Dyuwan Hoce O.

Solas
BSA-1
Problem 1
Far West Corporation, a newly registered corporation had the following transactions during the
year:
a) On January 2, Philippine SEC authorized the entity to issue 600,000 shares with par value of
ten peso per share.
b) The entity received subscription to 150,000 shares at par.
c) The entity collected 40% on the above subscription.
d) Received payment for 90,000 shares issued for P 22 market value
Solution:
a. Unissued Ordinary Shares 6,000,000
Authorized Ordinary Shares 6,000,000

(500,000 x 10)
b. Subscriptions Receivable 150,000
Subscribed Ordinary Shares 150,000
To record subscription of
15,000 shares
C. Cash 60,000
Subscription Receivables 60,000
Received 40% of subscribed shares
d. Cash 1,980,000
Ordinary Shares 900,000
Share Premium- Ordinary 1,080,000
To record issue of 90,000 shares

PARCORP Ballada Page 274

Problem 2
Use the following data to answer the questions
Southern Tagalog Incorporated has 100,000 authorized ordinary shares par value P 50, 10% of
which are treasury stock costing P750,000 and half of the remainder is outstanding:
a. What is the value of the treasury stock per share?
b. How many shares were issued?
c. If 3,000 shares of treasury stock were to be reissued at P 65 then what is the necessary
Journal entry
Solution:
a. 100,000 x 10% = 10,000 shares
750,000/ 10,000 = P 75
b.100,000 – 10,000 treasury stock = 90,000
90,000 x 50% = 45,000 Outstanding shares

10,000 + 45,000 = 55,000 Issued shares

c. Cash 195,000
Retained Earnings 30,000
Treasury stock 225,000

PARCORP Ballada Page 270, 272, 285

Problem 3
Gwen Corporation has the following information at year end
Preference Shares P 100 par value 6,000,000
Share Premium – Preference 2,600,000
Ordinary Shares P 5 par value 3,000,000
Share Premium – Ordinary 4,200,000
Subscribed Ordinary shares 1,200,000
Retained earnings 5,000,000
Treasury Stock 1,000,000

a. What is the Legal Capital to be reported? Contributed Capital? Total Shareholder’s Equity?
PS 6,000,000
OS 3,000,000

SOS 1,200,000
10,200,000 Legal capital
SPS 2,600,000
SPO 4,200,000
17,000,000 Total contributed capital
RE 5,000,000
TS (1,000,000)
21,000,000 Total Shareholder’s Equity

PARCORP Ballada Page 269

Problem 4
At the beginning of the year Ashtarte Incorporated was organized with a total of 200,000
authorized ordinary shares of P 150 par value per share. The transactions of the year are as
follows
a. Issued 25,000 shares for P 200 a share
b. Issued 2,000 shares for payment for legal services during which the market value of the
shares was P 175 per share
c. Issued 3,000 shares for land when fair value was P 220

1. What is the share capital at year end?

2. What is the share premium to be recorded?

Solution:
1. 25,000 x 150 =3,750,000
2,000 x 150= 300,000
3,000 s 150= 450,000
4,500,000
2. 25,000 x 50 = 1,250,000
2,000 x 25 = 50,000
3,000 x 70 = 210,000
1,510,000

PARCORP Ballada Page 272

Problem 5
Green Eats Corporation Bought 5,000 of their own shares which has a par value P20 for P30 per
share. They then reissued 2,000 for P25 and the remainder was reissued at cost. Write the
entries for each.

Solution:
Treasury Stock 150,000
Cash 150,000
To record purchase of treasury shares
for P 30 per share

Cash 50,000
Retained Earnings 10,000

Treasury Stock 60,000

To record reissue of treasury shares for
P 25; 2,000 shares

Cash
Treasury Stock
To record reissue of treasure stock at cost

PARCORP Ballada Page 285

Problem 6
Honkai Star Rail Inc. issued 10,000 callable preference shares P 50 par value at the beginning of
the year for P 70 market value. Record the entries for issuance and for the following
independent situations.
a. Called at year end for P 55 per share
b. Called at year end for P 75 per share

Solution:
Cash 700,000
Preference Shares 500,000
Share Premium- Preference 200,000
To record issue of callable preference shares

Case A
Preference Shares 500,000
Share Premium – Preference 50,000
Cash 550,000
To record call of shares

Case B
Preference Shares 500,000
Share Premium – Preference 200,000
Retained Earnings 50,000
Cash 750,000

PARCORP Ballada Page 288

Problem 7
Green Pastures Inc. decided to grant 100 share options to their 1,000 employees on Jan. 1,
2017 which has a fair value of P 25. The grant would be vested upon fulfilling 2 years of service
to the entity. Record the necessary entries for the following situations independently
1. No employees left for the 2 years
2. 150 employees left on 2017 and expected that 50 more would leave. No employee left on
the following year.

Solution:
Case 1
Dec. 31, 2017
Employee Benefits Expense 1,250,000
Share Options Outstanding 1,250,000

To record expected shares to be vested

Dec 31, 2018

Employee Benefits Expense 1,250,000
Share Options Outstanding 1,250,000
To record expected shares to be vested

Case 2
Dec. 31, 2017
Employee Benefits Expense 1,000,000
Share Options Outstanding 1,000,000
[100 x (1,000 – 150 – 50) x P 25 x ½ yrs]
Dec. 31, 2018
Employee Benefits Expense 1,125,000
Share Options Outstanding 1,125,000
[100 x (1,000 – 150) x 25 x 2/2 yrs] – 1,000,000

PARCORP Ballada Page 280

Problem 8
Sunflower Corporation granted 150 share options to 500 employees provided that they provide
services for 3 years on Jan 1 2016 with a fair value of P 20. At grant date 15% of the 500
remained. Assuming that prior entries were recorded correctly, record the necessary entries
when the options are exercised with a par value P 10 and current market value of P 40

Solution
15% x 500 = 75
150 x (500-75) x 20 = 1, 275,000 Shares options Outstanding

Cash 2,550,000
Share Options Outstanding 1,275,000
Ordinary Shares (425 x 150 x 10) 637,500
Share Premium 3,187,500
To record exercise of share options

PARCORP Ballada Page 281

Problem 9
Yellow Corporation bought their own delinquent shares worth 56,000 offer price and auction
expenses of 8,000. Before going delinquent the shares were valued at 48,000. Record the entry
for the purchase of delinquent shares.
Solution
Treasury Stock 56,000
Receivable for expenses 8,000
Subscriptions Receivable 48,000
To record purchase of own shares.

PARCORP Ballada Page 275

Problem 10
Rex Lapis subscribed for 5,000 shares of Morax Inc. with a par value of P 20 for P 25 per share
on September 1. Record the related entries if there are 3 separate payments of 30,000, 75,000
and 20,000 for Sept. 5, 15 and 25 respectively.
Solution:
Sept 1.
Subscription Receivable 125,000
Subscribed Ordinary Shares 100,000
Share Premium- Ordinary 100,000
To record subscriptions of shares

Sept 5
Cash 30,000
Subscription Receivable 30,000
To record installment
Sept 15
Cash 75,000
Subscription Receivable 75,000
To record installment

Sept 25
Cash 20,000
Subscription Receivable 20,000
To record installment

PARCORP Ballada Page 274

Problem 11

Algeria Corp issued 15,000 ordinary shares of P 100 par value in exchange for land and building
on March 1, 2018 with a total fair value of P 2,000,000 of which 25% is the value of the land.
Record the necessary entry for the transaction.
Solution
March 1, 2018
Land 500,000
Building 1,500,000
Ordinary Shares 1,500,000
Share Premium- Ordinary 500,000
To record issue of shares for land and
Building

PARCORP Ballada Page 277

Problem 12
MiHoyo Corp. issued 3,000 ordinary shares to Atty. Yan Fei for legal services during their
organization worth P 500,000. The par value of the shares was P 150. Record the relevant entry.

Solution:
Organization Expense 500,000
Ordinary Shares 450,000
Share Premium- Ordinary 50,000
To record issue of shares as payment for legal
Services

PARCORP Ballada Page 277, 278

Problem 13
Shareholder A of Vague Corporation donated 1,000 od P 100 par ordinary shares as a gift on
January 1, 2019. Vague Corporation issued all 1000 donated shares for P160 per share. Record
the entry for the events

Solution:
Memo Method
January 1, 2019
“Received 1,000 Ordinary Shares”

Journal entry
Cash 160,000
Donated Capital 160,000
To record issue of donated capital
PARCORP Ballada Page 287
Problem 14
Garon Corporation decided to recapitalize their 25,000 P 50 par value ordinary shares on two
separate dates, 70% on January 1, 2018 and the remainder on July 1 2018. Answer the
following questions:
1. What is the share Premium recapitalization on January 1, 2018 if the shares are P 40 stated
value?
2. What is the total share capital?

Solution:
1. Ordinary Shares 1,250,000
Ordinary Shares (25,000 x 40) 1,000,000
Share Premium – Recap 250,000
Answer: 250,000

2.Ordinary Shares 1,000,000

Share Premium 250,000
1,250,000
PARCORP Ballada Page 290

Problem 15
Star Inc. has 5,000 ordinary shares P 20 par value and 2,000 P 100 par value convertible
preference shares as of Dec 31, 2017. For the year end 2018 there was 8,000 ordinary shares
and 500 convertible preference shares. Assume there was no new issuance of shares or
retirement of shares during the year and the convertible preference shares is 1:3 to ordinary
shares and ay treasury stock is at par. Answer the following

1. What is the share premium- ordinary for the year end 2018?
2. How many shares are treasury stock?
3. What is total shareholder’s equity for the year end 2018
Solution
1. 1500 x 100 = 150,000
4,500 x 20 = (90,000)
60,000 Share Premium

2. 1500 x 3 = 4,500 + 5,000 = 9,500

(8,000) year end 2018
1, 500 treasury stock

3. Preference shares (500 x 100) 50,000

Ordinary Shares (8,000 x 20) 160,000
Share Premium- Ordinary 60,000
Treasury Stock (1500 x 20) (30,000)

Total Shareholder’s Equity 240,000

PARCORP Ballada Page 272, 285

Problem 16
A corporation decided to grant a 35,000 cash dividend to their shareholders. Record the
necessary entries if the dates of importance are Jan. 5, Jan. 25 and Feb 14

Solution:
Date of Declaration
Jan. 5 Retained earnings 35,000
Cash Dividends Payable 35,000
To record declaration of
Dividends
Date of Record
Jan 22.
“No Entry”
Date of Payment
Feb. 14 Cash Dividends Payable 35,000
Cash 35,000
To record payment of dividends
PARCORP Ballada Page 348, 349
Problem 17
Java Inc had the following transactions for the year 2017. Record the necessary entries
Nov 22 Declaration of Cash dividends worth 40,000
30 Declaration of Property dividends of equity Securities with a carrying amount of
500,000 and market value of 800,000

Dec 15 Payment of Cash Dividends

Solution:
Nov. 22 Retained Earnings 40,000
Cash Dividends Payable 40,000
To record dividends declared

Nov 30 Retained earnings 800,000

Property dividends Payable 800,000
To record dividends declared

Dec 15 Cash Dividends Payable 40,000

Cash 40,000
To record payment of dividends
PARCORP Ballada Page 348, 349
Problem 18
Levi Company provided the following information for the years 2021 and 2022 statement of
financial position

December 31 2022 December 31 2021

Share Capital P 5 par 7,500,000 4,500,000
Share Premium 52,000,000 40,000,000
Retained earnings 19,500,000 15,500,000
Treasury stock 7,000,000 5,000,000
600,000 shares 2022
400,000 shares 2021

1. How may shares were issued for the year 2022?

2. What is the Total Shareholder’s Equity for 2022?
3. How many shares are outstanding on 2022?

Solution:
1. 7,500,000 – 4,500,000 = 3,000,000/5 =600,000
2. 7,500,000 + 52,000,000 + 19,500,000 – 7,000,000 =72,000,000
3.7,500,000/5 = 1,500,000 – 600,000 = 900,000

PARCORP Ballada Page 270, 271

Problem 19
Ayala Corporation declared property dividends on December 25 2017 which has a carrying
value of 1,000,000 and market value of 2,500,000. At year end the value of the asset dropped
by 100,000 and stayed the same until the date of payment of Jan. 15 2018 Record the
necessary entries.

Solution:
December 25, 2017 Retained earnings 2,500,000
Property Dividends Payable 2,500,000
To record dividends declared
December 31, 2017 Property dividends Payable 100,000
Retained earnings 100,000
To record adjustment due to
Decrease in fair value

January 15, 2018 Property dividends payable 2,400,000

Investment in assets 2,400,000
Gain on Distribution
To record distribution of
Property dividends
PARCORP Ballada Page 349

Problem 20

Cadbury Inc. has the following data at year end 2020:

Ordinary Shares; authorized 200,000 issued 75,000 par P20 1,500,000
Share Premium 500,000
Retained Earnings 3,000,000
Treasury Stock(5,000 shares) 250,000
The following transactions were incurred during the year 2021
Jan. 25 Declared Share Dividends of 10%, market value of P45
Feb 30 Issued share dividends above
Nov. 24 Declared Cash Dividends amounting 225,000
Nov. 30 Declared 20% share dividends
Dec 15 Payment of cash Dividends

Answer the following:

1. How many issued shares were at the end of the year 2021?
2. What is the balance of the Retained Earnings at year end 2021?
3.What is the balance of Share Premium at year end 2021?

Solution:
1. 75,000 x 10% = 7,500 + 75,000 = 82,500 issued
2. 7,500 x 45 = 337,500 Beg. Balance Retained earnings 3,000,000
82500 x20% = 16 500 x 330,000 Share Dividends (667,500)
Cash Dividends (225,000)
Ending Balance 2,107,500
3. 7,500 x 25 = 187 500
PARCORP Ballada Page 359
Problem 21
Quantum Corp. decided to authorize a 3 for 1 share split. If there are currently 300,000 shares
before the split at P 120 par value, how many shares would there be after? How much would
the par value be? Would there be a change in the value of the shares?

Solution
300,000 x 3 = 900,000 shares
120/ 3 = P 40 par value
300,000 x 120 = 36,000,000
900,000 x 40 = 36,000,000
No change in value

PARCORP Ballada Page 353

Problem 22
At the end of the year 2020 Giordano Inc. has 40,000 Outstanding ordinary shares, P 20 par
value. Find the outstanding shares for 2019 if during the year these events happened:
A. May 24 declared and issued a 20% share dividend
B. June 15 Bought 4,000 shares as treasury stock (No treasury stock prior)
C. Nov 18 Issued a 2 for 1 share split

Solution:
40,000/2 = 20,000 + 4,000 = 24,000/1.2 = 20,000 Outstanding shares for 2019
PARCORP Ballada Page 352, 353
Problem 23
Jnovels Inc. has the following information
10% Preference Shares P 100 par

5,000 shares authorized 2,000 issued and outstanding 200,000

Ordinary Shares 10,000 authorized P 50 par
6,000 issued and outstanding 300,000
Retained Earnings 500,000
Jnovels failed to declare dividends for the past year and decided to declare for the current year
of 250,000
1. What share of dividends do both shareholders receive if it is Cumulative and non-
Participating
2. What share of dividends do both shareholders receive if it is Non- cumulative and Non-
Participating

Solution:
1.

Preference Ordinary Total

Outstanding share Capital 200,000 300,000 500,000
Dividends in arrears 20,000 20,000
200,000 x 10%
Current Dividends- 20,000 20,000
Preference 200,000 x 10%
Remainder to Ordinary 210,000 210,000
Total 40,000 210,000 250,000
2.

Preference Ordinary Total

Outstanding share Capital 200,000 300,000 500,000
Current Dividends- 20,000 20,000
Preference 200,000 x 10%
Remainder to Ordinary 230,000 230,000
Total 20,000 210,000 250,000
PARCORP Ballada Page 355, 356, 357
Problem 24
Using the Given information below of B Corporation find the profit for the year 2020
a. Declared cash dividend of 200,000
b. Declared Share Dividend of 10% of 200,000 outstanding shares
c.2019 ending balance of retained earnings was 750,000
d 2020 ending balance of retained earnings 1,200,000

Solution
1,200,000 2020 ending balance
200,000 Cash Dividends
20,000 Share Dividends
(750,000) 2019 ending Balance
670,000 Profit 2020

PARCORP Ballada Page 359

Problem 25
During the year end 2019 the accountant of Himeko Express Inc. noticed the following prior
period Errors. Record all the necessary adjustments
a. Land and Building were understated by 100,000 and 50,000 respectively
b. A receipt for miscellaneous expenses were not recorded for 15,000
c. Employee Benefits expense was overstated by 25,000

Solution
a. Land 100,000
Building 50,000
Retained earnings 150,000
To record adjustments for period errors

b. Retained earnings 15,000

Misc. Expense 15,000
To record adjustment for period errors

c. Retained Earnings 25,000

Employee Benefits Expense 25,000
To record adjustment for period errors

PARCORP Ballada Page 357

Problem 26
Star Travel Inc. bought their own shares worth 200,000 and to appropriate 600,000 for future
expansion of the company. Record the Journal entries to restrict the retained earnings
Solution:
Retained Earnings 200,000
Appropriated Retained Earnings 200,000
To record restriction for treasury stock

Retained Earnings 600,000

Appropriated Retained Earnings 600,000
To record restriction for expansion

PARCORP Ballada Page 358

Problem 27
Create the statement of retained earnings using the following information:
a. Beginning Balance 1,700,000 - Unappropriated

b. Ending Balance 2,200,000 – Total Retained earnings

c. Cash Dividends declared 150,000
d. Treasury stock worth 250,000

Solution Statement of Retained Earnings

Appropriated:
Beginning Balance 0
Add: Treasury Appropriation 250,000
Ending Balance 250,000

Unappropriated;
Beginning Balance 1,700,000
Add: Profit 650,000
Less: Cash Dividends Declared (150,000)
Appropriation for Treasury Stock (250,000)
Ending Balance 1,950,000

Total Retained Earnings 2,200,000

PARCORP Ballada Page 359
Problem 28
Create the shareholder’s equity section of the statement of Financial position using the
following information
a. Ordinary Shares ending balance= 4,350,000 P 50 par value
b. Share Premium Ordinary = 804,000
c. Treasury Stock = 216,000 P 48 cost per share
d. Retained Earnings ending Balance = 5,835,000
Solution:

Shareholder’s Equity
Share capital
Ordinary Shares P 50 par, 87,000 issued, 82,500 4,350,000
Share premium- Ordinary 804,000__
Total Share Capital 5,154,000

Retained Earnings
Appropriated 216,000
Unappropriated 5,619,000
5,835,000
Total Share capital and Retained Earnings 10,989,000
Less: Treasury Stock (216,000)
Total Shareholder’s Equity 10,773,000
PARCORP Ballada Page 360
Problem 29
Cuaron Brewery Inc. has the following information: Find the book value for both types of shares
a. Preference Liquidation Value = 1,300
b. 5 % Preference shares P 1000 par, 500 shares outstanding
c. Ordinary Shares P 50 par value 10,000 shares outstanding
d. Retained earnings =2,350,000
e Share Premium- Ordinary = 250,000, Share Premium- Preference 100,000
f. The preference shares are cumulative and has dividends for 2 years

Solution:
Preference
Liquidation Value (1,300 x 500) 650,000
Dividends in arrears (500,000 x 5%) x 2 50,000

Current Dividends (500,000 x 5%) 25,000

Preference Shareholder’s Equity 725,000

Book Value per share (725,000/ 500) 1,450

Ordinary
Total shareholder’s Equity
(500,000 + 500,000 + 2,350,000 + 250,000
+ 100,000) 3,700,000
Less: Preference Shareholder’s Equity (725,000)
Ordinary Shareholder’s Equity 2,975,000
Book value per share (2,975,00/10,000) 297.5

PARCORP Ballada Page 361, 362

Problem 30
Shifters and Movers Inc has the following information for the year 2020:

Preference Shares 10,000 authorized P 100 par value

2,000 issued and outstanding 200,000
Share Premium – Preference ?
Ordinary Shares 100,000 authorized P 10 par value
50,000 issued and outstanding 500,000
Share premium- Ordinary 725,000

These are events that happens in the year 2021

A. Additional issue of 20,000 ordinary shares at average price of P 23
b. Additional Issue of 3,000 shares at average price of P 225

1. What is the share premium Ordinary for the year end 2021
2. What is the share premium Preference for 2020 if the ending balance for the year 2021 is
525,000?

Solution
1. 20,000 x 13 = 260,000 + 725,000 = 985,000
2. 3,000 x 125 = 375,000
525,000 – 375,000 = 150,000

PARCORP Ballada Page 271,272