lOMoARcPSD|38140856

Reviewer FOR Shareholders' Equity Part 1

BS accountancy (University of Cebu)

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REVIEWER FOR SHAREHOLDERS’ EQUITY

Memorandum Entry Method Journal Entry Method

1) Authorization “Authorized to issue ____ shares of _____ share Unissued ____ Share Capital XXX
of Share Capital capital with a par value of P____” Authorized ____ Share Capital XXX
(Authorized shares __ Par value)

Note: This method cannot be used if the share capital is a

no-par and no-stated value stock.

2) Issuance of Cash XXX Cash XXX

Share Capital __Share Capital XXX Unissued __ Share Capital XXX
(equal to par
value)

3) Issuance of Cash XXX Cash XXX

Share Capital ____ Share Capital XXX Unissued ____ Share Capital XXX
(Above Par Value) ____ Share Premium XXX ____ Share Premium XXX

4) Issuance of Cash XXX Cash XXX

Share Capital Discount on ____ Share Capital XXX Discount on ____ Share Capital XXX
(Below Par Value) ____ Share Capital XXX Unissued ____ Share Capital XXX

Note: Under the Corporation Code of the

Philippines, the original issuance of share capital
below par value is not allowed. Therefore,
problems involving discounts are used for
illustration purposes only.

Issuance in Exchange for Non- Cash Assets or Properties

The asset received is recorded at its fair market value (also known as direct measurement), unless the FMV can’t be estimated
reliably. If the FMV of the asset received can’t be estimated reliably, it will be recorded at the fair value of the share capital issued,
also known as indirect measurement.

Upon issuance of the stock, Share Capital or Unissued Share Capital is credited at par value. The excess of the value assigned to the
asset received over the par value of the stock issued is credited to Share Premium or Additional Paid-in Capital or Share Capital in
Excess of Par.

Order of Priority:
1) Fair Value of Non-cash asset
2) Fair Value of Shares issued
3) Par Value of Shares issued
Issuance in Exchange for Service Rendered
The services received is recorded at its fair value

Fair value is above par

Organization Cost XXX
Share Capital (or Unissued Share Capital) XXX
Share Premium XXX

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Sale of Share Capital on a Subscription Basis

1. To record the receipt of subscription
It should be noted that the Subscribed
a. Subscription price is equal to the par value
Share Capital is always credited at par
Subscription Receivable XXX
Subscribed Share Capital XXX value, regardless of the subscription price.
b. Subscription price is above par value
Subscription Receivable XXX
Subscribed Share Capital XXX
Share Premium XXX
2. To record collection of subscription from subscribers
Cash XXX
Subscription Receivable XXX
3. To record issuance of stock certificate upon full payment of subscription
Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX

Subscription Defaults
a. Upon Default
Receivable from Highest Bidder XXX Other term for RFHB is “Due
Subscription Receivable XXX from Highest Bidder”
b. Costs incurred in connection with the delinquency sale
Receivable from Highest Bidder XXX
Cash XXX
c. Upon receipt of payment from Highest bidder
Cash XXX
Receivable from Highest Bidder XXX
d. Upon issuance of certificates of stock
Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX

All subscribed shares are issued. Shares are first given to the highest bidder. The excess, if any, are given to the
defaulting subscriber.
If there is no bidder, all of the delinquent shares will be issued to the name of the corporation. Such shares are
considered Treasury shares and the ff. entries will be made, after making the entries (a) and (b).

a.Treasury Shares XXX

Receivable from Highest Bidder XXX
b. Subscribed Share Capital XXX
Share Capital (or Unissued SC) XXX
DIVIDENDS
Date of Declaration Date of Record Date of Payment
(Announcement Date) (Distribution of Dividends to shareholders)
●Cash Dividends

Retained Earnings XXX No entry Cash Dividends Payable XXX

Cash Dividends Payable XXX Share Capital
(or Unissued SC) XXX

If the dividends declared are still unpaid as of the statement of financial position date, the balance of the
account Cash Dividends Payable is reported as current liability.
Cash dividends may either be:
1. Peso dividend- expressed in peso amount
2. Percentage dividend- expressed in percentage.
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●Scrip Dividends Scrip Dividends Payable XXX

Retained Earnings XXX Interest Expense XXX
Scrip Dividends Payable XXX No entry Cash XXX
-- Scrip dividends are deferred cash dividends.
-- Scrip dividends are declared if the company has no sufficient funds at that time for cash dividends but has sufficient
retained earnings.
-- Scrip dividends consist of a written promise to pay certain amounts at some future date.
●Property Dividends A. The carrying amount of the payable and
the carrying amount of the assets are the
Retained Earnings XXX No entry same
Property Dividends Payable XXX
Property Dividends Payable XXX
Assets XXX

B. The carrying amount of the payable is

Measurement of Property Dividends greater than the carrying amount of the
Payable assets
-Fair value of the Asset
1) Remeasured at the end of each Property Dividends Payable XXX
reporting period Assets XXX
2) Remeasured at settlement date Gain on Distribution of
Non-Cash Assets XXX
Measurement of Noncash Asset
Distributed C. The carrying amount of the payable is less
- PFRS 5, “noncurrent asset to be than the carrying amount of the assets
distributed to owners”
- Lower of carrying amount & fair Property Dividends Payable XXX
value less cost to distribute Loss on Distribution of
- Remeasured at the end of each Non-Cash Assets XXX
reporting period Assets XXX

●Share Capital Dividends (Bonus Issue)

A. Small Share Capital Dividend
A share capital dividend representing less than 20% of the outstanding shares
Retained Earnings is debited for the Fair Value
Share Dividends Distributable is always credited for the Par value

Retained Earnings XXX No entry Share Dividends Distributable XXX

Share Dividends Distributable XXX Share Capital
Share Premium XXX (or Unissued Share Capital) XXX
B. Large Share Capital Dividend
A share capital dividend representing more than 20% of the outstanding shares
Retained Earnings is debited for the Par Value

Retained Earnings XXX No entry Share Dividends Distributable XXX

Share Dividends Distributable XXX Share Capital
(or Unissued Share Capital) XXX
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Donated Capital
Donation is in the form of shares
a. Receipt of donated shares by a shareholder
“Memorandum entry”

b. Sale of Donated shares

Cash XXX
Donated Capital XXX Donated Capital is part of Share Premium.

Donation is in the form of non-cash assets

Asset XXX
Donated Capital XXX
Treasury Shares

1. Purchase of Treasury Shares (COST METHOD) Treasury share is recorded at cost regardless of
Treasury Shares XXX whether the share is acquired below or above par
Cash XXX or stated value

2. Reissuance of Treasury Shares

a. At Cost
Cash XXX 1. The excess over cost is not regarded as a “gain”
Treasury Share XXX but as a component of share premium.

b. Above Cost
Cash XXX
Treasury Share XXX 2. The excess of the cost over reissue should be
Share Premium1- T/S XXX debited to share premium- treasury share to the
extent of its balance. In the absence of any balance
c. Below Cost in this account, the loss is debited to Retained
Cash XXX Earnings.
Share Premium- T/S 2 (if any) XXX
Retained Earnings XXX
Treasury Share XXX

3. Retirement of Treasury Shares

3. The “loss” on retirement should be debited to
a. With Gain on Retirement the following accounts in the order of priority:
Share Capital XXX 1) SP to the extent of the credit when the share
Treasury Share XXX is issued (SP-Original Issuance)
Share Premium- Retirement of T/S XXX 2) SP from Treasury Share
3) Retained Earnings
b. With Loss on Retirement3
Share Capital XXX Share Premium from the original issuance=
4
Share Premium XXX No. of retired treasury shares/ Total number of
Share Premium- T/S (if any) XXX outstanding shares X Total Share Premium *(if not
Retained Earnings XXX specifically identifiable)
Treasury Share XXX

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Summary of Effect of Various Share Transactions

Summary of Reacquisition, Reissuance and Retirements

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