SHAREHOLDERS’ EQUITY

1. Shareholders’ Equity Composition

The accounts below appear in the December 31 trial balance of Prescett Company:
Authorized ordinary share ₱ 3,500,000
Unissued ordinary share 1,000,000
Subscribed ordinary share 500,000
Subscription ordinary share 600,000
Premium on ordinary share 200,000
Retained earnings – unappropriated 500,000
Retained earnings – appropriated 220,000
Revaluation surplus 400,000
Treasury shares, at cost 220,000

Required: Compute the amount of total shareholder’s equity that Prescett should report in its December 31 statement of
financial position.

2. Legal Capital
The stockholders’ equity section of Alyssa Anne Company revealed the following information on December 31, 2018:
Preference share, ₱ 1,150,000
Premium on share capital – Preference share 402,500
Ordinary share, ₱ 15 par 2,625,000
Premium on share capital – Ordinary share 1,375,000
Subscribed ordinary share 250,000
Retained earnings 950,000
Note payable 2,000,000
Subscription receivable – Ordinary share 200,000

Required: 1. How much is the legal capital? 2) Assume instead the ordinary shares have no par value but with stated
value, how much is the legal capital?

3. Issuance of Share Capital

Assume the following issuances of a ₱ 100 par value share of stock:
a. Issuance of 3,000 shares at par for cash.
b. Issuance of 5,000 shares at ₱ 110 per share for cash. Stock issue costs that were paid by the corporation
amounted to ₱ 60,000.
c. Issuance of 5,000 shares at ₱90 per share for cash.

Required: Prepare the necessary journal entries.

4. Issuance of Share Capital for Noncash Consideration

Assume the following issuances of a ₱ 100 par value share of stock:
a. Issued 2,500 shares of stock for machinery: The machinery has a fair value of ₱ 280,000 while the stock is
selling at ₱ 105 per share.
b. Issued 1,000 shares of stock for patent (an intangible asset): The stock is selling at ₱ 105 per share.
c. Issued 500 shares of stock in full payment of organization services rendered from the legal counsel: The fair
value of such services is ₱ 60,000.

Required: Prepare the necessary journal entries.

5. Issuance of Share Capital for Existing Liability

The company issued 2,000, ₱ 100 par ordinary shares for an outstanding bank loan of ₱ 250,000. On this date, shares
are quoted at ₱ 140 per share.

Required: Prepare the necessary journal entry to record the transaction.

6. Issuance of share capital: Two or more classes of shares

The company issued the following shares of stock:
a. Issued 5,000, ₱ 200 par value preference share, for ₱220 per share for cash
b. Issued 1,000, ₱ 100 par value ordinary share, for ₱ 120 per share for cash

Required: Prepare the necessary journal entry to record the transaction.

7. Issuance Two or More Classes of Shares (Relative Fair Value or Proportional Method)
The company issued for ₱ 1,000,000 cash, 1,000 shares of ₱ 200 par value Preference share and 2,000 shares of ₱ 100
ordinary share. The preference and ordinary shares have fair values of ₱ 240 and ₱ 180 per share, respectively on the
date of sale.

Required: Prepare the necessary journal entry to record the transaction.