Problem 20 -1 Memorandum Entry Method

Ocean Company is authorized to issue 100,000 shares at P 50 par value.

1. Subscription Receivable- Ordinary (100,000 x .25 = 25,000 s x P 50) 1,250,00

0
Subscribed Ordinary Share Capital (100,000 x .25 x P 50)

2. Cash (1,250,000 x .25) 312,500

Subscription Receivable- Ordinary

3. Cash ( 15,000 x P 50 x .75) 562,500

Subscription Receivable- Ordinary

Subscribed Ordinary Share Capital ( 15,000 x 50) 750,000

Ordinary Share Capital ( 15,000 x P 50)

4. Land 600,000
Ordinary Share Capital ( 10,000 x P 50)
Share Premium - Ordinary

5. Cash ( 5,000 x P 60) 300,000

Ordinary Share Capital (5,000 x P 50)
Share Premium - Ordinary ( 5,000 x 10)

6. Legal Expense 100,000

Ordinary Share Capital (2,000 x P 50)

Ordinary Share Capital (32,000 shares issued at P 50 par value) 1,600,

Subscribed Ordinary Share Capital (10,000 x P 50) 500,000

Less: Subscription Receivable (375,000) 125,

Premium in Excess of Par - Ordinary 150,

Total Shareholders’ Equity 1,875,

Capital Stock ( shares x par/stated value) XX

Subscribed Capital Stock ( shares x par / stated Value) XX

Less: Subscription Receivable (xx) XX

Premiums:
 Premium in excess of par or stated value Xx
Premium from treasury shares Xx
Premium from retirement of shares Xx
Donated Capital Xx
Warrants Outstanding Xx
Option Outstanding Xx Xx/

Contributed Capital XX

Retained Earnings:
Retained Earnings Appropriated Xx
Unappropriated XX Xx

OCI XX

Treasury Shares (XX)

SHAREHOLDERS’ EQUITY XX

Problem 20-2 Journal Entry Method

Unissued Capital Stock (50,000 x P 100) 5,000,000
Authorized Capital Stock 5,000,000

1. Subscription Receivable (50,000 x .40) = 20,000 s x P100) 2,000,000

Subscribed Capital Stock (20,000 x P 100) 2,000,000

2. Cash (2,000,000 x .25) 500,000

Subscription Receivable 500,000

3. Cash (10,000 x P 100 x .75) 750,000

Subscription Receivable 750,000

Subscribed Capital Stock (10,000 x P 100) 1,000,000

Unissued Capital Stock 1,000,000

4. Patent ( 5,000 x P 100) 500,000

Unissued Capital Stock 500,000

5. Cash ( 15,000 x P 120) 1,800,000

Unissued Capital Stock ( 15,000 x P 100) 1,500,000
Share Premium in excess of par 300,000
Authorized Capital Stock P 5,000,000
Less: Unissued Capital Stock 2,000,000
Issued Capital Stock 3,000,000

Subscribed Capital Stock 1,000,000

Less : Subscription Receivable 750,000 250,000

Share Premium in excess of Par 300,000

Shareholders’ Equity 3,550,000

Problem 20-3

Bump Company is authorized to issue 50,000

shares at P 100 par.
1. Subscription Receivable ( 40,000 x P 100) 4,000,0
00
Subscribed Capital Stock ( 40,000 x P 100) 4,000,0
00

2. Accounts Receivable 350,000

Notes Receivable 70,000
Inventory 680,000
Accounts Payable 100,000
Subscription Receivable (A) 1,000,0
00

3. Land 150,000
Building 850,000
Subscription Receivable (B) 1,000,0
00

4. Cash ( 8,000 + 4,000 + 3,000) x P 100 x .25 375,000

Subscription Receivable 375,000

5. Legal Expense 50,000

Capital Stock ( 500 x P 100) 50,000

6. Cash ( 40 X 1,000) 40,000

Subscription Receivable ( 120 -40) x P 1,000 80,000
 Subscribed Capital Stock ( 1,000 x P 100) 100,000
Share Premium ( 1,000 x 20) 20,000

7. Cash 200,000
Subscription Receivable (A) 200,000

Cash ( 13,000 x 100) – 1,000,000 300,000

Subscription Receivable (B) 300,000

Cash (8,000 x P100 x .75) 600,000

Subscription Receivable (C) 600,000

Subscribed Capital Stock (12.000 + 13,000 + 3,300,0

8,000) x P 100 00
Share Capital 3,300,0
00

Share Capital ( 33,500 shares at P 100 3,350,000

par)
Subscribed Capital Stock (41,000 – 800,000
33,000) x P 100
Less : Subscription Receivable 605,000 195,000
Share Premium in excess of Par 20,000
Shareholders’ Equity 3,565,000

Problem 20 -4
1. Brook Company is authorized to issue 30,000 shares of P
100 par Preference shares and 100,000 shares of P 50 par
Ordinary shares.

2. Cash ( 40,000 x P 60) 2,400,000

Ordinary Share Capital ( 40,000 x P 50) 2,0
Share Premium - Ordinary 4

3. Cash ( 10,000 x P 120) 1,200,000

Preference Share Capital ( 10,000 x P 100) 1,0
 Share Premium – Preference Share 2

4. Preference Share Subscription Receivable (10,000 x P 100) 1,000,000

Subscribed Preference Share 1,0

5. Cash 400,000
Preference Share Subscription Receivable 4

6. Legal Expense 100,000

Preference Share Capital (1,000 x P 100) 1

7. Property, Plant and Equipment 1,300,000

Ordinary Share Capital ( 20,000 x P 50) 1,0
Share Premium – Ordinary 3

8. Ordinary Share Subscription Receivable ( 15,000 x P 50) 750,000

Subscribed Ordinary Share Capital ( 15,000 x P 50) 7

9. Cash ( 750,000 x .40) 300,000

Ordinary Share Subscription Receivable 3

10. Cash ( 1,000,000 – 400,000) 600,000

Preference Share Subscription Receivable 6

Subscribed Preference Share (10,000 x P 100) 1,000,000

Preference Share Capital ( 10,000 x P 100) 1,0

11. Income Summary 2,000,000

Retained Earnings 2,0

Preference Share Capital (21,000 shares at P 2,100,00

100 par) 0
Ordinary Share Capital ( 60,000 shares at P 50 3,000,00
par) 0
Total Share Capital 5,100,000

Subscribed Ordinary Share (15,000 at P 50 par) 750,000

Less: Ordinary Shares Subscription Receivable 450,000 300,000

Share Premium - Preferred 200,000

Share Premium - Ordinary 700,000 900,000

Total Contributed Capital 6,300,000

Retained Earnings 2,000,000

Shareholders’ Equity 8,300,000

Problem 20 -5
1. Unissued Ordinary Share Capital ( 100,000 x 100) 10,00
Authorized Ordinary Share Capital

2. Subscription Receivable (100,000 x .25 x P 100) 2,50

Subscribed Ordinary Share Capital

3. Cash ( 2,500,000 x .25) 62

Subscription Receivable

4. Cash ( 10,000 x 100 x .75) 75

Subscription Receivable

5. Subscribed Ordinary Share Capital ( 10,000 x 100) 1,00

Unissued Ordinary Share Capital ( 10,000 x P 100)

6. Land 80
Building 2,50
Unissued Ordinary Share Capital ( 30,000 x P 100)
Share Premium

7. Loan Payable 1,10

Interest Payable 20
Unissued Ordinary Share Capital ( 10,000 x 100)
Share Premium ( 120 – 100) x 10,000
 Gain on extinguishment of Debt

8. Income Summary 3,00

Retained Earnings

Authorized Capital Stock P 10,000,000

Less: Unissued Capital Stock 5,000,000
Issued Capital Stock 5,000,000

Subscribed Capital Stock 1,500,000

Less : Subscription Receivable 1,125,000 375,000

Share Premium in excess of Par 500,000

Retained Earnings ( 3,000,000 + 100,000) 3,100,000

Shareholders’ Equity 8,975,000

20-6
Preference Share Subscription Receivable (20,000 x 100) 2,000,000
Subscribed Preference Share ( 20,000 x P 100) 2,000,000

Preference Share Subscription Receivable ( 4,000 x 120) 480,000

Subscribed Preference Share ( 4,000 x 100) 400,000
Share Premium – Preference Share 80,000

Cash ( 2,480,000 – 120,000) 2,360,000

Preference Share Subscription Receivable 2,360,000

Subscribed Preference Share ( 22,000 x 100) 2,200,000

Preference Share Capital ( 22,000 x 100) 2,200,000

Land 230,000
Ordinary Share Capital ( 8,000 x P 10) 80,000
Share Premium - Ordinary 150,000

Ordinary Share Subscription Receivable ( 40,000 x P 30) 1,200,000

Subscribed Ordinary Share Capital ( 40,000 x P 10) 400,000
Share Premium – Ordinary ( 40,000 x P 20) 800,000
 Cash ( 1,200,000 -360,000) 840,000
Ordinary Share Subscription Receivable 840,000

Subscribed Ordinary Share Capital ( 16,000 x P 10) 160,000

Ordinary Share Capital 160,000

Preferred Shares:
Preference Share Capital (22,000 x P 100) 2,200,000

Subscribed Preference Share (2,000 x P 100) 200,000

Subscription Receivable- Preference (120,000)

Premium - Preference 80,000

Ordinary Shares:
Ordinary Share Capital (24,000 x P 10) 240,000

Subscribed Ordinary Share (24,000 x P 10) 240,000

Subscription Receivable- Ordinary (360,000)

Premium - Ordinary 950,000

Authorized

Subscribed Unsubscribed

Issued Issued

How much was the subscription price of Preference share in paragraph 1?

Premium per share from Subscription of Preference Share in paragraph 2
20
Preference share subscribed in paragraph 2
4,000
Total Premium
80.000
Total Premium per record
80,000
Premium in subscription of shares in paragraph no.1
0
SO IT WAS ISSUED AT PAR

How many were subscribed of ordinary shares in paragraph no. 1?

No of Shares Issued and Subscribed ( 24,000 + 24,000) = 48,000
Shares issued in the last paragraph 8,000
The number of shares subscribed in Paragraph 1 40,000

How much was the subscription price of ordinary shares in paragraph no. 1
Total Premium ordinary 950,000
Less : Premium in last paragraph 230,000 – (8,000 x 10) 150,000
Total Premium in subscription in paragraph 1 800,000
/ No. of share subscribed in paragraph 1 40,000
Premium per share in paragraph no. 1 (800,000 / 40,000) 20
Plus the par value of ordinary 10
Issued Price in the subscription in par 1 30

20-7 PRACTICE PRACTICE PRACTICE

20 -8
1.a Convertible
Preference Share Capital ( 5,000 x P 100) 500,000
Share Premium-PS (500,000 / 50,000)= 10 x 5,000 50,000
Ordinary Share Capital ( 5,000 x 50) 250,0
Share Premium – Ordinary ( 550,000 – 250,000) 300,0
Shareholders Equity after conversion:
Preference Share (45,000 x P 100) 4,500,000
Share Premium – PS ( 45,000 x 10) 450,000
Ordinary Share ( 105,000 x 50) 5,250,000
Share Premium – O/S (1M + 300,000) 1,300,000
Retained Earnings 2,000,000
Total 13,500,000

1.b
Preference Share Capital ( 5,000 x P 100) 500,000
Share Premium-PS (500,000 / 50,000)= 10 x 5,000 50,000
Retained Earnings ( 1,000,000 – 550,000) 450,000
Ordinary Share Capital ( 5,000 x 4 x P50) 1,000,0

Shareholders Equity after conversion:

Preference Share (45,000 x P 100) 4,500,000
Share Premium – PS ( 45,000 x 10) 450,000
Ordinary Share (120,000 x 50) 6,000,,000
Share Premium – O/S (1M) 1,000,000
Retained Earnings (2,000,000 – 450,000) 1,550,000
Total 13,500,000

2.a Retirement
PS ( 5,000,000 + 500,000) / 50,000 = 110/ share
Preference Share Capital ( 5,000 x P 100) 500,000
Share Premium-PS (500,000 / 50,000)= 10 x 5,000 50,000
Retained Earnings ( 600,000 – 550,0000 50,000
Cash ( 5,000 x P 120) 600,0

Shareholders Equity after retirement:

Preference Share (45,000 x P 100) 4,500,000
Share Premium – PS ( 45,000 x 10) 450,000
Ordinary Share ( 100,000 x 50) 5,000,000
Share Premium – O/S (1M ) 1,000,000
Retained Earnings ( 2,000,000-50,000) 1,950,000
Total 12,900,000

2.b
Preference Share Capital ( 5,000 x P 100) 500,000
Share Premium-PS (500,000 / 50,000)= 10 x 5,000 50,000
Cash ( 5,000 x 80) 400,0
Share Premium Redemption 150,0

Shareholders Equity after conversion:

Preference Share (45,000 x P 100) 4,500,000
Share Premium – PS ( 45,000 x 10) 450,000
Ordinary Share (100,000 x 50) 5,000,,000
Share Premium – O/S (1M) 1,000,000
Share Premium - Redemption 150,000
Retained Earnings 2,000,000
Total 13,100,000

Problem 20 -9 Redeemable Preferred Shares (Financial Liability)

1.1.2020 Cash 5,000,00
0
Redeemable Preference Share 5,000,0

12.31.2020 Interest Expense ( 5M x .10) 500,000

Interest Payable 500,0

12.31.2021 Interest Expense ( 5M + 500,000) x .10) 550,000

Interest Payable 550,0

1.1. 2022 Redeemable Preference Share 5,000,00

0
 Interest Payable 1,050,00
0
Cash 6,050,0

20-10
Authorized share capital 5,000,000
Less: Unissued share capital 2,000,000 3

Subscribed share capital 1,000,000

Less : Subscription Receivable 400,000

Share Premium

Retained Earnings Appropriated 600,000

Add: Retained Earnings Unappropriated 300,000

Revaluation Surplus

Shareholders’ Equity 5,200,000

20-11
Share Capital 5,000,000
Subscribed Capital 3,000,000
Less: Subscription Receivable 2,000,000 1,000,000
Share Premium 1,500,000
Contributed Capital 7,500,000

20-17
OS Fair 10,000 x 360 3,600,000
PS Fair 20,000 x 270 5,400,000
Total Fair 9,000,000

OS Price 3.6/9 x 8,000,000 3,200,000

OS Par 10,000 x 200 2,000,000
Premium in OS 1,200,000

PS Price 5.4/9 x 8,000,000 4,800,000

PS Par 20,000 x 200 4,000,000
PS Premium 800,000

20-18
2020 2020 2021
475,000 x 15 7,125,000
Income 1,025,000
Dividend (230,000)
Total 2020 7,920,000 7,920,000
100,000 x 17 1,700,000
150,000 x 8 1,200,000
50,000 x 9 450,000
Net Income 1,215,000
Dividend (635,000)
Total SE 2021 11,850,000

20-19
Preference Share = 8,000 x 105 = 840,000
Conversion to OS ( 8,000 x 3 x 25) =600,000
Premium of OS 240,000

20-20
Preference Shares 15,000 x 110 1,650,000
Ordinary Shares 15,000 x 3 x 25 1,125,000
Premium - OS 525,000
21-1
a. Treasury Shares (5,000 x 160) 800,000
Cash 800,000

b. Cash 1,000,000
Treasury Shares 800,000
Premium from TS Transaction 200,000

c. Cash 700,000
Retained Earnings 100,000
Treasury Share 800,000

SE before Treasury Shares P 7,200,000

Treasury Shares (800,000)
SE 6,400,000
After b above
SE before Treasury Shares P 7,200,000
Premium from TS 200,000
SE 7,400,000

After c above
SE before Treasury Shares P 7,200,000
Deduction to RE (100,000)
SE 7,100,000

21-2
a. Assuming the par value is P 15.
Cash ( 200,000 x 20) 4,000,000
Share Capital ( 200,000 x 15) 3,000,000
 Share Premium 1,000,000

Cash ( 250,000 X 25) 6,250,000

Share Capital ( 250,000 x 15) 3,750,000
Share Premium 2,500,000

Treasury Share ( 50,000 x 20 ) 1,000,000

Cash 1,000,000

Cash ( 25 x 50,000) 1,250,000

Treasury Shares 1,000,000
Share Premium Treasury 250,000

b. Assuming no par but there is a stated value of P 20

Cash ( 200,000 x 20) 4,000,000
Share Capital ( 200,000 x 20) 4,000,000

Cash ( 250,000 x 25) 6,250,000

Share Capital ( 250,000 x 20) 5,000,000
Share Premium 1,250,000

Treasury Share ( 50,000 x 20 ) 1,000,000

Cash 1,000,000

Cash ( 25 x 50,000) 1,250,000

Treasury Shares 1,000,000
Share Premium Treasury 250,000

21-3
a. Cash ( 30,000 x 140) 4,2
Preference Share Capital ( 30,000 x 100)
Share Premium – Preference ( 30,000 x 40)
b. Cash ( 100,000 x 55) 5,5
Ordinary Share Capital ( 100,000 x 50)
Share Premium – Ordinary ( 100,000 x 5)

c. Preference Share (10,000 x 100) 1,0

Share Premium – Preference ( 10,000 x 40) 4
Cash ( 10,000 x 120)
Share Premium – Retirement ( 10,000 x 20)

d. Treasury Shares – Ordinary ( 15,000 x 52) 7

Cash

e. Cash (10,000 x 60 ) 6
Treasury Shares – Ordinary ( 10,000 x 52)
Share Premium from Treasury Shares

f. Memo Entry : Received 20,000 ordinary shares as donation

Cash (10,000 x 65) 6

Donated Capital

g. Income Summary 3,0

Retained Earnings

h. Retained Earnings ( 5,000 x 52) 2

RE Appropriated for Treasury Shares

b.
Preference Shares 2,000,000
Ordinary Shares 5,000,000 7,000

Premium in Excess of par – Preferred 800,000

Premium in Excess of par – Ordinary 500,000
Premium from Retirement 200,000
Premium from Treasury Shares 80,000
Donated Capital 650,000 2,230

Retained Earnings Appropriated for Treasury 260,000

Unappropriated Retained Earnings 2,740,000 3,000

Treasury Shares (260,

TOTAL SE 11,970

21-4
Share Capital ( 20,000 x P 150) 3,000,000
Share Premium (20,000 x P 10) 200,000
Retained Earnings 1,500,000
Total SE 4,700,000

a. Share Capital (20,000 x 150) 3,000,000

Share Premium (20,000 x 10) 200,000
Share Capital (20,000 x 2 x 50) 2,000,000
Share Premium 1,200,000

b. Memo Entry :Issued 100,000 new shares

(20,000 x P 30) with a par value of P 30 as a
result of a 5 for 1 split.

c. Share Capital ( 20,000 x P 150) 3,000,000

Share Premium (20,000 x P 10) 200,000
Share Capital (20,000 x P 100) 2,000,000
Share Premium 1,200,000
or
Share Capital 1,000,000
Share Premium 1,000,000

d. Share Capital ( 20,000 x P 150) 3,000,000

Share Premium (20,000 x P 10) 200,000
Retained Earnings 800,000
Share Capital (20,000 x 4 x P 50) 4,000,000
21-5
Preference Share 5,000 x P 100 500,000
Ordinary Share Capital 50,000 x P 50 2,500,000
Share Premium -Preferred (200,000) / 5,000 = 40 200,000
Share Premium - Ordinary (500,000 / 50,000 = 10 500,000
Retained Earnings 2,000,000
Total SE 5,700,000

1. Cash ( 20,000 x 50) 1,000,000

Ordinary Share Capital 1

2. Treasury Shares – Ordinary ( 5,000 x 60) 300,000

Cash

3. Memo: Issued 140,000 shares (70,000 x 2) as a result

of o 2 for 1 split. Par Value is now P 25. (P50/2)

4. Cash ( 3,000 x 40) 120,000

Treasury Shares ( 60 / 2 x 3,000)
Share Premium - Treasury

5. Memo: received 15,000 ordinary shares from

shareholders as donation.

Cash ( 10,000 x 40) 400,000

Donated Capital

6. Income Summary 500,000

Retained Earnings

7. Retained Earnings (7,000 x 30) 210,000

RE Appropriated for treasury shares
 12% Preference Share (5,000 s x P 100) 500,000
Ordinary Shares ( 140,000 s x P 25) 3,500,000 4

Share Premium - PS 200,000

Share Premium - OS 500,000
Share Premium – Treasury Shares 30,000
Donated Capital 400,000 1

RE Appropriated for treasury shares 210,000

Unappropriated Retained Earnings 2,290,000 2

Treasury Shares (
Shareholders’ Equity 7

21-6 QUASI REORGANIZATION ( Purpose to zero in deficit)

a.
a Share Capital ( 5,000,000 x .10) 500,000
Donated Capital 500,000

Donated Capital 500,000

Retained Earnings 500,000

b.
Share Capital ( 50,000 x 50) 2, 500,000
Share Premium 2,500,000

Share Premium 500,000

Retained Earnings 500,000

c.
Share Capital ( 50,000 x 100) 5,000,000
Share Premium 1,000,000
Share Capital ( 100,000 s x P 55) 5,500,00
Retained Earnings 500,00
d.
a. Share Capital ( 50,000 x 100) 5,000,000
Share Premium 1,000,000
Share Capital ( 150,000 x 20) 3,000,00
Retained Earnings 500,00
Share Premium - Recap 2,500,00

21-7
1. Memo: Issued 25,000 rights to shareholders to acquire one share of ordinary, P 50
60 with every 5 rights submitted.

Cash ( 20,000 / 5 = 4,000 s x P 60) 240,000

Ordinary Share Capital ( 4,000 x P 50)
Share Premium - Ordinary

Memo: 5,000 rights expired

2. Cash 2,500,000
Warrants Outstanding ( 20,000 x 10)
Preference Share Capital ( 20,000 x 100)
Share Premium - Preference

Cash (18,000/2 = 9,000 s x P 60) 540,000

Warrants Outstanding (18,000 x 10) 180,000
Ordinary Share Capital ( 9,000 x P 50 )
Share Premium – OS (9,000 x 10) + 180,000

Warrants Outstanding (200,000 – 180,000) 20,000

Share Premium – Unexercised Warrant

3. Cash 6,000,000
Warrants Outstanding 25,000 x (80-60)
Preference Share Capital ( 50,000 x 100)
Share Premium - Preference
 Cash ( 25,000 x P 60) 1,500,000
Warrants Outstanding 500,000
Ordinary Share Capital ( 25,000 x 50)
Share Premium - Ordinary

21-8
5.30.2020 Cash ( 5,000,000 x 1.2) 6,000,000
Bonds Payable
Premium on Bonds Payable ( 5,000,000 x .05)
Warrants Outstanding 6M – (5M x 1.05)

12.31.2020 Cash (10,000 x P 120 ) 1,200,000

Warrants Outstanding ( 750,000 x 10,000/15,000) 500,000
Ordinary Share Capital ( 10,000 x 100)
Share Premium - Ordinary

Income Summary 2,000,000

Retained Earnings

7.01.2021 Memo: Issued 60,000 rights to shareholders to buy 1 share at P 130 with

12.31.2021 Cash ( 60,000 / 5 = 12,000s x P 130) 1,560,000

Ordinary Share Capital ( 12,000 s x P 100)
Share Premium - Ordinary

Memo: All rights were exercised.

Income Summary 3,000,000

Retained Earnings

Warrants Outstanding 250,000

Share Premium – Expired Warrants
For P 5,000,000 / 1,000 = 5,000 x 3 shares = shareholders can buy 15,000
shares altogether.

Ordinary Share Capital (72,000 s x P 100 par) 7,200,000

Premium (1,000,000 + 700,000+
360,000 + 250,000) 2,310,000

Retained Earnings (3M + 2M + 3M) 8,000,000

17,510,000