Chapter 15

Accounting for Corporations

PROBLEM 4: MULTIPLE CHOICE
1. B - 2,000 sh. x (18 – 5) = 26,000 share premium recorded at the
subscription date, not collection date

2. C - [160,000 – (10,000 x 10)] + [20,000 x (22 – 10)] = 300,000

3. A
Solution:
Share capital (30K x 10) 300,000
Subscribed shares (40K x 10) 400,000
Subscriptions receivable (40K x 18 x 25%) (180,000)
Share premium (30K x 2) + (40K x 8) 380,000
Total SHE 900,000

Short-cut: (30,000 x 12) + (40,000 x 18 x 75%) = 900,000

4. C
Solution:

• 1 Cash (10,000 x ₱14) 140,000

Share capital (10,000 x ₱1) 10,000
Share premium 130,000
1 Share premium 2,000
Cash 2,000
• 2 Cash (20,000 x ₱20 x 25%) 100,000
Subscriptions receivable (20K x ₱20 x 75%) 300,000
Subscribed share capital (20,000 x ₱1) 20,000
Share premium 380,000
• Date Cash (15,000 x ₱20 x 75%) 225,000
Subscriptions receivable 225,000
Date Subscribed share capital (15,000 x ₱1) 15,000
Share capital 15,000
 Date Share premium 3,000
Cash 3,000

Total SHE before share transactions 900,000

Share capital (10,000 + 15,000) 25,000
Subscribed share capital (20,000 - 15,000) 5,000
Subscription receivable (300,000 – 225,000) (75,000)
Share premium (130,000 – 2,000 + 380,000 – 3,000) 505,000
Total SHE after share transactions 1,360,000

Short-cut: 900,000 + (10,000 x 14 – 2,000) + (20,000 x 20 x 25%) +

(15,000 x 20 x 75% - 3,000) = 1,360,000

5. A - 10,000 x ₱3 cost = 30,000

6. D
Solution:
Date Cash (1,000 x ₱160) 160,000
Treasury shares (240,000 x 1/2) 120,000
Share premium – treasury shares 40,000
Date Retained earnings – appropriated 120,000
Retained earnings – unrestricted 120,000

7. A
Solution:
Date Cash (10,000 x ₱48) 480,000
(a) Share premium – treasury shares -
(b) Retained earnings 20,000
Treasury shares (10,000 x ₱50) 500,000
8. D
Solutions:

Date Cash (10,000 x ½ x ₱58) 290,000

Treasury shares (10,000 x ½ x ₱50) 250,000
Share premium – treasury shares 40,000

Date Share capital (5,000 x ₱10) 50,000

Share premium – original issuance (5K x ₱5) 25,000
(a) Share premium – treasury shares (see above) 40,000
(b) Retained earnings (balancing figure) 135,000
Treasury shares (10,000 x ½ x ₱50) 250,000

9. D
Solution:

Date Share capital (1,000 x ₱10) 10,000

Share premium – original issuance (1K x ₱20) 20,000
Cash (1,000 x 25) 25,000
Share premium – retirement 5,000

10. D