Chapter 10

Shareholders’ Equity (Part 1)

PROBLEM 3: EXERCISES

1. Solutions:
(1)

Shares sold (40,000 x ₱28) ........................... ₱1,120,000

Shares issued in payment of debt (600 x ₱31) ......... 18,600
Net income ........................................... 142,000
Total liabilities .................................... 82,000
₱1,362,600
Less dividends ....................................... 36,000
Total liabilities & stockholders' equity ............. ₱1,326,600

(2)
₱1,326,600 - ₱82,000 = ₱1,244,600

(3)
₱1,120,000 + ₱18,600 = ₱1,138,600

(4)
40,600 shares x ₱15 = ₱609,000

(5)
40,600 shares x ₱15 = ₱609,000

(6)
120,000 - 40,600 = 79,400 shares

(7)
₱1,138,600 - ₱609,000 = ₱529,600

2. Solution:

Aug. 10 Treasury Stock ..................... 1,072,000

  Cash ............................. 1,072,000
Nov. 21 Cash (8,000  ₱145) ................ 1,160,000
Treasury Stock ..................... 1,072,000
Paid-In Capital from Sale of
  Treasury Stock (8,000 x ₱11) ... 88,000
3. Solutions:

(1)
Cash (5,000 x ₱105) ......................... 525,000
  Common Stock Warrants ..................... 66,818
  Preferred Stock (5,000 x ₱25) ............. 125,000
  Paid-In Capital in Excess of Par-Preferred 333,182
   Stock ...................................

Value assigned to warrants:

    14/110 x ₱105 x 5,000 = ₱ 66,818

Value assigned to preferred stock:

    96/110 x ₱105 x 5,000 = ₱458,182

(2)
Common Stock Warrants ....................... 66,818
Cash (10,000 x ₱30) ......................... 300,000
  Common Stock (10,000 x ₱10) ............... 100,000
  Paid-In Capital in Excess of Par-Common 266,818
   Stock ....................................

(3)
Common Stock Warrants (70% x ₱66,818) ....... 46,773
Cash (7,000 x ₱30) .......................... 210,000
  Common Stock (7,000 x ₱10) ................ 70,000
  Paid-In Capital in Excess of Par-Common
Stock .................................... 186,773

Common Stock Warrants (30% x ₱66,818) ....... 20,045

  Paid-In Capital from Expired Stock Warrants 20,045
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