ACCOUNTING FOR STOCK CORPORATION

HANDOUT NO. 02

PROBLEM 1
The following accounts are found in the trial balance of Goodwill Trading Corporation at December 31,
2021:

Authorized Ordinary Shares, P50 par P2,000,000

Subscription Receivable - collectible on Jan, 31, 2022 200,000
Unissued Ordinary Shares 800,00
Subscribed Ordinary Shares 400,000
Share Premium - Ordinary 300,000

1. What is the total number of shares issued?

Answer: 24,000 shares

Number of Issued Shares (P2,000,000 - P800,000) / P50 = 24,000 shares

2. What is the total number of shares still available for subscription?

Answer:
No. Of authorized shares (P2,000,000/P50) 40,000
Issued shares (P2,000,000 - P800,000) / P50 (24,000)
Subscribed Shares (P400,000/P50) (8,000)
Shares still available for subscription 8,000 shares

3. What is the total contributed capital?

Answer: P1,900,000
Contributed Capital:
Ordinary Share Capital (P2,000,000 - P800,000) P1,200,000
Subscribed Ordinary Shares Capital 400,000
Share Premium - Ordinary 300,000
Total Contributed Capital P1,900,000

PROBLEM 2
The shareholders’ equity of Janet Corporation at the end of 2021 and 2020 are as follows:
 2021 2020
12% Preference Share Capital, P100 par P1,000,000 P600,000
Ordinary Share Capital, P20 par 2,000,000 1,800,000
Share Premium - Preference 160,000
Share Premium - Ordinary 800,00 400,000

4. What is the total number of ordinary shares issued at December 31, 2021?

Answer: 100,000 shares

P2,000,000 / P20 = 100,000 shares

5. How many preference shares were issued during 2021?

Answer: 4,000 shares

(P1,000,000 - P600,000) / P100 = 4,000 shares

6. What is the average issue price per share of the preference issued in 2021?

Answer: P140 per share

Increase in Preference Share Capital (P1,000,000 - P600,000) P400,000
Increase in Share Premium - Preference 160,000
Total issue price of PS in 2021 P560,000
Divide by no. of shares issued in 2021 4,000
Average issue price per share P 140

7. How many ordinary shares were issued in 2021?

Answer: 10,000 shares

(P2,000,000 - P1,800,000) / P20 = 10,000 shares

8. What is the average issue price per share of the ordinary shares issued in 2021?

Answer: P60 per share

Increase in Ordinary Share Capital (P2,000,000 - P1,800,000) P200,000
Increase in Share Premium - Ordinary (P800,000 - P400,000) 400,000
Total issue price of OS in 2021 P600,000
Divide by no. of ordinary shares issued in 2021 10,000
Average issue price per ordinary share P 60

PROBLEM 3
On July 1, 2020, Nokia Corp. issued 1,000 of P10 par ordinary shares and 2,000 of P10 par convertible
preference shares for a lump-sum price of P45,000. At this date, Nokia’s ordinary and preference were
selling at P18 and P14 per share, respectively.
 Ordinary Share Capital (1,000 x P18) P18,000
Preference Share Capital (2,000 x P14) 28,000
Total P46,000

9. What is the amount credited to Share Premium - Ordinary?

Answer: P7,609
Allocated amount (P45,000 x 18/46) P17,609
Total par Value ( 1,000 x P10) (10,000)
Share Premium - Ordinary P 7,609

10. What is the amount credited to Share Premium - Preference?

Answer: P7,391
Allocated amount (P45,000 x 28/46) P27,391
Total par value (2,000 x P10) 20,000
Share Premium - Preference P 7,391

PROBLEM 4
Fortune Company prepared this journal entry on June 30, 2021:

Cash 140,000
Ordinary Share Capital 130,000
Share Premium - Ordinary 10,000
Issued ordinary shares at P140 per share.

11. What is the par value of the shares?

Answer: P130
Par Value (P130,000 / 1,000) P130

12. How many shares were issued?

Answer: 1,000 shares

No. Of shares issued (P140,000/P140) 1,000

PROBLEM 5
Global Company exchanges a piece of equipment for 4,000 shares of International Company’s ordinary
share capital that has a P100 par value. The equipment costs Global P1,000,000 when purchased five
years ago, and currently has a fair value of P560,000. The equipment has a recorded accumulated
depreciation of P550,000 in the books of Global.

13. What is the amount credited to Share premium - Ordinary as a result of this exchange?
 Answer: P160,000
Fair market value of equipment P560,000
Total Par Value of Ordinary Shares issued (4,000 x P100) 400,000
Share Premium P160,000

PROBLEM 6
Worldwide Company was authorized to issue 10,000 preference shares of P200 par value and 100,000
ordinary shares of P20 par value. Subscription for 4,000 preference shares was received at P225 per share
with a downpayment of 25%. The balance is payable after 60 days.

14. What is the amount of Share Premium - Preference recognized by Worldwide upon receipt of
the preference shares subscription?

Answer: P100,000
Total Subscription price (4,000 x P225) P900,000
Total Par Value (4,000 x P200) 800,000
Share Premium - Preference P100,000

PROBLEM 7
On January 31, 2021, Mendoza Corp. was incorporated with an authorized share capital of P3,000,000
divided into 100,000 shares of P30 par. In February, 30,000 shares were sold for P40 per share. In
March, 20,000 shares were sold on a subscription basis at a price of P45 per share. As of December 31,
2021, one-half of the subscriptions in March was collected.

15. What amount will appear on December 31, 2021 statement of financial position as Ordinary
Share Capital?

Answer: P900,000
Ordinary Share Capital (30,000 x P30) P900,000

PROBLEM 8
On January 31, 2021, Sebastian Corp. was incorporated with an authorized share capital of P3,000,000
divided into 100,000 shares of P30 par. In February, Daniel subscribed to 30,000 shares at P40 per share.
In March Daniel paid one-half of the total subscription price, but subsequently failed to pay the balance
on due date. Sebastian Corp. declared the shares as delinquent and advertised them in a public auction,
paying P10,000. Coleco was the highest bidder for a bid of 14,000 shares.

16. How much did Coleco pay the corporation?

Answer: P610,000
Unpaid subscription (30,000 x P40) x 1/2 P600,000
Advertising cost 10,000
 Total P610,000

17. How many shares did Daniel receive from the subscription?
Answer: 16,000 shares
30,000 - 14,000 = 16,000 shares

PROBLEM 9
The following is a list of selected account balances taken from the December 31, 2021 general ledger of
Marcel Corporation:

Accounts Payable P1,400,000

Accounts Receivable 2,357,000
Ordinary Share Capital 1. ,260,000
Share Premium - Ordinary Shares 1,082,750
Share Premium - Preference Shares 92,100
Preference Share Capital 500,000
Subscribed Preference Share Capital 140,000
Retained Earnings 191,950
Subscriptions Receivable - Preference Shares 105,000

18. What is the total contributed capital for Marcelo Corp. at December 31, 2021?

Answer: P2,969,850
Ordinary Share Capital P1,260,000
Share Premium - Ordinary 1,082,750
Share Premium - Preference 92,100
Preference Share Capital 500,000
Subscribed Preference Share 140,000
Subscription Receivable (105,000)
Total Contributed Capital P2,969,850

19. What is the total shareholders’ equity of Marcelo Corp. at December 31, 2021?

Answer: P3,161,800
Total Contributed Capital P2,969,850
Retained Earnings 191,950
Total Shareholders’ Equity P3,161,800

PROBLEM 10
World Class Corp.’s records included the following shareholders’ equity accounts:

Preference Share Capital, P15 par, 200,000 shares authorized P2,550,000

Share Premium - Preference 340,000
Ordinary Share Capital, no par, P50 stated value, 100,000 shares authorized 3,000,000

20. What was the average issue price of the preference shares?
 Answer: P17 per share
No. Of Issued Preference Shares (P2,550,000/P15) 170,000
Total Issue Price of Preference Shares (P2,550,000 + P340,000) P2,890,000
Average issue price per share (P2,890,000/170,000) P17 per share

21. How many ordinary shares were issued?

Answer: 60,000 shares

No. Of Ordinary Shares Issued (P3,000,000/P50) 60,000 shares

PROBLEM 11
Shown below is information to the shareholders’ equity of Pop Corp. as of December 31, 2021:

12% Cumulative Preference Share Capital, P100 par P820,000

Ordinary Share Capital, P30 par, 300,000 shares authorized, 100,000
shares issued and outstanding 3,000,000
Share Premium - Ordinary 3,300,000
Retained Earnings (deficit) (500,000)

22. What was the original issue price per share of the ordinary shares?

Answer: P63 per share

Original issue price per ordinary share (P3,000,000 + P3,300,000) / 100,000) P63

23. What is the total paid-in capital?

Answer: P7,120,000
Paid-in Capital:
12% Cumulative Preference Share Capital, P100 par P 820,000
Ordinary Share Capital, P30 par, 300,000 shares authorized, 100,000
shares issued and outstanding 3,000,000
Share Premium - Ordinary 3,300,000
Total Paid-in Capital P7,120,000

24. What is the total shareholders’ equity?

Answer: P6,620,000
Shareholders’ Equity:
Total Paid-in Capital P7,120,000
Retained Earnings (Deficit) (500,000)
Total Shareholders’ Equity P6,620,000