Janelle C.

Mondejar BSA 1-1

ACCOUNTING FOR CORPORATION AND DIVIDENDS
PRO-FORMA ENTRIES

Appropriation of Retained Earnings

Cash Issuance Dr. Retained Earnings- Unappropriated xxx
Cr. Retained Earnings- Appropriated xxx
@PAR value
Dr. Cash xxx
Share Split
Cr. Share Capital xxx
Memo Entry: Issued *number for shares with
Above PAR value
PAR value of xxx as a result of an “xx-for-xx”
Dr. Cash xxx
split of *number of old shares with PAR value
Cr. Share Capital xxx
of xxx.
Below PAR value
You cannot issue share below its PAR, it will
Split Up
violate the trust fund doctrine.
Increase the number of shares and decrease the
PAR or stated value.
Subscription of Share
With at least 25% down payment Cash Dividends
Dr. Cash xxx Date of Declaration
Dr. Subscription Receivable xxx Dr. Retained Earnings xxx
Cr. Subscribed Share Capital Cr. Cash Dividends Payable
xxx xxx
Cr. Share Premium xxx Date of Record
No Entry
Delinquent Subscription Date of Distribution
To record expenses incurred related to the
Dr. Cash Dividends Payable xxx
auction
Cr. Cash xxx
Dr. Receivable from the Highest Bidder xxx
Cr. Cash xxx Preference Share Dividends
To record collection from the highest bidder
Dr. Cash xxx Cumulative and Nonparticipating
Cr. Subscription Receivable xxx Allocate first to the preference shareholders.
Cr. Receivable from the Highest Bidder (Share capital @PAR x PS percentage x all
To record the issuance of Share Certificate unpaid dividends over the years)
Dr. Subscribed Share Capital xxx Excess is allocated to the ordinary
Cr. Share Capital xxx shareholders.
(Total dividends declared – Total allocated to
Treasury Share PS)
Re-acquisition of Share
Dr. Treasury Share xxx Earnings per Share
Cr. Cash xxx = Net Income – Preference Dividends
Appropriation of Retained Earnings
Dr. Retained Earnings- Unappropriated xxx Weighted Average of Ordinary Share
Cr. Retained Earnings- Appropriated xxx Outstanding

Re-issuance of Treasury Share @cost Book Value per Share

Dr. Cash/Non-Cash Asset xxx Preference Share- BV
Cr. Treasury Share xxx = Total Preference Shareholder’s Equity
Number of Preference Share Outstanding
Retirement of Share (Retirement Cost > OIP)
Dr. Share Capital @ PAR xxx Ordinary Share- BV
Dr. Share Premium-OS xxx = Total Shareholder’s Equity – Preference
Dr. Share Premium-TS xxx Shareholder Equity
Dr. Retained Earnings Number of Ordinary Share Outstanding
Cr. Treasury Share @cost xxx
 Comprehensive Problem Example

JOURNAL ENTRIES:
1. Jaselle Co. received authorization from the 1. Memo Entry: The authorized
Security and Exchange Commission to issue capitalization is P2,000,000 divided into
an ordinary share of P2,000,000 divided into 10,000 ordinary shares with PAR value of
10,000 shares with PAR value of P200 per P200. And P2,250,000 preference shares
share. And 15,000 noncumulative and with PAR value of P150 per shares.
participating 12% preference shares with a par
2. Dr. Cash 1,555,000
value of P150 pesos.
Cr. Ordinary Share 1,000,000
2. Issued 5,000 ordinary shares at P215, and Cr. Share Premium-OS 75,000
3,000 12% preference shares at P160. Cr. Preference Share 450,000
3. Subscribed 5,000 ordinary shares at P210. Cr. Share Premium-PS 30,000
25% of the total subscription was paid in
subscription date. 3. Dr. Cash 262,500
4. Earned Net Income of P1,500,000. Dr. Subs. Receivable-OS 787,500
Cr. Subscribed OS 1,000,000
5. Reacquired 4,000 ordinary shares at P220.
Cr. Share Premium- OS 50,000
(Related to transaction 2)
6. Declared P500,000 cash dividends to both 4. Dr. Income Summary 1,500,000
ordinary and preference shareholders. Cr. Retained Earnings
7. Reissued the 2,500 treasury share at cost. 1,500,000

8. The remaining subscription become

5. Dr. Treasury Share 880,000
delinquent and was put into auction. Jaselle
Co. incurred P5,000 as expense for bidding. Cr. Cash 880,000
The highest bidder paid the amount due.
Dr. Retained Earnings-Unapp. 880,000
9. Share split up all share capital into 2.
Cr. Retained Earnings-App.
10. Retired the remaining treasury share at 880,000
P180.
6. Dr. Retained Earnings 500,000
11. Issued 4,000 ordinary shares and 10,000
preference share for P110 and P90, Cr. Cash Dividends Payable
respectively. 500,000

12. Earned income of P450,000. 7. Dr. Cash 550,000

Requirements: Cr. Treasury Share 550,000
1. Journal Entries
Dr. RE- Appropriated 550,000
2. Compute all the balances Cr. RE-Unappropriated 550,000
3. Compute the Earnings per share and Book
Value per share for Ordinary and Preference 8. Dr. Receivable from the HB 5,000
Share assuming the liquidation value is P170, Cr. Cash 5,000
and all transactions occurred on the first
month of the year. Dr. Cash 792,500
Cr. Subs. Receivable-OS 787,500
Cr. Receivable from the HB 5,000
Dr. Subscribed Ordinary Share 1,000,000
Cr. Ordinary share 1,000,000
 Comprehensive Problem Example

9. Memo Entry: Issued 10,000 ordinary

shares with PAR value of P100 and 6,000 Earnings per Share
preference share with PAR value of P75, as
a result of 2-for-1 split from 5,000 old = 1,950,000 – 144,000
ordinary shares at P200 PAR value and
3,000 old preference share at P150 PAR 18,500
value. = 97.62

P500,000 dividends
10. Dr. Ordinary share 300,000
Allocation to PS
Dr. Share Premium 22,500
(1,200,000 x 12% x 1yr)- 144,000
Dr. Retained Earnings 7,500
Excess allocated to OS
Cr. Treasury Share 330,000
(500,000-144,000)- 356,000

Dr. RE- Appropriated 330,000

Book Value per Share
Cr. RE-Unappropriated 330,000

Preference Share
11. Dr. Cash 1,340,000
= 2,864,000
Cr. Ordinary Share 400,000
16,000
Cr. SP-OS 40,000
= 179
Cr. Preference Share 750,000
Cr. SP-PS 150,000
Ordinary Share
= 5,322,000 – 2,864,000
12. Dr. Income Summary 450,000
18,500
Cr. Retained Earnings 450,000
= 132.87

Liquidation Value (16k x 170)- 2,720,000

COMPUTE ALL THE BALANCES:
PS Dividends- 144,000

ORDINARY SHARES
Issued- 1,850,000

PREFERENCE SHARES
Issued- 1,200,000

SHARE PREMIUM
Ordinary Share- 142,000
Preference Share- 180,000

RETAINED EARNINGS
Appropriated- 0
Unappropriated- 1,950,000

TOTAL SHAREHOLDER’S EQUITY

= 5,322,000

LEGAL CAPITAL
Ordinary Share- 1,850,000
Preference Share- 1,200,000