PROBLEM NO.

2
PROBLEM NO. 1
Lake Company
rganized at the beginning of the year and was a;:s ~rgani~d at the beginning of the current
any was o . h • with par value of p~~d to tssue share capital of 50,000 shares
Ocean C001 P uthorized to issue s are capital of
ear and was a
current Y f p par value.
l00,000 shares o 50 The following tr .,
- ansact1ons oecurred during the year:
The followmg . transactions occurred
. during the year in
1. Received subsc · t· . t s
1
connec tI·on with the share capita : , 4 np ions at par value from mcorpora or
equal to 0% of the authorized share capital.
l. The incorporators subscribed for 25% of the authorized
2. Received a 25% downpayment on the subscriptions from
share capital at par value. · the incorporators.

2. The incorporators paid 25% on their subscription.
3. Full payment was received on 15,000 shares originally
subscribed.
4. Land with fair value of P600,000 was acquired upon
issuance of 10,000 shares. The market.value of the share
at this time is P55.
' 3. Received full payment on 10,000 shares originally
subscribed.
4. A patent was acquired by issuing 5,000 shares. The patent
has no fair value.
5. Received cash subscriptions to 15,000 shares at P120 per
share.

Required:
5. Cash subscription to 5,000 shares at P60 per share was
received. '
a. PreparE:! journal entries to record the transactions
following the journal entry method.
6. Issued 2,000 shares to the legal counsel in payment for
hie Pl00,000, bill for organization services. b. Present the shareholders' equity in the statement of
-Required: financial position.

a. Pr~pare journal entries to record the transactions using

the memorandum method.

b. Prese~t the shareholders' equity in the statement of

financial position. ·
PROBLEM NO. 3
·ganized BuJllP Company at the beg· PROBLEM NO. 4
Or
B, c' D' an dt•Eyear with an aut h or1ze
· d sh are
. cap.1nh:
•411g
A,
;~,:~.~~~':sisting of 50,000 shares of PIOO par v.J~:l of
P::
Brook Cornpan
8
On January 1, subscriptions were ta.k;en from A for 12 · year. The enti; . organized at the beginni~g of curr~nt
C.
1· shares, from B for 13,000 shares, from for 8,000 sh ,Ooo shareholders' eqU.ity:
VIded the following transactions affecting
from D for 4,000 shares and from E for 3,qoo share ares,
at par. . , ' s, au 1. The entity was . .
authonzed t.o issue share capital as follows.
2. A transfer_re~ to the corpo!ation in partial pay . Preference h
the subscnpt10n. the followmg assets and liabi"l:t~ent of Ordina s are capital; Pl00 par, 30,000 shares
. 1 ies: ry share capital, P50 par value, 100,000 shares
Accounts receivable ·
Notes receivable 350,00Q 2. 40,000 ordina h P60
Inventory · 70,0oo sh are. ry s ares of were issued for cash at ·per
Accounts payable 680,00Q 3
100,000 . 10,000 preference shares were issued at P120 for cash.
3. B transferred the following assets to th e corpor
. · t·· 4
•a1 - 10 . 10,000 preference shares were subscribed at par value.
part1 payment of the subscription: . a n in,
5. P400,000 was received on the above subscription to
preference shares.
Land
Building 150,000
· 850,000 6. 1,000 preference shares were is.sued in payment of legal
fees of PI00,000 in connection with organizing the
4. The remaining incorporators paid 25% of their' corporation.
subscriptions.
7. 20,000 ~rdinary shares were issued for property, plant
and equipment which had a fair value of Pl,300,000.
5. The corporation received a bill . on January 10 in the ·
8. 15,000 ordinary,sh~res were subscribed for at par.
amount of P50,000 from the legal counsel for organization
services rendered. The counsel accepted 500 shares in 9. Forty percent of the ordinary share capital subscription
full payment. . was collected.
10. The balance owing on the subscription described in 4 and
6. A subscription for 1,000 shares at Pl20 per share ·was . 5 was collected, and the preference shares were issued.
r~ceived from Fon January 11. F paici,P40 per share on 11. The net income for the current year was P2,000,000.
his subscriptibn.

7 Required: ·
· subscriptions.
On Ja~u~ry 12, A, B, and C paid the remainder of their
. · ·ournal entries to record the transactions using
a. P repare J .
Required: the memorandum method. .
' h hareholders' equity in the statement of
a. Prepare journal entries to d ., . . b Present t e 8 . -
b: Present the h h Id , rec?r the transactions. . financial position.
s are o ers eqUity. . .
 PROBLEM NO. 6
PROBLEM NO. 5 . ze d a t the begi n ning of the
w as o rg a m Timber Corn
Lagoon Company containing t�any Pre sented
curren t year. e followi g ;;tatement of financial position
n ac n
ans actions affecting . _ ts amon g others:
_ ty pro vi.de d the follo wing tr Subscnptions re
ce .
1v able _ Prefe n
The enti Subs cri ptions r re
shareholders' eq
uity: Prefierence shareeceiva.bI e-ord· ce 120, 000
din y ca � it aI, P1oo P , a
lllary 360, 000
thorized to issue 1 00,00 or ar
l 00,000 sh
ra t·o n wa s au
0
ares, IS � uthorize
22' 000 shar e s sued and outstandin d
1. The co rpo 1
g
ue of PlOO.
shares with par val Preference shar . 2,200,000
Ordinary shar e �:;r�ai;�bscribed, 2,000 shares 200, 000
of the authorized ordinary capital 200,000 shar es, , O par value, authorized
2. Twenty-five percent is
�4, 000 shar es sued and outstanding
valµe.
was subscri bed� for at p ar Ordma ry share c . 240,000
Share premium-�::� sub scribed, 24,000 shar es 240,
twenty-five percent of the subscription. " nce 000

3. Collected Share premium - Ordmre ary

80,000
950, 000
was received on 1 0,000 shares originally The corpor ation was orgaruz:
4. Full collection
.. d at the beginning of current
subscribed. year and immediate} re e ve d
� \ subscriptions to 20 , 000
preference shares 8u�scriptions to
5. Issued the share certificates on the fully paid 1 0 , 000 ordinary shares were
received on the sam
· e d ate .
shares.
.
Dur ing the year • su bscript10ns. w ere received for a n
6. Land with fair value of PB00,000 and a building thereon a ddit'IOna1 4, 000 preference shares at a price of P120 per
fairly valued at P2,5 00, 000 were acquired for 3 0 , 000 s hare.
shares.
�ash payments were received from subscribers at frequent
7. Issued 1 0,0 00 shares for an outstanding bank loan of mtervals for. several months after subscription. ·The entity
Pl,3 00 ,!)00, including accrued interest of P200,000. On followed a policy of issuing share certificates only when
this date, shares are quoted at P120 per share. subscribers had paid in full.

8. Net income for the year amou�ted to P3,000,000. ordinary shares in

During the year, the entity issued 8,000
a fair v alue of P230, 000.
exchange for a tract of lan d with
Required:
a. Prepare journal entries using journal entry method. Required:
na l en tries for all the transactions ca rried
b. Present the shareholders'. equity. a Prepare J · our . . the account balances.
durin g -the ye ar as mdic ated by
· out
ch
a m o tint of contributed capit al for ea class
b. Compute the at year·end.
l
of share capita
 July 15
PROBLEM NO. 7 Exchanged 1
. ns on January 1, 2017
pera t IO Preferenc h 2 ,000 ordinary shares and 20,000
anY began °. hares of PlOO par value
·
of P7 oooeoos ares for a b.u ilding with a fair value
' , 0. .
Fullho~sed ~:::: 100,000 o~dinnar/e ~hares of 10% PlOO Par
A uthorize . tible pre1.ere The build· . .
and 50,000 con ver . P6 500 000 ~ng Was originally purchased for
value. .
.
· ,
involving shareholders equity .of p4 QOO y th e owner and has a carrying amount
,y , O00.
. transactions . .
The follovnn_g h. fir t year of operat10ns:
during t e s · · In add't • ·
occurre d p 3 0 1 ion, 10,000 ordinary shares were sold for
0 ordinary shares to the -promoters in ' OO,OO0 cash on same date.
1 Issue d 10, 00 · o
Jan. · exchange for land valued at P2,50 ,000 and Aug. 1
services valued at P500,000. ~eceived payments in full for half of the share
subscr~ptions and partial payments on the rest of
th e subscriptions . Total cash received was
The property had cost the promoters Pl,800,000
P4,500,000 . .
three years before an·d was carried on the
promoters' books at Pl,500,000.
Share certificates were issued for the subscriptions
paid in full.
Feb. 20 Issued 15,000 preference shares for Pl20 per
share. Each share can be · converted to five Aug. 31 Received notice from holders of share
ordinary shares. · subscriptions for 5,000 shares that they would not
pay further on the subscriptions because the price
·The entity paid P50,000 to an agent for seUing the of the share had fallen to P190 per share.
shares.
The amount still due on those contracts was
Mar. 10 Sold 25,000 ordinary sha·r es for P260 per share. Pl,500,000.
to
1f,

Issue costs amounted P200,000.

Amounts previously paid on the contracts are
Apr. 1 Sold 20,000 ordinary · shares under share forfeited according to the agreement.
subscriptions at P350 per share. .
31 Net income for the first year of operations was ,1
I

No share certificates are issued until a P3,000,000. ·1

I
subscription contract is paid in full. No cash was ,. "1
received. ·
Instructions:
1. Prepare journal entries to record the transactions.
· 2. Present th~ shareholders' equity on December 31, 2017.
 PROBLEM NO. 10
PROBLEM NO. 8 the following data at current Glee Com pany rev ea1e d the following shareholders ' equ1.. t y
a year-end:
t
Sand Coropa'nY provided
5,000,000 2,300,000
year-end: 500,000 Preference share capital, PlOO par 805,000
Preference share capital, PlOO par, 50,000 shares 5,000,000 Share premium - PS
5 ,250,000
Share preroiuro - PS P50 par, 100,000 shares 1,000,000 Ordinary share capital, P15 par 2 , 750,000
OrdinarY share capital, Share premium
2,000,000 500,000
Shar_e preroiuro - ordinarY share S.ubscribed ordinary share capital
Retallled earnings 1,900,000
Retained earnings
400,000
Subscriptions receivable • ordinary
Required: 5,000 preference
1. Prepare journal entry assuming that What is the amount of legal capital?
shares are converted:
a. Preference shares are convertible into ordinary
shares on a share-for-share basis.
b. Each preference share is convertible into 4 ordinary
shares. · ·

2. Prepare journal entry assuµiing 5,000 preference shares PROBLEM NO. 11

are callable and called in for payment at:
Bronze Company provided the following information at
a. 120 year-end:
b. 80
Share capital 5 ,000 ,000
PROBLEM NO. 9 Subscribed share capit al 3 ,000,000
Subscription receivable 2 ,000,000
On January 1, 2017, Lilianne Company issued mandatorily 1,500,000
Share premium
redeemable preference shares in exchange for cash equal to 500,000
Cumulative t}'.anslation loss
the total par value of the shares of P5,000,000. 700,000
Treasury shares, at cost
Retained earnings 1,000,000
No dividends are to be paid on these shares but the shares
must be redeemed on January 1, 2019 for P6,050,000. Cumulative unrealized gain on futures contract
designated as cash flow hedge 600,000
The implicit interest rate is 10% which is compounded
annually. What is the contributed capital at year-end?
Required:

Phrep_are journal entries for 2017, 2018 and 2019 t d

t e issuance of preference sha . o recor
redemption of the shares. res , interest expense and