BAFACR4X

Intermediate Accounting III

September 22, 2020
PROBLEM SET NO. 11
Retained Earnings

Problem 11.1 CASH DIVIDENDS

On December 8, 2020, Jackie Company declared P1.80 cash dividend per P50-par value ordinary shares for
shareholders of record on December 20, 2020. The dividends are payable on January 5, 2020.

On December 20, 2020, the Ordinary Share Capital had a balance of P3,244,650. Treasury shares held as of the
same date is 2,783.

Journalize the foregoing transactions.

Problem 11.2 PROPERTY DIVIDENDS

On November 28, 2020, Pinxy Company declared dividends for shareholders on record of December 14, 2020.

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Each outstanding ordinary share will receive 10 shares of Noypi Company from the shareholdings of Pinxy
Company. There were 64,500 outstanding shares on the date of record. The dividend is to be paid on January

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5, 2021. The carrying amount of the investment to be distributed is P1,500,000.

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The fair value of the Noypi shares are as follows: P2.50 on November 28, P2.60 on December 14, P2.30 on
December 31 and P2.40 on January 5. rs e
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Journalize the following transactions.
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Problem 11.3 SHARE DIVIDENDS

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On December 9, 2020, Yellow Company declared a bonus issue to its holders of its P50-par ordinary shares
when the fair market value of each share is P114. Issued shares were 67,000 and outstanding shares were 63,520.
The shares were distributed on December 29, 2020. The cost of each treasury share is P90.
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Journalize the dividends assuming the independent scenarios:

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a. The bonus issue is 20%.

b. The bonus issue is 10%.
c. The bonus issue of 5% came from the treasury shares.
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d. The bonus issue of 10% resulted into fractional shares of 252. 130 full shares were subsequently issued.
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Problem 11.4 SCRIP DIVIDENDS

On November 30, 2020, Regional Company declared 2% scrip dividends on the outstanding 80,000 P100-par
ordinary shares payable on January 30, 2021. The interest on the scrip dividends is 5%.
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Journalize the foregoing transactions.

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 BAFACR4X
Intermediate Accounting III
September 22, 2020
PROBLEM SET NO. 11
Retained Earnings

Problem 11.5 LIQUIDATING DIVIDENDS

Ipers Company, a wasting asset entity, declares dividend for each year. The following are the account balance
for yearends 2019, 2020 and 2021 before declaration of dividends.
2019 2020 2021
Capital Liquidated 70,000 100,000 150,000
Accumulated Depletion 80,000 100,000 165,000
Retained Earnings ??? 160,000 200,000

Determine the composition of the dividends declared on 2020 and 2021.

Problem 11.6 APPROPRIATION

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On January 1, 2020, 20% of the Rescue Company’s retained earnings of P10,000,000 was appropriated for the

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construction of a new branch building. Cost of treasury shares held on the same date is P135,000. The following

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occurred during the year:

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 The building was completed at a total cost of P1,800,000.

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 Additional appropriations were made for the construction of a new satellite for P1,500,000.
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 12,000 treasury shares were held on yearend at a cost of P20 each.
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 P2,000,00 cash were restricted for the retirement of bonds payable due in 2021.
 Net Income for 2020 is P4,200,000.
 Dividends declared were P2,500,000.
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Determine the composition of the Retained Earnings on December 31, 2020.

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Problem 11.7 RETAINED EARNINGS

On January 1, 2020, the Retained Earnings of Panda Company had a balance of P2,800,000. The Share Capital
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account composed of 200,000 shares issued and outstanding for P1,000,000. The following chronologically
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occurred during the year:

 Reacquired 10,000 shares at P30 each to be held as treasury.
 A correction for the adjustment of the beginning balance of the Retained Earnings was made. The
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depreciation expense for 2019 was overstated by P150,000. The tax rate is 30%.
 Declared and issued 30% stock dividends.
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 Declared and paid P10 cash dividends.

The net income for 2020 is P3,000,000.
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Determine the composition of the following:

a. Retained Earnings
b. Issued Shares

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 BAFACR4X
Intermediate Accounting III
September 22, 2020
PROBLEM SET NO. 11
Retained Earnings

Problem 11.8 QUASI-REORGANIZATION

The Skinny Red Company has a deficit in retained earnings of P1,000,000. Business appears to be turning
around, so the president wants the company to go through a quasi-reorganization. The statement of financial
position of the company prior to the reorganization contains the following information:
Current assets 500,000
Land 1,500,000
Buildings, net 4,000,000
Liabilities 1,000,000
Ordinary share capital, P20 par value 6,000,000
Retained earnings (Deficit) (1,000,000)

As part of the quasi-reorganization, the current assets and buildings are to be written down by P100,000 and

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P300,000, respectively. Ordinary share capital is to be exchanged and will be restated at a legal capital of

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P4,000,000. The resulting additional paid in capital will be used to cancel the resulting deficit.

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a. Journal entries to record the quasi-reorganization.

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b. Prepare a statement of financial position immediately after the quasi-reorganization.
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