Illustrative Problem - Share Capital Transactions

Transactions Memorandum Method Jour
1. Authorization X Corporation was authorized to issue Unissued Share Capita

10,000 shares of ordinary with a par value of
P100 per share.
2. Subscription at par Susbcriptions Receivable xx Susbcriptions Receivab

Subscribed Share Capital xx
3. Collection on subscription Cash xx Cash

Susbcriptions Receivable xx
4. Issuance of certificate Subscribed Share Capital xx Subscribed Share Capit

Share Capital xx
5.Sale of shares for cash at par. Cash xx Cash

Share Capital xx
6. Sale of shares for above par. Cash xx Cash

Share Capital xx
Share Premium xx
7. Issuance of share for services Pre-operating Expenses xx Pre-operating Expense

received for organizing the Share Capital xx
corporation. Share Premium xx
8. Issuance of shares for noncash Equipment xx Equipment

transactions. Share Capital xx
Share Premium xx
Account Titles to be used if there are two classes of share capital
Memorandum Method Journal Entry Method
Subscriptions Receivable- Ordinary Unissued Ordinary Share Capital

Susbcribed Ordinary Share Capital Unissued Preference Share Capital
Subscriptions Receivable-Preference Authorized Ordinary Share Capital
Subscribed Preference Share Capital Authorized Preference Share Capital
Share Premium-Ordinary Share Premium-Ordinary
Share Premium-Preference Share Premium-Preference
Journal Entry method
Unissued Share Capital xx
Auhtorized Share Capital xx
xx

xx
xx
Share Premium xx
Pre-operating Expenses xx
Share Premium xx
Equipment xx
Share Premium xx
MEMORANDUM ENTRY METHOD JOURNA
Illustrative Problem :
1. ABC Corporation was authorized to issue
100,000 share capital with a par value of P100.
ABC Corporation was authorized to issue 100,000 share Unissued Share Capital
capital with a par value of P100.
2. Received subscriptions from various subscribers

of 25,000 shares at par with a 60% down payment.
Cash 1,500,000 Cash

Subscriptions Receivable 1,000,000 Subscriptions Receivable
Subscribed Share Capital 2,500,000
3. Collected the balance in No. 2 and issued

the corresponding stock certificates
Cash 1,000,000 Cash

Subscriptions Receivable 1,000,000
Subscribed Share Capital 2,500,000 Subscribed Share Capital

Share Capital 2,500,000
4. 20,000 shares were sold for cash at par value.

Cash 2,000,000 Cash
5. Received subscriptions from Mr. A

of 10,000 shares at P110 per share.
Subscriptions Receivable 1,100,000 Subscriptions Receivable

Share Premium 100,000
6. Collected ½ of the subscriptions in No. 5
Cash 550,000 Cash

Subscriptions Receivable 550,000
7. Collected in full the balance in No. 5.
Cash 550,000 Cash

Subscribed Share Capital 1,000,000 Subscribed Share Capital

8. Issued 1,000 shares for legal services
valued at P120,000.
Pre-Operating Expenses 120,000 Pre-Operating Expenses
Share Capital 100,000
9. Issued 2,000 shares for an equipment

having a fair market value of P230,000.
Equipment 230,000 Equipment
10. Received subscriptions of 5,000 shares

at P120.Collected 40% of the total subscriptions.
Cash 240,000 Cash

Subscriptions Receivable 360,000 Subscriptions Receivable
Subscribed Share Capital 500,000
11. Received merchandise in full

settlement of the subscriptions in No. 10
Merchandise 360,000 Merchandise

Subscribed Share Capital 500,000 Subscribed Share Capital

12. Issued 3,000 shares at P115 per share.

Cash ### Cash
Shareholders' Equity:
Share Capital:
Preference Share Capital xx
Subscribed Preference Share Capital xx
Less: Subscriptions Receivable xx xx xx
Ordinary Share Capital xx
Subscribed Ordinary Share Capital xx
Less: Subscriptions Receivable xx xx xx xx
Reserves:
Share Premium- Preference xx
Share Premium- Ordinary xx xx
Total Contributed Capital xx
Retained Earnings xx
Treasury Share Capital (xx)
Total Shareholders' Equity xx
JOURNAL ENTRY METHOD
Unissued Share Capital 10,000,000

Authorized Share Capital 10,000,000
Cash 1,500,000
Cash 1,000,000

Cash 2,000,000

Cash 550,000
Cash 550,000

Pre-Operating Expenses 120,000
Unissued Share Capital 100,000
Equipment 230,000
Cash 240,000
Merchandise 360,000

Cash 345,000
45,000
Authorized Share Capital xx

Less: Unissued Share Capital xx
Issued Share Capital xx
Reserves xx
Total Contributed Capital xx
Retained Earnings xx
Treasury Share Capital (xx)
Total Shareholders' Equity xx
xx
xx
xx
(xx)
xx
Page 15-32
Problem #3 The Delgado Software Corporation is authorized to issue 80,000

shares. During the current year, the corporation issued 25,000 shares.
Required:
Prepare the required entry to record the issuance of the ordinary shares,
under each of the following assumptions:
1) The shares have a P5 par value and were sold for P20 per share.
Cash 500,000
2) The shares are no-par but with a stated value of P10. The total
issue price was P850,000.
Cash 850,000
3) The share are no-par and have not stated value. They were issued at P25
per share.
Cash 625,000
DELINQUENT SUBSCRIPTIONS
The Corporation Code provides that the board of directors may at anytime declare due and
This official declaration is called a call usually expressed in the form of a board resolution s
If the stockholder does not pay on the date fixed, he is declared delinquent and the delinque
Who is the highest bidder?
The highest bidder is the person who is willing to pay the “offer price” of the delinquent sto
The offer price normally includes the following:

a. Balance due on the subscription
b. Interest accrued on the subscription due
c. Expenses of advertising and other costs of sale.
1) X subscribes for 10,000 shares at par of P100
Susbcriptions Receivable 1,000,000

2) X pays P600,000
Cash 600,000
Susbcriptions Receivable 600,000
3) The subscription balance is called and X defaults.
Receivable from Highest Bidder 400,000

Susbcriptions Receivable 400,000
4) The corporation pays P30,000 for expenses incurred in

connection with the auction of the delinquent shares.

Cash 30,000
5) Y is the highest bidder and he is willing to pay the offer price.
Cash 430,000

X 6,000
Y 4,000
nytime declare due and payable unpaid subscriptions.
of a board resolution stating the date fixed for payment of the unpaid subscriptions.
quent and the delinquent stock will be sold at public auction to the highest bidder.
” of the delinquent stock for the smallest number of shares.

Illustrative Problem - Share Capital Transactions

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Transactions Memorandum Method Jour

1. Authorization X Corporation was authorized to issue Unissued Share Capita

2. Subscription at par Susbcriptions Receivable xx Susbcriptions Receivab

3. Collection on subscription Cash xx Cash

4. Issuance of certificate Subscribed Share Capital xx Subscribed Share Capit

5.Sale of shares for cash at par. Cash xx Cash

6. Sale of shares for above par. Cash xx Cash

7. Issuance of share for services Pre-operating Expenses xx Pre-operating Expense

8. Issuance of shares for noncash Equipment xx Equipment

Account Titles to be used if there are two classes of share capital

Memorandum Method Journal Entry Method

Subscriptions Receivable- Ordinary Unissued Ordinary Share Capital

Subscribed Share Capital xx

2. Received subscriptions from various subscribers

Cash 1,500,000 Cash

3. Collected the balance in No. 2 and issued

Cash 1,000,000 Cash

Subscribed Share Capital 2,500,000 Subscribed Share Capital

4. 20,000 shares were sold for cash at par value.

5. Received subscriptions from Mr. A

Subscriptions Receivable 1,100,000 Subscriptions Receivable

6. Collected ½ of the subscriptions in No. 5

Cash 550,000 Cash

7. Collected in full the balance in No. 5.

Cash 550,000 Cash

Subscribed Share Capital 1,000,000 Subscribed Share Capital

9. Issued 2,000 shares for an equipment

10. Received subscriptions of 5,000 shares

Cash 240,000 Cash

11. Received merchandise in full

Merchandise 360,000 Merchandise

Subscribed Share Capital 500,000 Subscribed Share Capital

12. Issued 3,000 shares at P115 per share.

Unissued Share Capital 10,000,000

Subscribed Share Capital 2,500,000

Subscriptions Receivable 1,100,000

Subscribed Share Capital 1,000,000

Subscribed Share Capital 500,000

Authorized Share Capital xx

Problem #3 The Delgado Software Corporation is authorized to issue 80,000

Who is the highest bidder?

The offer price normally includes the following:

1) X subscribes for 10,000 shares at par of P100

Susbcriptions Receivable 1,000,000

3) The subscription balance is called and X defaults.

Receivable from Highest Bidder 400,000

4) The corporation pays P30,000 for expenses incurred in

Receivable from Highest Bidder 30,000

Subscribed Share Capital 1,000,000

” of the delinquent stock for the smallest number of shares.

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