Accounting for Partnership and Corporation SOLMAN (Baysa & Lupisan, 2014) Chapter 8 PDF

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CHAPTER 8 Organization and Formation of a Corporation E 8-1 a. Memorandum entry method Jan. 1 Authorized to issue 25,000 shares of 10% preference share capital with a par value of P100.

May

Dec.

1

Authorized to issue 500,000 shares of ordinary share capital with a stated value of P10.

1

Cash Preference Share Capital (6,250 x P100) Ordinary Share Capital (125,000 x P10) Ordinary Share Capital in Excess of Stated Value

1

1

1

May

Dec.

1

1

625,000 1,250,000 625,000

Cash Preference Share Capital (2,500 x P100) Preference Share Premium

300,000

Cash Ordinary Share Capital (25,000 x P10) Ordinary Share Capital in Excess of Stated Value

350,000

b. Journal entry method Jan. 1 Unissued Preference Share Capital Authorized Preference Share Capital 1

2,500,000

250,000 50,000

250,000 100,000

2,500,000 2,500,000

Unissued Ordinary Share Capital Authorized Ordinary Share Capital

5,000,000

Cash Unissued Preference Share Capital Unissued Ordinary Share Capital Ordinary Share Capital in Excess of Stated Value

2,500,000

5,000,000

625,000 1,250,000 625,000

Cash Unissued Preference Share Capital Preference Share Premium

300,000

Cash Unissued Ordinary Share Capital Ordinary Share Capital in Excess of Stated Value

350,000

250,000 50,000

250,000 100,000

E 8-2 a. Memorandum entry method Apr. 1 Authorized to issue 500,000 shares of ordinary share capital with a par value of P10.

APC – Chapter 8 (2007 edition)

1

May

Cash Ordinary Share Capital (200,000 x P10) Ordinary Share Premium

3,600,000 2,000,000 1,600,000

25 Pre-Operating Expenses Ordinary Share Capital (5,000 x P10) Ordinary Share Premium

70,000

28 Equipment Ordinary Share Capital (15,000 x P10) Ordinary Share Premium

200,000

b. Journal entry method Mar. 1 Unissued Ordinary Share Capital Authorized Ordinary Share Capital 1

Apr.

page 2

50,000 20,000

150,000 50,000

5,000,000 5,000,000

Cash Unissued Ordinary Share Capital Ordinary Share Premium

3,600,000

25 Pre-Operating Expenses Unissued Ordinary Share Capital Ordinary Share Premium

70,000

28 Equipment Unissued Ordinary Share Capital Ordinary Share Premium

200,000

2,000,000 1,600,000

50,000 20,000

150,000 50,000

E 8-3 1. Authorized to issue 500,000 shares of ordinary share capital with a par value of P20 Cash Ordinary Share Capital (125,000 x P20) Ordinary Share Premium (125,000 x P5) 2.

2,500,000 625,000

Authorized to issue 500,000 shares of Ordinary Share Capital with a stated value of P15. Cash Ordinary Share Capital (125,000 x P15) Ordinary Share Capital in Excess of Stated Value

3.

3,125,000

3,125,000 1,875,000 1,250,000

Authorized to issue 500,000 shares of no-par and no stated value Ordinary Share Capital. Cash Ordinary Share Capital (125,000 x P25)

3,125,000 3,125,000

E 8-4 Authorized to issue 50,000 shares of ordinary share capital with a stated value of P20.

APC – Chapter 8 (2007 edition)

a. b.

c.

d.

e.

E 8-5 June

Cash Ordinary Share Capital (12,500 x P20) Pre-Operating Expenses Ordinary Share Capital (2,500 x P20) Ordinary Share Capital in Excess of Stated Value

250,000

Pre-Operating Expenses Ordinary Share Capital (2,000 x P20) Ordinary Share Capital in Excess of Stated Value

50,000

Land Ordinary Share Capital (10,000 x P20) Ordinary Share Capital in Excess of Stated Value

300,000

Cash (5,000 x P24) Ordinary Share Capital (5,000 x P20) Ordinary Share Capital in Excess of Stated Value

120,000

1

1

Sept.

8

8

E 8-6 July

page 3

1

8

OSC Subscription Receivable (35,000 x P50) OSC Subscribed (35,000 x P20) Ordinary Share Premium (35,000 x P30)

250,000 70,000 50,000 20,000

40,000 10,000

200,000 100,000

100,000 20,000

1,750,000 700,000 1,050,000

Cash (P1,750,000 x 40%) OSC Subscription Receivable

700,000

Cash OCS Subscription Receivable

1,050,000

OSC Subscribed Ordinary Share Capital

Cash Ordinary Share Capital (125,000 x P10) Preference Share Capital (12,500 x P50) Ordinary Share Capital in Excess of Stated Value Pre-Operating Expenses (1,250 x P60) Preference Share Capital (1,250 x P50) Preference Share Premium (1,250 x P10)

12 OSC Subscription Receivable (75,000 x P20) OSC Subscribed (75,000 x P10) Ordinary Share Capital in Excess of Stated Value 12 Cash

700,000

1,050,000 700,000 700,000

2,500,000 1,250,000 625,000 625,000 75,000 62,500 12,500 1,500,000 750,000 750,000 600,000

APC – Chapter 8 (2007 edition)

page 4

OSC Subscription Receivable P1,500,000 x 40% = P600,000

July

E 8-7 Sept.

600,000

21 Merchandise Inventory Land Building Equipment Ordinary Share Capital (20,000 x P10) Ordinary Share Capital in Excess of Stated Value

10,000 150,000 100,000 20,000

30 Cash (P1,500,000 – P600,000) OSC Subscription Receivable

900,000

30 OSC Subscribed Ordinary Share Capital

750,000

1

1

8

200,000 80,000

900,000

750,000

OSC Subscription Receivable (125,000 x P30) OC Subscribed (125,000 x P20) Ordinary Share Premium (125,000 x P10)

3,750,000

Cash (P3,750,000 x 40%) OSC Subscription Receivable

1,500,000

Land Ordinary Share Capital (25,000 x P20) Ordinary Share Premium

2,500,000 1,250,000

1,500,000 750,000 500,000 250,000

10 Cash OSC Subscription Receivable P2,200,000 / 3 = P750,000

750,000

20 Cash OSC Subscription Receivable

750,000

30 Cash OSC Subscription Receivable

750,000

30 OSC Subscribed Ordinary Share Capital E 8- 8 a. OSC Subscription Receivable (125,000 x P25) OSC Subscribed (125,000 x P10) Ordinary Share Capital in Excess of Stated Value

750,000

750,000

750,000 2,500,000 2,500,000

3,125,000 1,250,000 1,875,000

APC – Chapter 8 (2007 edition)

b.

c.

d.

e.

f.

P 8-1 Aug.

page 5

Cash (P3,125,000 x 60%) OSC Subscription Receivable

1,875,000

Cash (50,000 x P25 x 40%) OSC Subscription Receivable

500,000

OSC Subscribed Ordinary Share Capital (50,000 x P10) Cash (60,000 x P25 x 40%) OSC Subscription Receivable

500,000

OSC Subscribed Ordinary Share Capital (60,000 x P10)

600,000

Receivable from Highest Bidder OSC Subscription Receivable 15,000 sh x P25 x 40% = P150,000

150,000

Receivable from Highest Bidder Cash

1,875,000

500,000

500,000 600,000 600,000

600,000

150,000

5,000 5,000

Cash Receivable from Highest Bidder

155,000

OSC Subscribed Ordinary Share Capital (15,000 x P10)

150,000

155,000 150,000

1

Authorized to issue 30,000 shares of P50 par value preference share capital.

1

Authorized to issue 100,000 shares of P20 par value ordinary share capital.

2

PSC Subscription Receivable (15,000 x P60) PSC Subscribed (15,000 x P50) Preference Share Premium (15,000 x P10)

900,000

Cash PSC Subscription Receivable P900,000 x 30% = P270,000

270,000

2

2

2

OSC Subscription Receivable (35,000 x P30) OSC Subscribed (35,000 x P20) Ordinary Share Premium (35,000 x P10) Cash (1,050,000 x 20%) OSC Subscription Receivable

750,000 150,000

270,000

1,050,000 700,000 350,000 210,000 210,000

APC – Chapter 8 (2007 edition)

Sept.

P 8-2 Nov.

page 6

30 Cash (P900,000 x 30%) PSC Subscription Receivable

270,000

31 Cash (20,000 x P30 x 80%) OSC Subscription Receivable

480,000

31 OSC Subscribed Ordinary Share Capital (20,000 x P20)

400,000

31 Cash (15,000 x P30 x 40%) OSC Subscription Receivable

180,000

21 Cash PSC Subscription Receivable 11,000 sh x P60 x 40% = P264,000

264,000

21 PSC Subscribed Preference Share Capital (11,000 x P50)

550,000

270,000

480,000

400,000

180,000

264,000

550,000

21 Receivable from Highest Bidder PSC Subscription Receivable 4,000 sh x P60 x 40% = P96,000

96,000

28 Cash Receivable from Highest Bidder

96,000

96,000

96,000

28 PSC Subscribed Preference Share Capital (4,000 x P50)

200,000

30 Cash OSC Subscription Receivable 15,000 sh x P30 x 40% = P180,000

180,000

30 Ordinary Share Capital Subscribed Ordinary Share Capital (15,000 x P20)

300,000

2

2

5

OSC Subscription Receivable (50,000 x P30) OSC Subscribed (50,000 x P25) Ordinary Share Premium (50,000 x P5)

200,000 180,000

300,000

1,500,000 1,250,000 250,000

Cash (P1,500,000 x 40%) OSC Subscription Receivable

600,000

Equipment Ordinary Share Capital (10,000 x P25) Ordinary Share Premium

400,000

16 OSC Subscription Receivable (30,000 x P28)

600,000

250,000 150,000 840,000

APC – Chapter 8 (2007 edition)

page 7

OSC Subscribed (30,000 x P25) Ordinary Share Premium (30,000 x P3)

Dec.

16 Cash (P840,000 x 20%) OSC Subscription Receivable

168,000

28 Cash (35,000 x P30 x 60%) OSC Subscription Receivable

630,000

28 OSC Subscribed Ordinary Share Capital (35,000 x P25)

875,000

16 Cash OSC Subscription Receivable 25,000 sh x P28 x 80% = P560,000 16 OSC Subscribed Ordinary Share Capital (25,000 x P25)

560,000

16 Receivable from Highest Bidder OSC Subscription Receivable 5,000 sh x P28 x 80% = P112,000

112,000

20 Receivable from Highest Bidder Cash

3.

4.

168,000

630,000

875,000

560,000 625,000 625,000

112,000

5,000 5,000

26 Cash Receivable from Highest Bidder

117,000

26 OSC Subscribed Ordinary Share Capital (5,000 x P25)

125,000

P 8-3 Partnership Books 1. Inventories Capital Adjustment Account 2.

750,000 90,000

117,000

125,000

90,000 90,000

Accumulated Depreciation Equipment Capital Adjustment Account

160,000

Capital Adjustment Account Goodwill

100,000

Goodwill Capital Adjustment Account FMV of CS issued Adj. NA, excluding cash Goodwill

156,000

80,000 80,000

100,000

156,000 P980,000 824,000 P156,000

APC – Chapter 8 (2007 edition)

5.

6.

7.

page 8

Capital Adjustment Account Bautista, Capital (3/4) Bernaldo, Capital (1/4)

226,000

Rainbow Corp. Stocks Allowance for Doubtful Accounts Accounts Payable Accounts Receivable Inventories Equipment Goodwill

980,000 12,000 104,000

Bautista, Capital Bernaldo, Capital Cash Rainbow Corp. Stocks

563,500 458,500

169,500 56,500

124,000 296,000 520,000 156,000

42,000 980,000

New Corporation’s Books 1. Authorized to issue 50,000 shares of P50 par value ordinary share capital. 2.

3.

Cash (10,000 x P70) Ordinary Share Capital (10,000 x P50) Ordinary Share Premium (10,000 x P20)

700,000

Accounts Receivable Inventories Equipment Goodwill Allowance for Doubtful Accounts Accounts Payable Ordinary Share Capital Ordinary Share Premium

124,000 296,000 520,000 156,000

P 8-4 1. a. Land Preference Share Capital Preference Share Premium b.

c.

Cash Preference Share Capital Preference Share Premium Pre-operating Expenses Ordinary Share Capital Ordinary Share Premium

500,000 200,000

12,000 104,000 700,000 280,000

150,000 100,000 50,000 35,000 25,000 10,000 5,400 4,000 1,400

APC – Chapter 8 (2007 edition)

d.

2.

Cash Ordinary Share Capital Ordinary Share Premium

78,000 60,000 18,000

PS = P125,000 /P50 par = 2,500 shares OS = P 64,000 / P5 par = 12,800 shares

P 8-5 1. Total preference shares issued (P1,000,000/P50 par) PS issued for equipment PS issued for cash 2.

page 9

20,000 sh 10,000 10,000 sh

Preference share premium Premium from issuance in exchange for equipt. (P550,000 – P500,000) Share premium from issuance for cash

P120,000 50,000 P 70,000

Issuance price per share = P50 + (P70,000/10,000)

P 57

3.

OSC issued = P3,000,000/P10

300,000 sh

4.

Issuance price per share = P7,500,000/300,000 sh

P 25

5.

PIC from issuance of PS for equipment

P50,000

P 8-6 1. P1,440,000/ P50 = 28,800 shares 2. P1,360,000/P10 = 136,000 shares 3. P720,000 / P50 = 14,400 shares 4. P280,000/P10 = 28,000 shares 5. (P2,160,000 + P216,000) / (28,800 + 14,400) = P55 6. (P1,640,000 + P328,000) / (136,000 + 28,000) = P12 7. P360,000 / 14,400 shares = P25 8. P12 – (P182,000/28,000 sh) = P5.50 Multiple Choice 8-1 D 8-2 A 8-3 C 8-4 C 8-5 A 8-6 D 8-7 D 8-8 D 8-9 B 8-10 D 8-11 B 8-12 C

25,000 sh x P24 x 25% = P150,000 4,000 sh x P110 x 25% = P110,000 2,000 sh x P17 = P34,000 (25,000 + 1,000 + 5,000) x P20 = P620,000 (25,000 x P2) + (1,000 x P4) + (5,000 x P6) = P84,000 (P900,000 – P750,000) + (P100,000 x P15) + (5,000 x P5) = P1,675,000 [(50,000 + 50,000 +100,000) x P15] + (5,000 x P50) + P1,675,000 = P4,925,000 (100,000 x P30) + (3,000 x P50) =3,150,000 (7,500 + 6,000 x P4) = P54,000

APC – Chapter 8 (2007 edition)

8-13 8-14 8-15

page 10

A D D

TM 28 1. T 2. F 3. F 4. T 5. F

6. 7. 8. 9. 10.

T F F T T

11. 12. 13. 14. 15.

TM 29 1. Corporation 2. Incorporation 3. Domestic corporation 4. Incorporators 5. Pre-operating costs/organization costs 6. Stated value 7. Ordinary share capital 8. Preference share capital 9. Par value 10 Ordinary share capital TM 30 1. C 2. C 3. D 4. C

5. 6. 7. 8.

C A B D

9. 10. 11. 12.

T T F F T

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

A B B C

16. 17. 18. 19. 20.

F T T F F

21. 22. 23. 24. 25.

Outstanding share capital Delinquent subscriber 25% 25% Paid-in capital in excess of stated value P5.00 50 years Stock certificate Receivable from highest bidder Goodwill

13. 14. 15. 16.

C B C B

17. 18. 19. 20.

TM 31 Problems A.

1. 2. 3. 4. 5.

P50,000 P55 500,000 sh P15 P50,000

P60,000 (total) – P10,000 (land) = P50,000 P2,750,000 / 50,000 sh = P55 P5,000,000 / P10 = 500,000 sh P7,500,000 / 500,000 sh = P15 P550,000 – (10,000 sh x P50) = P50,000

B.

1. 2. 3. 4. 5.

P100 / 325 sh P70,000 P50,000 P2,460,000 P64,000

P42,250/P130 = 325 shares; P32,500/325 sh = P100 P120,000 – (1,000 x P50) = P70,000

C. 1. 2. 3.

57,600 sh 272,000 sh 28,800 sh

(24,000 sh x P60) + (6,000 sh x P120) + (2,000 sh x P150) 8,000 sh x P8 = P64,000

P2,880,000 / P50 P2,720,000 / P10 P1,440,000 / P50

T T T F T

D A C D

APC – Chapter 8 (2007 edition)

4. 5. 6. 7. 8.

56,000 sh P55 P12 P25 P5.50

P560,000 / P10 (P4,320,000 + P432,000) / (57,600 + 28,800) = P55 (P3,280,000 + P656,000) / (272,000 + 568,000) = P12 P720,000 / 28,800 = P25 P12 – (P364,000/56,000)

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