity: Ordinary
containing the following accounts among others: were 100,000 ordinary shares of P100 par value and 50,000 convertible preference share capital, 50,000 shares, P100 par 5,000,000
shares of 10% P100 par value. Share premium 200,000
Subscriptions receivable – preference 120,000 Retained earnings 2,000,000
Subscriptions receivable – ordinary 360,000 The following transactions involving shareholders' equity occurred during the first year of
Preference share capital, P100 par, authorized operations: Subsequently, the following transactions, among others occurred:
100,000 shares, issued and outstanding 22,000 shares 2,200,000 Jan. 1 Issued 10,000 ordinary shares to the promoters in exchange for land valued at a. Treasury shares of 5,000 were acquired at P160 per share.
Preference share capital subscribed, 2,000 shares 200,000 P2,500,000 and services valued at P500,000. b. Assuming the treasury shares were reissued for
Ordinary share capital, P10 par value, authorized The property had cost the promoters P1,800,000 three years before and was P1,000,000.
200,000 shares, issued and outstanding 24,000 shares 240,000 carried on the promoters' books at P1,500,000. c. Assuming the treasury shares were reissued for P700,000.
Ordinary share capital subscribed, 24,000 shares 240,000
Share premium – preference 80,000 Feb. 20 Issued 15,000 preference shares for P120 per share. Each share can be REQUIRED:
Share premium – ordinary 950,000 converted to five ordinary shares. 1. Prepare journal entries to record the transactions.
The entity paid P50,000 to an agent for selling the shares. 2. Prepare journal entry to record the retirement of the treasury shares, assuming the
The corporation was organized at the beginning of current year and immediately treasury shares are not reissued. The original issue price of treasury shares was
received subscriptions to 20,000 preference shares. Subscriptions to ordinary shares Mar. 10 Sold 25,000 ordinary shares for P260 per share. Issue costs amounted to P104 per share.
were received on the same date. P200,000.

During the year, subscriptions were received for an additional 4,000 preference
shares at a price of P120 per share.
Cash payments were received from subscribers at frequent intervals for several
months after subscription. The entity followed a policy of issuing share certificates
only when subscribers had paid in full.
During the year, the entity issued 8,000 ordinary shares in exchange for a tract of
land with a fair value of P230.000
REQUIRED:
a. Prepare journal entries for all the transactions carried out during the year as
indicated by the account balances.
b. Compute the amount of contributed capital for each class of share capital at year-
end.
Problem 20-9: On January 1, 2020, Lilianne Company issued mandatorily
redeemable preference shares in exchange for cash equal to the total par value of
the shares of P5,000,000.
No dividends are to be paid on these shares but the shares must be redeemed on
January 1, 2022 for P6,050,000.
The implicit interest rate is 10% which is compounded annually.
REQUIRED:
Prepare journal entries for 2020, 2021 and 2022 to record the issuance of preference
shares, interest expense and redemption of the shares.
Apr. 1 Sold 20,000 ordinary shares under share subscriptions at P350 per share.
No share certificates are issued until subscription contract is paid in full. No
cash received.
July 15 Exchanged 12,000 ordinary shares and 20,000 preference shares for a
building with a fair value of P7,000,000.
The building was originally purchased for P6,500,000 by the owner and has a
carrying amount of P4,800,000.
In addition, 10,000 ordinary shares were sold for P3,000,000 cash on same
date.
Aug. 1 Received payments in full for half of the share subscriptions and partial
payments on the rest of the subscriptions. Total cash received was P4,500,000
Share certificates were issued for the subscriptions paid in full.
Aug. 31 Received notice from holders of share subscriptions for 5,000 shares that they
would not pay further on the subscriptions because the price of the share had
fallen to P190 per share.
The amount still due on those contracts was P1,500,000.
Amounts previously paid on the contracts are forfeited according to the
agreement.
Dec. 31 Net income for the first year of operations was P3,000,000.
INSTRUCTIONS:
1. Prepare journal entries to record the transactions.
2. Present the shareholders' equity on December 31, 2020.
Problem 21-2: At the beginning of current year, Alegro Company reported the
following issues of share capital:
200,000 shares at P20 4,000,000
250,000 shares at P25 6,250,000
During the current year, the entity reacquired 50,000 shares at P20, and these were
reissued at year-end at P25 per share.
REQUIRED:
Prepare journal entries to record the foregoing transactions assuming:
a. The share has a P15 par value.
b. The share is no par with stated value of P20.
Problem 21-3: Honda Company provided the following data during the first year of
operations:
a. Sold 30,000 preference shares, 12%, P100 par, at P140.
b. Sold 100,000 ordinary shares of P50 par at P55.
c. Purchased and retired 10,000 preference shares at P120.
d. Purchased 15,000 ordinary shares at P52 to be held as treasury.
e. Sold 10,000 treasury ordinary shares at P60.
f. Shareholders donated to the entity 20,000 ordinary shares when shares had a
market price of P60. One half of these shares were sold for P65.
g. Net income for the year was P3,000,000.
h. Appropriated retained earnings equal to the remaining cost of treasury shares.
REQUIRED:
1. Prepare journal entries to record the transactions.
2. Present the shareholders' equity.
Problem 21-4: Divina Company reported share capital P3,000,000, 20,000 shares, Problem 21-6: Lancer Company reported the following shareholders’ equity: Problem 21-7: Marianne Company provided the following independent transactions
P150 par, share premium P200,000, and retained earnings P1,500,000. affecting shareholders' equity:
Share capital, 50,000 shares, P100 par 5,000,000
REQUIRED: Share premium 1,000,000 1. Issued 25,000 rights to shareholders, 1 right on each share permitting holders to
Prepare journal entry for each of the following cases: Retained earnings ( 500,000) acquire one ordinary share of P50 par value at P60 with every 5 rights submitted.
a. Recapitalization is effected, each shareholder receiving 2 shares of new no-par Total shareholders' equity 5,500,000
with a stated value of P50 for each share owned. Shares are selling at P30 per share at this time. Subsequently, 20,000 rights are
b. A share split is effected, each shareholder receiving 5 shares, par value P30, for The entity wishes to cancel the deficit and is considering each of the following exercised and 5,000 rights expired.
each share owned. possibilities:
c. A recapitalization is effected, each shareholder receiving 1 share of new P100 par a. Shareholders are to donate 10% of their shares to the entity and these are 2. Issued 20,000 preference shares of P100 par value for P2,500,000, with 20,000
value for each share owned. formally retired. warrants to acquire 10,000 ordinary shares, P50 par, at P60.
d. A recapitalization is effected, each shareholder receiving 4 new shares of P50 par b. The par value of shares is to be reduced to P50.
value for each share owned c. Two new no-par shares are to be exchanged for each share outstanding and the On the date of the issuance, the warrants have a market value of P10, but the
legal capital for the entity is to be restated at P5,500,000. The stated value is P55. preference share has no known market value ex-warrant.
d. Three new no-par shares with a stated value of P20 are to be exchanged for every
Problem 21-5: Toyota Company has two classes of share capital outstanding share. Subsequently, 18,000 warrants were exercised and the remainder lapsed.
consisting of 12%, P100 par value preference share and P50 par value
ordinary share. REQUIRED: 3. Issued 50,000 preference shares of P100 par value for P6,000,000 with 50,000
Prepare journal entry that would be required for each possibility warrants to acquire 25,000 ordinary shares, P50 par, at P60 per share.
The entity reported the following balances at the beginning of the current year:
On the date of issuance, the market values are:
Preference share capital - 5,000 shares 500,000 Problem 21-8: Glorious Company reported the following shareholder equity on January 1, Preference share ex-warrant None
Ordinary share capital - 50,000 shares 2,500,000 2020: Warrant None
Share premium – PS 200,000 Ordinary share capital, P100 par; 200,000 shares authorize: Ordinary share 80
Share premium – ordinary 500,000 50 000 shares issued and outstanding 5,000,000
Retained earnings 2,000,000 Share premium 1,000,000 Subsequently, all the warrants were exercised.
Retained earnings 3,000,000
The following data summarize the transactions for the current year: REQUIRED:
Shares Per share On May 31, 2020, the entity issued bonds of P5,000,000 at 120, giving with each P1,000 Prepare journal entries to record the independent transact
1. Issue of ordinary share capital 20,000 50 bond a warrant enabling the holder to purchase 3 shares at P120 per share for a one year
2. Purchase of treasury share - ordinary 5,000 60 period.
3. Share split-ordinary 2 for 1 Problem 22-1: On December 31, 2020, Zebra Company showed the following
4. Reissue of treasury share 3,000 40 Shares were selling for P140 at this time. The market value of bond ex-warrant is 105. shareholders' equity:
5. Shareholders donated 15,000 ordinary shares to the corporation.
Subsequently, 10,000 donated shares were reissued at P40 per share. By December 31, 2020, 10,000 shares had been issued in connection with warrants issued Share capital, P100 par, 100,000 shares authorized,
6. Net income for the year was P500,000. on the sale of bonds. 50,000 shares issued 5,000,000
7. Appropriated retained earnings equal to the cost of treasury shares. Share premium 1,000,000
Net income for 2020 was P2,000,000. Retained earnings 2,000,000
REQUIRED: Treasury shares, 5,000 at cost 600,000
a. Prepare journal entries to record the transactions. On July 15, 2021, the entity issued rights to shareholders, 1 right on each share, permitting
b. Present the shareholders' equity at year-end. holders to acquire for a one-year period 1 share at P130 with every 5 rights submitted. On December 31, 2020, Zebra Company declared a cash dividend of P30 per share
Shares were selling for P150 at this time. to shareholders of record on January 15, 2021 and payable on January 31, 2021.

All rights were exercised and the additional shares were issued on December 31, 2021. REQUIRED:
Prepare journal entry on December 31, 2020. January 15. 2021 and January 31,
The remaining share warrants issued to the bondholders expired. 2021.

REQUIRED:
a. Prepare journal entries to record the transactions.
b. Present the shareholders equity on December 31, 2021
Problem 22-2: Candel Company owned 10,000 shares of equity securities of XYZ Problem 22-5: Oriental Company showed the following balances at year-end: Problem 22-8: Nikko Company showed the following balances:
Company with carrying amount of P90 per share.
On October 31, 2020, Candel Company declared these shares as property dividend Wasting asset 8,000,000 Share capital authorized P100 par, 50,000 shares 5,000,000
to be paid on March 31, 2021. Accumulated depletion 1,000,000 Share capital unissued, 20,000 shares 2,000,000
The quoted price for XYZ share is P130 on October 31, 2020, P150 on December Share capital, P100 par 5,000,000 Subscribed share capital, 10,000 shares 1,000,000
31, 2020 and P110 on March 31, 2021. Capital liquidated 500,000 Treasury shares (5,000 at cost) 600,000
Retained earnings 1,200,000 Share premium 500,000
REQUIRED: The Board of Directors declared a dividend of P30 per share at year-end. Retained earnings 1,500,000
Prepare journal entries in connection with the property dividend. Market value of share:
REQUIRED: On declaration date 140
Prepare journal entry for the declaration of the dividend and the subsequent payment. On issuance date 150
Problem 22-3: On January 1, 2020, Leilanie Company reported the following
shareholders' equity: REQUIRED:
Prepare journal entries assuming the Board of Directors declared:
Share capital 1,500,000 Problem 22-6: On January 1, 2020. Easy Company had ordinary and preference 1. A share dividend from unissued share capital of one share for each ten
Share premium 3,000,000 shares outstanding. shares outstanding.
Retained earnings 5,000,000 2. A share dividend from the treasury shares of one share for each ten shares
The incorporators or original shareholders own ten ordinary shares but no preference outstanding. The cost of the treasury shares is capitalized.
The entity had 400,000 authorized shares of P5 par value, of which 300,000 shares shares.
were issued and outstanding.
On March 1, 2020, the entity acquired 50,000 shares for P10 per share to be held as On December 31, 2020, the entity declared dividends on Trdinary shares payable on Problem 22-9: Michelle Company showed the following data:
treasury. July 1, 2021. Preference share capital, par value P20, 100,000 shares
The shares were originally issued at P8 per share. The entity used the cost method authorized, 50,000 shares issued 1,000,000
to account for treasury shares. The entity decided to give the ordinary shareholders a between receiving a cash Ordinary share capital, par value P10, 200,000 shares
On July 1, 2020, the entity declared a property dividend of inventory payable on dividend of P500,000 per share or property dividend in the form of a noncash asset. authorized, 100,000 shares issued 1,000,000
March 1, 2021. Retained earnings 2,000,000
The inventory had a P1,200,000 carrying amount and a fair value of P1,500,000 on The noncash asset is a standard model from the car fleet. Each car has a fair value of Market value of share on date of declaration:
July 1, 2020, P1,800,000 on December 31, 2020 and P2,000,000 on March 1, 2021. P600,000 and carrying amount of P400,000. Preference share 30
The net income for 2020 was P3,000,000. Ordinary share 15
The entity estimated that 80% of the ordinary shareholders will take the option of the
REQUIRED: cash dividend and 20% will elect for the noncash asset. REQUIRED:
Prepare journal entries for 2020 and 2021 in connection with treasury shares, For each of the following, prepare journal entries on the date of declaration and date of
property dividend and net income. REQUIRED: payment:
1. Prepare journal entries for 2020 and 2021 assuming the shareholders have chosen a. A 10% ordinary share dividend is declared on ordinary share.
the cash alternative. b. A 50% ordinary share dividend is declared on ordinary share.
Problem 22-7: Valerie Company showed the following data: 2. Prepare journal entries for 2020 and 2021 assuming the shareholders have chosen c. A 10% ordinary share dividend is declared on both ordinary and preference share.
Share capital, par value P100, 50,000 shares issued 5,000,000 the noncash alternative and the fair value of the car did not change. d. An ordinary share dividend is declared whereby each ordinary shareholder shall
Share premium 200,000 receive one ordinary share for every five shares held.
Retained earnings 2,000,000
Market value of share on declaration date 150 Problem 22-4: On October 1, 2020, Greece Company declared a property dividend of In view of the ratio of new shares to old shares, it is necessary that fractional share
Market value of share on distribution date 170 machinery payable on April 1, 2021. warrants be issued to various shareholders calling for 3,000 shares.
REQUIRED: The carrying amount of the machinery is P4,000,000 on October 1, 2020. Only 90% of the warrants are turned in and the remainder lapsed
For each of the following, prepare journal entries on the date of declaration and date
of payment: The machinery had the following fair value:
1. A 20% share dividend is declared. October 1, 2020 3,800,000
2. A 10% share dividend is declared. December 31, 2020 3,700,000
April 1, 2021 3,500,000

REQUIRED:
Prepare journal entries for 2020 and 2021 in connection with the property dividend.
Problem 22-10: National Company provided the following transactions: Problem 23-2: The board of directors of Mazda Company decided to embark on a Problem 23-4: On January 1, 2020, Marimar Company reported the following
2020 substantial plant expansion. shareholders' equity:
Sept. 15 Declared a 20% share dividend on 100,000 share par value P10. To demonstrate the need to retain assets in the entity, the board agreed on December
The shares were originally sold at 15. 31, 2020 to authorize an appropriation of retained earnings in the amount of Share capital, P100 par 6,000,000
Oct. 15 Distributed the share dividend declared on September 15 which included P5,000,000, the anticipated cost of plant expansion. Share premium 500,000
fractional warrants for 2,000 shares. Retained earnings 1,800,000
Dec. 1 One thousand five hundred shares were issued for fractional warrants. The plant was partially constructed on December 31, 2021, and the board decided to
The remaining warrants expired. reduce the appropriation by P3,000,000, the cost incurred to date. Transactions during the year and other information relating to shareholders' equity
accounts were as follows:
2021 Finally, in July 2022, the plant was completed and the remaining portion of the
Sept. 15 Declared scrip dividend of P2 per share payable on November 15, 2021 appropriation was removed. 1. On January 26, the entity reacquired for cash 5,000 shares for P110 per share.
Problem 23-5:
with On January
interest at 12%.1, 2020, Nissan Company had an ordinary share capital Problem 23-7: Subic Company has suffered substantial operating losses for several 2. On April
Problem 4, Bacolod
23-8: the entityCompany
sold for cash 3,000the
approved shares of treasury
following for P140 at
reorganization peryear-end:
share.
Nov.of154,000,000 authorized
Paid the shares with P20 par value, of which 1,000,000 shares were
scrip dividend. years.
REQUIRED: 3. On June 1, the entity declared a cash dividend of P20 per share, payable July 5,
Dec.issued
1 and outstanding.
Declared a dividend of 1 share of Sharp Company on every share of Prepare
The entity's
journal
ability
entries
to service
to record,
debtsreduce
and pay
andoperating
finally remove
expenses
the appropriation.
has been impaired. 1.toThe
shareholders
preferenceofshare record on July
capital is to1.be exchanged P2.000,000 of 10% debenture
National Company owned. Consequently, the owners, and creditors have decided to execute a quasi- 4. On November 1, the entity declared a 2 for 1 split and changed the par value
bonds.
The shareholders'
Sharp Companyequityshares
on January 1, 2020
are carried at areveal following
cost of P3 per balances:
share and the reorganization. 2.from P100istotoP50.
Goodwill On November
be written off. 20, shares were issued for the share split.
Problem 23-3: of
Onfinancial
Januaryposition
1, 2020,ofSusan
Subic Company
Company disclosed the following is as
Ordinary sharevalue
market capital
is P4 per share. 20,000,000 The statement P to the reorganization 3.5.The
On property,
Decemberplant 5, 4,000 shares were
and equipment areissued in exchange
appraised for a expert
independent secondathand
a
shareholders' equity: equipment. costThe equipment originally
Share
31 premium
Distributed the Sharp Company shares to shareholders.6,000,000
The market value follows: replacement of P12,000,000. The cost
SECP400,000,
approved was carried by the
the revaluation previous
of the property
Retained earnings
of Sharp Compass share is P6. 5,000,000 owner
and at a carrying
equipment to giveamount of the
effect to P200,000 and was fairly valued at P260,000.
reorganization.
Share capital, P100 par, 100,000 shares authorized,
ASSETS 4.6.The
Netresulting
income for the is
deficit current
to be year
offsetwas P1,730,000.
against the revaluation surplus.
Transactions during the year and other information relating to shareholders' equity
REQUIRED: Cash50,000 shares issued 5,000,000
200,000 7. Appropriated retained earnings equal to the cost of treasury shares.
accounts
Prepare were:
journal entries to record the transactions. Share premium
Accounts receivable 400,000
300,000 Statement of financial position at year-end
Retained
Inventory earnings 1,500,000
500,000 REQUIRED:
1 On January 5, the entity issued at P54 per share, 100,000 preference shares with Property, plant and equipment 9,900,000 a. Prepare journal entries to record theAssets transactions.
During the current year, the entity had the following transactions: (3,100,000) b. Prepare a statement of changes in equity for the year ended December
P50 par value and 9% cumulative. Each preference share is convertible, at the Accumulated depreciation Cash 425,00031, 2020.
1. In February, the entity reacquired 6,000 shares for P90 per share. c. Present
option of the holder, into two ordinary shares. The entity had 400,000 authorized Goodwill 1,200,000 Other currenttheassets
shareholders' equity on December 31, 204 1,325,000
preference shares. 2. In June,
Total assetsthe entity sold 3,000 shares of its treasury for P120 per9,000,000
share.
Problem 23-1: As a result of an agreement with bondholders, and Malice Company is Property, plant and equipment 8,000,000
2. OntoFebruary 1, the entity reacquired 10,000 3. In September each shareholder was issued for each share held one stock right to
required appropriate earnings of P200,000 at theordinary shares
end of each at P32 year
calendar per share.
for the purchase two additional shares AND
for P140 per share. The rights expire on December
Less: accumulated
Problem 23-6: Currentdepreciation
conditions warrant that 2,000,000
the Peach Company 6,000,000
shoula undergo
3. On April 30,
years 2016 to 2020. the entity sold 250,000 ordinary shares at P34 per share. LIABILITIES SHAREHOLDERS' EQUITY Goodwill
a quasi-reorganization at year-end. 500,000
4. On June 18, the entity declared a cash dividend of P2 per ordinary share, 31, 2020.
Accounts payable 1,100,000 Total assets 8,250,000
payable on July 12, to upon
shareholders of of
record on July indebtedness
1. 4. In payable
Note October, 10,000 stock rights were exercised when the market value was P150
500,000
At the beginning of 2021, liquidation the bonded of P1,000,000, per share. Selected items prior to the quasi-reorganization are:
5. On November 19, the entity sold 5,000
the retained earnings appropriation is canceled. shares of treasury for P42 per share. Mortgage payable 4,200,000 1. Inventory was recorded Liabilities
at cost and Shareholders'
of P3,250,000. TheEquity
fair value of the inventory was
6. On December 15, the entity declared the yearly cash dividend on preference 5. On December
Ordinary 15, 2020,
share capital, P100the entity
par, declared
50,000 sharesthe first cash dividend to shareholders
5,000,000 Current liabilities
P3,000,000. 2,000,000
of P20premium
per share, payable on January 10, 2021, to shareholders of1,000,000 record on
Thisshare capital,bypayable
is followed on January
the declaration and14,
the2021
issuetoofshareholders
a 30% shareofdividend
record on
on 250,000 Share
Decemberearnings
31, 2020.
Preference
2. Property,share
plantcapital, 12% cumulative,
and equipment P100 par
were recorded at P6,000,000 net 1,500,000
of the
December 31, 2020
outstanding shares with P10 par value. The market value is P15 per share. Retained (2,800,000) Ordinary sharedepreciation.
accumulated capital, 50,000 The shares, P100
fair value of par 5,000,000
the property was P5,000,000
7. The net income for the current year was P3,500,000. 6. Onliabilities
Total December and21, 2020, the entity
shareholders' formally retired 2,000 treasury
equity shares.
9,000,000 Share
3. Thepremium
par value of the share capital is to be reduced from P10 to P5 750,000
per share.
8. Appropriated retained earnings equal to the cost of treasury shares. 7. Net income for the current year was P540,000.
REQUIRED: Retained earnings (1,000,000)
8. Appropriated
The retained
entity provided earningsinformation
the following equal to the
in cost of treasury
relation shares.
to the quasi-reorganization:
Prepare all indicated entries for the annual appropriation of retained earnings, Total Liabilities and
Shareholders' shareholders'
equity consisted of:equity 8,250,000
Required:
payment of bonds payable, cancelation of appropriation and issuance of share
dividend.a. Prepare journal entries to record the transactions 1.REQUIRED:
An independent appraisal of the entity's inventory reveals goods with carrying Required:
Share capital, par value P10 per share,
b. Prepare a statement of changes in equity for 2020. amounta. of P150,000
Prepare journal entries toand
to be obsolete record the transactions.
worthless. a. Prepare
authorized, journal
issued andentries to give effect to the reorganization.
outstanding
b. Prepare a statement of changes in
2. Equipment costing P2,000,000 and with accumulated equity for depreciation
the year ended
of P1,200,000
c. Present the shareholders’ equity on December 31, 2020. 350,000 sharesa statement of financial position after the reorganization
b. Prepare 3,500,000
is expected December 31,P300,000.
to be sold for 2020. However, the holder of the note payable Share premium 800,000
Present
agreesc.to accept thethe shareholders'
equipment in full equity on December
satisfaction 31, 2020
of the note. Retained earnings (deficit) ( 450,000)
3. The goodwill is to be written off as loss. 3,850,000
4. The mortgage holder agrees to accept 40,000 new preference shares with P100 4. The resulting deficit balance is to be offset against the share premium.
par value in satisfaction of the liability.
5. The par value of the ordinary share is reduced to P20. REQUIRED:
6. The resulting deficit is offset against the share premium. a. Prepare journal entries to give effect to the reorganization.
REQUIRED:
b. Present the shareholders' equity after the reorganization
a. Prepare journal entries to give effect to the quasi-reorganization.
b. Prepare a statement of financial position immediately after the reorganization.