Shareholder’s Equity

PROBLEM NO. 1 Comprehensive Problem

You have been asked to audit the Tanya Company. During the course of your audit, you are asked to
prepare comparative data from company’s inception to the present. You have determined the following:
A. Tanya charter became effective on January 2, 2014 when 20,000 shares of ₱10 ordinary shares
and 10,000 shares of 7%cumulative, nonparticipating, preference shares were issued. The
ordinary shares were sold at ₱12 per share, and the preference shares were sold at par value of
₱100 per share.
B. Tanya was unable to pay preference dividends at the end of first year. The owners of preference
share agreed to accept 2 ordinary shares for every 50 preference shares owned in discharge of the
preference dividends due on December 31, 2014. The shares were issued on January 2, 2015. The
fair market value was ₱30 for ordinary shares at the date of issue.
C. Tanya acquired all the outstanding shares of Akinka Corporation on May 1, 2016 in exchange for
10,000 ordinary shares of Tanya.
D. Tanya split its ordinary shares 3 for 2 on January 1, 2017, and 2 for 1 on January 1, 2018.
E. Tanya offered to convert 20% of the preference shares to ordinary shares on the basis of 2
ordinary shares for 1 preference share. The offer was accepted, and the conversion was made on
July 1, 2018.
F. No cash dividends were declared on ordinary until December 31, 2016. Cash dividends per share
of ordinary share shares were declared and paid as follows:
JUNE DEC.31
30
2016 - ₱3.20
2017 ₱1.50 ₱2.50
2018 ₱1.25 ₱1.00

Questions:
Based on the preceding information, determine the following:
1. The number of shares outstanding on December 31, 2016
ORDINAR PREFEREN
Y CE
a. 30,000 10,000
b. 30,200 9,800
c. 35,000 10,000
d. 30,400 10,000

2. The number of shares outstanding on December 31, 2017

ORDINAR PREFEREN
Y CE
a. 45,300 10,000
b. 45,600 10,000
c. 76,000 10,000
d. 52,500 9,800

3. The number of shares outstanding on December 31, 2018

ORDINAR PREFEREN
Y CE
a. 95,200 8,000
b. 49,600 10,000
c. 93,200 7,840
d. 93,200 8,000

4. The amount of cash dividend declared and paid to shareholders in 2017

a. ₱182,400 c.   ₱159,600
b. ₱83,600 d.   ₱121,600

5. The amount of cash dividend declared and paid to shareholders in 2018

a. ₱214,200 c.   ₱153,200
b. ₱217,200 d.   ₱209,200 (PhilCPA adapted)