Problem 9.

1-1 Brook Company

Required: (10) Prepare the journal entries to record the transactions using the memorandum method.

GENERAL JOURNAL
DATE Page Number 01
DESCRIPTION PR
2020 Debit Credit
1 Authorized to issue share capital
Preference Share Capital - P100 par, 30,000 shares 3,000,000.00
Ordinary Share Capital - P50 par, 100,000 shares 5,000,000.00
Total Authorize Share Capital 8,000,000.00
Memorandum entry

2 Cash 2,400,000.00
Ordinary share capital 2,000,000.00
Share premium - Ordinary Share 400,000.00
To record issue of 40,000 ordinary share at 60 per share

3 Cash 1,200,000.00
Preference share capital 1,000,000.00
Share premium - Preference Share 200,000.00
To record issue of 10,000 preference share
at 120 per share

4 Subsciption receivable 1,000,000.00

Subcribed preference share capital 1,000,000.00
To record subcription of 10,000 preference share at par

5 Cash 400,000.00
Subcription receivable 400,000.00
To record payment for above subscription of preference
share

6 Legal expenses 100,000.00

Preference share capital 100,000.00
To record 1000 prefrence share as payment for legal fees

7 Property, plant and equipment 1,300,000.00

Ordinary share capital 1,000,000.00
Share premium - Ordinary share 300,000.00
To record 20,000 ordinary share issued for PPE

8 Subsciption receivable 750,000.00

Subcribed Ordinary share capital 750,000.00
To record 15,000 subscription for ordinary share at par

9 Cash 300,000.00
Subscription receivable 300,000.00
To record 40% payment for Ordinary share
capital subscription

10 Cash 600,000.00
Subscription receivable 600,000.00
Subcribed preference share capital 1,000,000.00
Preference share capital 1,000,000.00
To record full payment of the remaining balance for the
subcription of preference share

11 Profit and loss 2,000,000.00

Retained earnings 2,000,000.00
To record net income for the current year
 Required: (10) Compute for the balance of the following:

a. Ordinary share capital 2,000,000.00

1,000,000.00
3,000,000.00

b. Preference share capital 1,000,000.00

1,000,000.00
100,000.00
2,100,000.00

c. Share premium – ordinary shares 400,000.00

300,000.00
700,000.00

d. Share premium – preference shares 200,000.00

e. Subscriptions receivable 450,000.00

Problem 9.1-2 Ocean Company

Required: 1. Prepare the journal entry assuming that 5,000 preference shares are converted:
a. Preference shares are convertible into ordinary shares on a share-for-share basis.

GENERAL JOURNAL
DATE PR Page Number 01
DESCRIPTION
2020 Debit Credit
Prefrence share (5,000*100) 500,000.00
Share Premium - Preference share ((5,000/50,000)*500,000) 50,000.00
Ordinary share (5,000*50) 250,000.00
Share Premium - Ordinary share 300,000.00
To record share to share conversion of shares

b. Each preference share is convertible into 4 ordinary shares.

GENERAL JOURNAL
DATE PR Page Number 01
DESCRIPTION
2020 Debit Credit
Prefrence share (5,000*100) 500,000.00
Share Premium - Preference share ((5,000/50,000)*500,000) 50,000.00
Retained earnings 450,000.00
Ordinary share ((5,000*4)*50) 1,000,000.00
To record convertion of preference share into 4 ordinary share per PS

Required: 2. Prepare journal entry assuming 5,000 preference shares are callable and called in for payment at:
a. Php 120

GENERAL JOURNAL
DATE PR Page Number 01
DESCRIPTION
2020 Debit Credit
Prefrence share (5,000*100) 500,000.00
Share Premium - Preference share ((5,000/50,000)*500,000) 50,000.00
Retained Earnings 50,000.00
Ordinary share (5,000*120) 600,000.00
To record callable of preference share to ordinary share at 120
 b. Php 80

GENERAL JOURNAL
DATE PR Page Number 01
DESCRIPTION
2020 Debit Credit
Prefrence share (5,000*100) 500,000.00
Share Premium - Preference share ((5,000/50,000)*500,000) 50,000.00
Cash (5,000*80) 400,000.00
Share premium - redemption (5,000*20) 150,000.00
To record redeption of preference share

Problem 9.1-3 River Company

Required: Compute for the amount of the proceeds that should be allocated to the preference shares.

Ordinary share (10,000*360) 3,600,000.00

Preference share (20000*270) 5,400,000.00
Total market value 9,000,000.00

Fraction 54 / 90
Multipy: Total consideration 8,000,000.00
Allocated proceeds 4,800,000.00

Required: Compute for the amount of the proceeds that should be allocated to the ordinary shares.

Ordinary share (10,000*360) 3,600,000.00

Preference share (20000*270) 5,400,000.00
Total market value 9,000,000.00

Fraction 36 / 90
Multipy: Total consideration 8,000,000.00
Allocated proceeds 3,200,000.00

Required: Determine the amount of the share premium from the issuance of preference shares.

Proceeds from Preference share 4,800,000.00

Par value of Preference share (20,000*200) 4,000,000.00
Share premium- preference share 800,000.00

Required: Determine the amount of the share premium from the issuance of the ordinary shares.

Proceeds from Ordinary share 3,200,000.00

Par value of Ordinary share (10,000*200) 2,000,000.00
Share premium- ordinary share 1,200,000.00

Problem 9.1-4 X Corporation

Required: Compute for the par value per share of the ordinary share with par value

Total Amout of Ordinary share with par 50,000,000.00

No. of shares of Ordinary share with par 500,000.00
Ordinary share - par value 100.00

Required: Compute for the stated value of ordinary share, no par value

Total Amout of Ordinary share with no par 10,000,000.00

No. of shares of Ordinary share with no par 500,000.00
Ordinary share - no par 20.00