BM1705

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Accounting for Corporation (51 points)

Mac Corporation’s capital stock transactions for the month of January are summarized below:

Jan. 01 The corporation was authorized to issue 50,000 preference shares with a par value of P150 per
share and 100,000 ordinary shares with a stated value of P100 per share. The minimum
requirements as to the subscriptions and payment were met by the five (5) incorporators.
03 Cash subscription received, 20,000 preference shares at P160 per share and 30,000 ordinary
shares at P102 per share.
05 Issued 200 ordinary shares to a lawyer who drafted the Articles of Incorporation and Corporate
By-Laws whose bill for the services rendered was P25,000.
10 Received subscriptions for 10,000 ordinary shares at P104 per share, receiving a 25% down
payment.
12 Received subscriptions for 5,000 preference shares at P155 per share, receiving a down
payment of 40%.
25 Collected the balance due from the subscriptions received on January 10 and issued the
corresponding stock certificates.
26 Issued 2,000 ordinary shares in exchange for a 150 square meter lot, appraised at P220,000.
27 Issued 500 preference shares in exchange for equipment with a market price of P80,000.
28 Issued 300 shares to a bank as payment for a loan made earlier in the amount of P38,000.
30 Collected the balance of the subscriptions on January 12 with the corresponding stock certificates
being issued.

Using the memo entry method, prepare the journal entries to record the aforementioned transactions and the
Shareholders’ Equity section of the Balance Sheet.
Memo Entry Method

MAC CORPORATION
Memo Entry
DATE
Jan. 01 Preference Share Capital Ordinary Share Capital
Authorized 50,000 with par value of P150 per share Authorized 100,000 with no par value, with stated value
of P100 per share

03 Cash P 6,260,000
Subscribed Preference Share Capital (20,000 x P150) P 3,000,000
Subscribed Ordinary Share Capital (30,000 x P100) 3,000,000
Preference Share Premium (20,000 X 10) 200,000
Ordinary Share Capital Excess of Stated Value (30,000 x 2) 60,000

05 Legal Fees 25,000

Ordinary Share Capital (200 x 10) 20,000
Ordinary Share Capital Excess of Stated Value 5,000

10 Cash (1,040,000 x 25 %) 260,000

Ordinary Subscription Receivable (1,040,000 x 75%) 780,000
Subscribed Ordinary Share Capital (10,000 x 104) 1,040,000

12 Cash (775,000 x 40%) 310,000

Preference Subscription Receivable (775,000 x 60%) 465,000
Subscribed Preference Share Capital (5,000 x 155) 775,000

25 Cash (1,040,000 x 75%) 780,000

Ordinary Subscription Receivable 780,000

Subscribed Ordinary Share Capital 1,040,000

Ordinary Share Capital 1,040,000

26 Land 220,000
Ordinary Share Capital (200 x 100) 200,000
Ordinary Share Capital Excess of Stated Value 20,000

27 Equipment 80,000
Preference Share Capital (500 x 150) 75,000
Preference Share Premium 5,000

28 Loan Payable 38,000

Ordinary Share Capital (300 x 100) 30,000
Ordinary Share Capital Excess of Stated Value 8,000

30 Cash (775,000 x 60%) 465,000

Preference Subscription Receivable 465,000

Subscribed Preference Share Capital 775,000

Preference Share Capital 775,000
Memo Entry Method

Preference Share Capital, Authorized 50,000 shares with a par P 850,000

value of P150 per share, Issued 5,500 shares
Subscribed Preference Share Capital P 3,000,000
Less: Preference Subscription Receivable 0 3,000,000
Paid-in Preference Share Capital 3,850,000
Ordinary Share Capital, Authorized 100,000 shares, stated value, 1,290,000
P100, Issued 12,500 shares
Subscribed Ordinary Share Capital P 3,000,000
Less: Ordinary Subscriptions Receivable 0 3,000,000
Paid-in Ordinary Share Capital 4,290,000
Total Paid-in Share Capital 8,140,000
Add: Preference Share Premium 205,000
Ordinary Share Capital in Excess of Stated value 93,000 298,000
TOTAL SHAREHOLDERS' EQUITY P 8,438,000

Rubrics for Grading:

Journal Entries: 3 points for each correct journal entry

Shareholders’ Equity Section

CRITERIA PERFORMANCE INDICATORS POINTS
Content Correct accounts and amounts used 12
Sums Computed final amounts are correct/balanced 3
Total 15

Reference:
Abeleda, N. S. (2012). Simplified accounting for partnership and corporation. Parañaque: Nelson Publications.

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