1/24/22, 11:35 AM [Solved] Reference: Auditing problems, Cabrera You were assigned to audit the shareholders' equity of Poveous

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Reference: Auditing problems, Cabrera You were assigned to audit...

Reference: Auditing problems, Cabrera

You were assigned to audit the shareholders' equity of Poveous Corp. for the year ended December 
31, 2020. Poveous Corp. was incorporated in early 2019 when it was authorized by SEC to issue 
500,000 ordinary shares (P10 par) and 100,000 convertible preference shares (P20 par). The 
following schedule reflects the company's capital balances as of December 31, 2019: 
Ordinary shares, 100,000 shares issued during the company's 
 incorporation in exchange of a land with a fair value of P1.4M.
P1,800,000
Preference shares, 50,000 shares issued during the company's 
 incorporation at P50 per share. Each preference share is convertible to 
 four ordinary shares.
2,500,000
Retained earnings, which is the company's net income in 2019 540,000
Total shareholders' equity P4,840,000
Your inquiries and investigation revealed the following transactions, which occurred in 2020:
a. On February 12, 20,000 preference shares were converted to ordinary shares.
b. On August 15, the company reacquired 20,000 ordinary shares (from the 2019 issue) at P22 
per share and reverted them to treasury since it intends to reissue the same.
c. On October 11, the company reissued 4,000 treasury shares at P28 per share.
d. On November 5, the company reissued 6,000 treasury shares at P19 per share.
e. On December 1, the company retired 5,000 treasury shares and reverted them to unissued 
basis.
f. On December 15, the company reissued 2,000 treasury shares in lieu of an equipment with a 
fair market value of P62,000.
g. The company registered an adjusted net income in 2020 at P830,000.

Based on the information above, determine the adjusted balance of the following as of Dec. 31, 2020:
11. Ordinary Shares
12. Preference Shares
13. Share premium - Ordinary shares
14. Share premium - Preference shares
15. Share premium - Treasury shares
16. Retained earnings - Unappropriated
17. Total stockholders' equity 

Accounting Business Cost Accounting COST ACCOU 223 섈 쉋

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   Ordinary Shares 

 Dec. 31, 2019 Balances  1,000,000.00 

 Journal Entry A  800,000.00  

 Journal Entry E  ( 50,000.00 )

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1/24/22, 11:35 AM [Solved] Reference: Auditing problems, Cabrera You were assigned to audit the shareholders' equity of Poveous Corp. for the year ended December 31, 2... | Course Hero

 Dec. 31, 2020 Balances 

Find 1,750,000.00 
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Question  Preference Shares 
Answer & Explanation Related Questions Related Textbooks Related Courses

 Dec. 31, 2019 Balances  1,000,000.00 

 Journal Entry A  ( 400,000.00 )

 Dec. 31, 2020 Balances  600,000.00 

   Share Premium - Ordinary Shares 

 Dec. 31, 2019 Balances  800,000.00 

 Journal Entry A  200,000.00 

 Journal Entry E  ( 40,000.00 )

 Dec. 31, 2020 Balances  960,000.00 

   Share Premium - Preference Shares 

 Dec. 31, 2019 Balances  1,500,000.00 

 Journal Entry A  ( 600,000.00 )

 Dec. 31, 2020 Balances  900,000.00 

   Treasury Shares 

 Dec. 31, 2019 Balances   

 Journal Entry B  440,000.00  

 Journal Entry C  ( 88,000.00 )

 Journal Entry D  ( 132,000.00 )

 Journal Entry E  ( 110,000.00 )

 Journal Entry F  ( 44,000.00 )

 Dec. 31, 2020 Balances  66,000.00 

   Share Premium - Treasury Shares 

 Dec. 31, 2019 Balances   

 Journal Entry C  24,000.00 

 Journal Entry D  ( 18,000.00 )

 Journal Entry E  ( 6,000.00 )

 Journal Entry F  18,000.00 

 Dec. 31, 2020 Balances  18,000.00 

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1/24/22, 11:35 AM [Solved] Reference: Auditing problems, Cabrera You were assigned to audit the shareholders' equity of Poveous Corp. for the year ended December 31, 2... | Course Hero

   Retained Earnings - Unappropriated 

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 Dec. 31, 2019 Balances  540,000.00 

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 Journal Entry E  ( 14,000.00 )

 Journal Entry G  830,000.00 

 Dec. 31, 2020 Balances  1,356,000.00 

 Total Shareholders' Equity   

 Ordinary Shares  1,750,000.00 

 Preference Shares  600,000.00  

 Share Premium - Ordinary Shares  960,000.00  

 Share Premium - Preference Shares  900,000.00  

 Treasury Shares  ( 66,000.00 )

 Share Premium - Treasury Shares  18,000.00 

 Retained Earnings - Unappropriated  1,356,000.00 

 Total Shareholders' Equity  5,518,000.00 

 Journal Entries 2019       

   Accounts   Debit   Credit   Computation 

 1.  Land           1,000,000 + 800,000 

   1,800,000.00 

   Ordinary Shares              100,000 shares x 10 par 

 1,000,000.00 

   Share Premium - Ordinary               100,000 shares x 8 excess value 

Shares   800,000.00 

         

 2.  Cash           1,000,000 + 1,500,000 

   2,500,000.00 

   Preference Shares              50,000 shares x 20 par 

 1,000,000.00 

   Share Premium - Preference             50,000 shares x 30 excess value 

Shares   1,500,000.00 

         

 3.  Income Summary             

  540,000.00  

   Retained Earnings                

 540,000.00 

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1/24/22, 11:35 AM [Solved] Reference: Auditing problems, Cabrera You were assigned to audit the shareholders' equity of Poveous Corp. for the year ended December 31, 2... | Course Hero

    Find study resources       숿

 Journal Entries 2020       

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   Accounts   Debit   Credit   Computation 

 a.  Preference Shares             20,000 shares x 20 par 

  400,000.00  

   Share Premium - Preference            20,000 shares x 30 excess value 

Shares  600,000.00  

   Ordinary Shares                20,000 shares x 4 x 10 par 

 800,000.00 

   Share Premium - Ordinary               balancing figure 

Shares   200,000.00 

         

 b.  Treasury Shares             20,000 shares x 22 cost 

  440,000.00  

   Cash                20,000 shares x 22 cost 

 440,000.00 

         

 c.  Cash                112,000.00    4,000 shares x 28 issue price 

   

   Treasury Shares                 4,000 shares x 22 cost 

 88,000.00 

   Share Premium - Treasury                4,000 shares x 6 excess value 

Shares   24,000.00 

         

 d.  Cash                114,000.00    6,000 shares x 19 issue price 

   

   Share Premium - Treasury              6,000 shares x 3 deficit 

Shares  18,000.00 

   Treasury Shares                6,000 shares x 22 cost 

 132,000.00 

         

 e.  Ordinary Shares               5,000 shares x 10 par 

  50,000.00 

   Share Premium - Ordinary               5,000 shares x 8 excess (original

40,000.00  issuance) 

   Share Premium - Treasury               remaining share premium from TS 

Shares  6,000.00 

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1/24/22, 11:35 AM [Solved] Reference: Auditing problems, Cabrera You were assigned to audit the shareholders' equity of Poveous Corp. for the year ended December 31, 2... | Course Hero

   Retained
FindEarnings 
study resources              balancing figure  숿
14,000.00 

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   Treasury Shares                5,000 shares x 22 cost 
 110,000.00 

         

 f.   Equipment               

62,000.00 

   Treasury Shares                 2,000 shares x 22 cost 

 44,000.00 

   Share Premium - Treasury                excess 

Shares   18,000.00 

         

 g.  Income Summary             

  830,000.00  

   Retained Earnings                

 830,000.00 

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