GENSANTOS FOUNDATION COLLEGE, INC.

Bulaong Extension, General Santos City 9500
BSA/BSMA Department
AUDITING PROBLEMS E.J. SEBUA, CPA
AUDIT OF SHAREHOLDER’S EQUITY PRACTICE PROBLEMS
Problem 1. Components of Shareholder’s equity
The accounts below appeared in the Dec. 31, 2021 trial balance of the Dizon Company:
Ordinary shares, P20 par, 30,000 shares authorized, 20,000 shares issued P400,000
Subscriptions Receivables 20,000
Subscribed ordinary shares 30,000
Retained earnings 180,000
Share premium 80,000
Treasury shares, 800 shares, at cost 30,000

Required: Determine the following:

1 Total authorized share capital
2 Total unissued share capital
3 Total issued share capital
4 Total subscribed share capital
5 Total shareholder equity
6 Number of subscribed shares
7 Number of outstanding shares
8 Legal Capital
9 Contributed capital

Problem 2. Subscription of Ordinary/Preference Shares using Memo/Journal Entry Methods

Samgyup Foodies, Inc. was organized on June 8, 2021 and the articles stipulated the ff. authorized capital:
a. 6,500 preference shares, P100 par value
b. 45,000 ordinary shares, P35 par value

Samgyup completed the ff. transactions during the first year of operations:
June 16 Received subscriptions to 15,000 ordinary shares at P35 per share, and collected half of the subscriptions.
July 8 Subscribers to 15,000 ordinary shares paid an additional 25% of the subscription price.
Aug 7 Subscribers to 15,000 ordinary shares fully paid the balance of the subscription balance. Samgyup issued
15,000 shares.
Oct 5 Received subscriptions to 4,000 of preference shares at P120 per share. Collected 50% of the subscriptions.
Nov 9 Received 25% of the subscriptions to 4,000 preference shares.
Required:
1 Prepare the journal entries under the ff. methods:
a. Memorandum Entry method
b. Journal entry method
2 Compute the shareholder’s equity as at Dec. 31, 2021.

Problem 3. Issuance of Ordinary and Preference shares.

Sinovac Company was organized on January 1, 2021. It is authorized to issue 15,000 shares of 6%, P40 par value
preference shares, and 40,000 shares of no-par ordinary shares with a stated value of P15 per share. The ff. stock
transactions were completed during the year:
Mar 1 Issued 7,500 ordinary shares for cash at P15 per share
Jun 1 Issued 2,500 ordinary shares for cash at P30 per share
Aug 1 Issued 1,000 ordinary shares for cash at P10 per share
Sep 1 Issued 7,500 preference shares for cash at P50 per share
Nov 1 Issued 3,000 preference shares for cash at P45 per share
Nov 12 Issued 1,500 ordinary shares to lawyers for their bill for P60,000 pertaining to services rendered in
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         GENSANTOS FOUNDATION COLLEGE, INC.
Bulaong Extension, General Santos City 9500
BSA/BSMA Department
AUDITING PROBLEMS E.J. SEBUA, CPA
helping the company organize.
Dec 1 Issued 2,000 ordinary shares for the acquisition of land. The asking price of the land was P45,000; the fair
value of land was P50,000.
Dec 15 Issued 2,000 ordinary shares for an outstanding bank loan of P50,000. On such date, the ordinary shares
were quoted at P20 per share.

Required:
1 Journalize the transactions
2 Compute the shareholder’s equity as at Dec. 31, 2021

Problem 4. Treasury Stock Transaction

Roque, Inc. has the ff. share outstanding on Dec. 31, 2020:
Ordinary shares, P95 par, 150,000 shares authorized, 50,000 shares issued and outstanding P4,750,000
Share premium – original issuance 2,700,000

The ff. are the transactions that took place during 2021:
Apr 16 Roque purchased 2,000 of its own issued shares for P180 per share.
May 5 Sold 400 of the reacquired shares for P180 each.
Jul 15 Roque sold 1,000 of the reacquired shares for P200 per share.
Sep 1 Sold 300 reacquired shares for P170 per share.
Sep 20 Retired the remaining treasury shares.

Required: Journalize the ff. transactions.

Problem 5. Donations
Gutierrez Corp. received the ff. donations during 2021:
Apr 19 Evergreen Homes, a major stockholder of the company, gave the corporation 1 hectare of land valued at
P2,000,000.
May 15 A shareholder donated 6,000 shares of Gutierrez P90 par ordinary shares. The share was selling for P200
per share on May 15.
Aug 8 Rocor Property Holdings, Inc., a major stockholder of the company donated a warehouse. The appraised
value of the warehouse is P800,000.
Sep 9 3,000 of the ordinary shares donated on May 15 were sold for P1,080,000

Required: Prepare the journal entries to record the transactions related to the donations.

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