CA5101 Financial Accounting & Reporting

ACCOUNTING FOR STOCK CORPORATION

Handout No. 01

Problem 1

Good Harvest Corp. was incorporated on Jan. 1, 2021, with authorized share capital of 300,000 shares at
P20 par value. Record the transactions completed during the months of January and February using
1. Memorandum method
2. Journal entry method

a. The incorporators subscribed 25% of the authorized share capital and paid 25% of the
subscription price.

b. Good Harvest issued 10,000 shares for cash at P22 per share.

c. The corporation received subscription for 5,000 shares at P24 per share. Thirty (30) percent of the
subscription was collected and the balance is due on March 31, 2021.

d. The incorporators in (a) paid the balance due on their subscriptions and the shares certificates
were accordingly issued.

Memorandum Method:

Memo Entry: Authorized to issue 300,000 shares with P20 par value.

(a)
Cash (P6,000,000 x 25% x 25%) 375,000
Subscriptions Receivable (P1,500,000 x 75%) 1,125,000
Subscribed Share Capital (300,000 x P20 x 25%) 1,500,000

(b)
Cash (10,0000 x P22) 220,000
Share Capital (10,000 x P20) 200,000
Share Premium 20,000

(c)
Cash (5,000 x P24 x 30%) 36,000
Subscriptions Receivable (P5,000 x P24 x 70%) 84,000
Subscribed Share Capital (5,000 xP20) 100,000
Share Premium 20,000

(d)
Cash 1,125,000
Subscriptions Receivable 1,125,000

Subscribed Share Capital 1,500,000

Share Capital 1,500,000
Shareholders’ Equity:
Share Capital, P20 par, 85,000 share issued P1,700,000
Subscribed Share Capital 100,000
 Share Premium 40,000
Total Shareholders’ Equity P1,840,000

Note: The Subscriptions Receivable which is due on March 31, 2021 will be shown as
part of the current assets.

Journal Entry Method

Unissued Share Capital (300,000 x P20) 6,000,000

Authorized Share Capital 6,000,000

(a)
Cash 375,000
Subscriptions Receivable 1,125,000
Subscribed Share Capital 1,500,000

(b)
Cash (10,0000 x P22) 220,000
Unissued Share Capital (10,000 x P20) 200,000
Share Premium 20,000

(c)
Cash (5,000 x P24 x 30%) 36,000
Subscriptions Receivable (P5,000 x P24 x 70%) 84,000
Subscribed Shared Capital (5,000 xP20) 100,000
Share Premium 20,000

(d)
Cash 1,125,000
Subscriptions Receivable 1,125,000

Subscribed Share Capital 1,500,000

Unissued Share Capital 1,500,000

Shareholders’ Equity:
Authorized Share Capital P6,000,000
Less: Unissued Share Capital 4,300,000
Issued Share Capital P1,700,000
Subscribed Share Capital 100,000
Share Premium 40,000
Total Shareholders’ Equity P1,840,000

Note: The Subscriptions Receivable which is due on March 31, 2021 will be shown as
part of the current assets.
Problem 2

Goodwil Corp. was authorized to issue 60,000, P100 par value ordinary share capital on November 3,
2021. The following are share capital transactions completed during the month of November:
Nov. 4 Issued 9,000 shares to David at par.

Cash (9,000 x P100) 900,000

Ordinary Share Capital 900,000

Nov. 7 Received subscriptions from Ramos for 5,500 shares at P120 per share.

Subscriptions Receivable (5,500 x P120) 660,000

Subscribed Ordinary Share Capital (5,500 x P100) 550,000
Share Premium 110,000

Nov. 11Received subscriptions from Vargas for 6,000 shares at P125 per share.
Twenty five percent downpayment was collected.

Cash (6,000 x P125 x 25%) 187,500

Subscriptions Receivable (6,000 x P125 x 75%) 562,500
Subscribed Ordinary Share Capital (6,000 x P100) 600,000
Share Premium 150,000

Nov. 15Collected in full the subscription of Ramos and share certificate was
correspondingly issued.

Cash 660,000
Subscriptions Receivable 660,000

Subscribed Ordinary Share Capital 550,000

Ordinary Share Capital 550,000

Nov. 21Issued 1,000 shares in exchange for machinery with equivalent cash
price of P125,000.

Machinery 125,000
Ordinary Share Capital (1,000 x P100) 100,000
Share Premium 25,000

Nov. 22Received full payment from Vargas.

Cash 562,500
Subscriptions Receivable 562,500

Subscribed Ordinary Share Capital 600,000

Ordinary Share Capital 600,000

Nov. 24Received a statement of account for the services rendered by Delgado,

for drafting and filing the Articles of Incorporation and corporate by-laws.
The bill is for P60,000 which is settled by issuing 500 ordinary shares.

Organization Costs 60,000

 Ordinary Share Capital (500 x P100) 50,000
Share Premium 10,000

Nov. 30The remaining shares were subscribed by Bautista at P130 per share.
The corporation collected 40% of the subscription price, the balance is
payable on or January 31, 2022.

Cash (38,000 x P130 x 40%) 1,976,000

Subscriptions Receivable (38,000 x P130 x 60%) 2,964,000
Subscribed Ordinary Share Capital (38,000 x P100) 3,800,000
Share Premium 1,140,000

Required:

(b) Journalize the foregoing transactions using the memorandum entry method.

(c) Prepare the contributed capital section of the statement of financial position at December 31, 2021,
assuming that there were no other transactions that occurred during December relating to share
capital.

Shareholders’ Equity:
Contributed Capital:
Ordinary Share Capital, P100 par, 22,000 shares issued P2,200,000
Subscribed Ordinary Share Capital 3,800,000
Share Premium 1,435,000
Total Contributed Capital P7,435,000