Honda company provided the following data during the first year of operations:

Requirement 1
a. Sold 30,000 preference shares, 12%, P100 par, at P140.

Cash (30,000*P140) 4,200,000

Preference share capital (30,000*P100) 3,000,000

Share premium-preference share 1,200,000

b. Sold 100,000 ordinary shares of P50 par at P55.

Cash (100,000*55) 5,500,000

Ordinary share capital (100,000*50) 5,000,000

Share premium-Ordinary share 500,000

c. Purchased and retired 10,000 preference shares at P120.

Preference share (10,000*100) 1,000,000

Share premium-preference share 400,000

Cash (10,000*120) 1,200,000

Share premium-retirement 200,000

d. Purchased 15,000 ordinary shares at P52 to be held as treasury.

Treasury shares (15,000*52) 780,000

Cash 780,000

e. Sold 10,000 treasury ordinary shares at P60.

Cash (10,000*60) 600,000

Treasury shares (10,000*52) 520,000

Share premium-treasury shares 80,000

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 f. Shareholders donated to the entity 20,000 ordinary shares when shares had a market price of P60. One
half of these shares were sold for P65.

Cash {(20,000/2)*65} 650,000

Donated capital 650,000

g. Net income for the year was P3,000,000.

Profit and loss 3,000,000

Retained earnings 3,000,000

h. Appropriated retained earnings equal to the remaining cost of treasury shares.

Retained earnings 260,000

Retained earnings appropriated for treasury shares 260,000

(780,000-520,000)

Requirement 2

Honda Company
Shareholders’ Equity

Preference share capital, 12%, P100 par P2,000,000

Ordinary share capital, P50 par and 100,000 shares issued

of which 5,000 shares are in treasury and 10,000 shares are donated 5,000,000

Share premium:

Preference share P800,000

Retirement of preference share 200,000

Ordinary shares 500,000

Treasury shares 80,000

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 Donated capital 650,000 2,230,000

Retained earnings:

Unappropriated 2,740,000

Appropriated for treasury share 260,000 3,000,000

Treasury shares, at cost (260,000)

Shareholders’ Equity P11,970,000

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