Summary notes Dr.

Retained earnings xxx

Cr. Property Plant Payable xxx
PRO-FORMA ENTRIES
Authorization
Comprehensive Problem
(Memorandum entry)
Issuance of shares 1. Dumbledoor Corporation was authorized to
Above par: P800,000 divided into 20,000 ordinary shares at P35
Dr. Cash/non-cash assets xxx par value and 60,000 cumulative and non-
Cr. Share Capital xxx participating preference shares with stated value of
Share Premium xxx P15.

Subscription of shares Memo Entry:

Subscription price > par: The authorized capitalization is P800,000 divided
Dr. Subscription receivable xxx into 20,000 ordinary shares at P30 par value and 60,000
Cr. Subscribed share capital xxx cumulative and non-participating preference shares with
Share premium xxx par value of P15.

Re-acquisition of treasury shares 2. Issued 12,000 ordinary shares having a selling

Dr. Treasury shares xxx price 0f P37 and 7,500 10% preference shares for
Cr. Cash xxx having a selling price of P20 for a lump sum of
P650,000.
Appropriation of treasury shares
Dr. Retained earnings – unappropriated xxx OS: 12,000 x P37 = P444,000
Cr. RE– appropriated xxx PS: 7,500 x P 20 = P150,000
P P594,000
Re-Issuance of treasury shares
Below cost: OS: P444,000 ÷ P594,000 x P650,000 = P485,858.55
Dr. Cash xxx PS: P150,000 ÷ P594,000 x P650,000 = P164,141.45
1st Share premium – TS xxx
nd
2 Retained earnings xxx Dr. Cash P900,000
Cr. Treasury shares xxx Cr. Ordinary shares P360,000.00
Share premium – OS 125,858.55
Retirement of treasury shares Preference shares 112,500.00
Retirement cost < original issuance: Share Premium – PS 51,641.45
Dr. Share Capital xxx
Share Premium xxx 3. Subscribed ordinary 5,000 shares for P32
Cr. Treasury Shares xxx
Share premium – TS xxx Dr. Subscription receivable – OS P160,000
Cr. Subscribed ordinary shares P150,000
Dr. Retained earnings – appropriated Share Premium – OS 10,000
Cr. Retained earnings – unappropriated
4. 4. Re-acquired 2,000 ordinary shares for P18.
Share Split
Dr. Treasury shares P64,000
(Memorandum entry) Cash P64,000

Share dividends (Small Dividends) Dr. RE – Unappropriated P64,000

Date of declaration: Cr. RE – Appropriated P64,000
Dr. Retained earnings xxx
Cr. Share dividends distributable xxx 5.
Share premium xxx 6.
7.
8.
Property Dividends 9.
Date of declaration:
5. Reissued 1,000 treasury shares for P15.
 Dr. Cash P15,000
Retained earnings 3,000
Treasury shares P18,000
Dr. RE – Appropriated P18,000
Cr. RE – Unappropriated P18,000

6. Declared 10% share dividends to ordinary shares; FMV is P35.

I 1
(15,000 x 10% x P35
s 2
= P52,500)
s ,
(15,000 x 10% P30 u 0
= P45,000) e 0
d 0
S 5
Dr. Retained earnings u , P 52,500
Cr. Share b 0 dividends distributable P45,000
Share s 0 Premium – OS 7,500
. 0
7. Share split up to 2 T (
Memo Entry: Issued S 2 23,000 ordinary shares with par value of P17.5 and
15,000 10% , preference shares with stated value of P7.5 as a result of
split up to 2. 0
0
0
)
O 1
S 5
,
0
0
0
From To
# par issuance # par issuance
Issued- OS 12,000 30 37 23,000 15 18.5
Subscribed 5,000 30 32 10,000 15 16
Issued - PS 7,500 15 20 15,000 7.5 10
TS 2,000 18 -- 2,000 9 --
SDD 15,000 30 35 30,000 15 17.5

8. Retired the 1,000 treasury shares.

485,858.55 ÷ 1,000 = 48.6 ÷ 2 = 24.3 15
par
9.3

Dr. Ordinary shares (1,000 x P15) P15,000

Share premium – OS (1,000 x 9.3) 9,300
Cr. Treasury Shares (1,000 x P9) P 9,000
Share Premium – TS 15,300
Retained Earnings – Appropriated P 9,000
Retained Earnings – Unappropriated P 9,000

9. Issued 9,500 ordinary shares at P20 and 4,000 preference shares at P10
Dr. Cash P230,000
Cr. Ordinary shares P142,500
Share Premium – OS 47,500
Preference Shares 30,000
Share Premium – PS 10,000

10. Declared land 250,000 worth as dividends to preference shareholders.

 Retained earnings P300,000
Property dividends distributable P300,000

11. Earned net income of 1,000,000

Dr. Income summary P1,000,000

Cr. Retained Earnings P1,000,000

Shareholders’ Equity

Paid-in Capital:
Ordinary shares (360,000 - 15,000 +142,000) P487,000
Less: Subscribed ordinary shares 150,000
Subscription receivable - OS (160,000)
Preference shares (112,500 + 30,000) 142,500
Share dividends distributable 52,500
Total PIC P671,500
Additional Paid-in Capital:
Share premium – OS P181,558.55
Share premium – PS 122,500
Share premium – TS 11,500
Total APIC
315,558.55
Total Contributed Capital 987,058.55
Retained Earnings – Unappropriated 663,000
Retained Earnings – Appropriated 37,000
Treasury shares 37,000
Total Shareholder’s Equity 1,620,058.55

Ordinary shares Preference shares

Issued 360,000 112,500
Subscribed 150,000
Share Dividends Declared 52,500
Treasury Shares (2,000 x P9) 18,000
Total 544,500 112,500
÷ 15 ÷ 7.5
Shares 36,300 15,000

14% Preferences shares, Cumulative and Non-Participating

Total Dividends Declared 300,000

PS (10% x 112,500 x 2 years 22,500
OS (300,000 – 22,500) 277,500
As allocated --

Compute Earnings Per Share

BEPS = NET INCOME – PREFERENCE DIVDEND
WEIGHTED AVERAGE # OF OS
1,000,000 – 22,500
36,900
= 26.5

Compute Book Value Per Share

BEPS of PS = PSE / # of PS outstanding

900,000 + 22,500 / 15,000 61.5 =
BEPS of OS = Total SHE – Total PSE / # of OS outstanding
1,620,058.55 – 922,500 / 36,300 19.21 =