Corporation Handout 02 (Practice materials with answers) PDF

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ACCOUNTING FOR STOCK CORPORATIONHANDOUT NO. 02PROBLEM 1The following accounts are found in the trial balance of Goodwill Trading Corporation at December 31, 2021:Authorized Ordinary Shares, P50 par P2,000, Subscription Receivable - collectible on Jan, 31, 2022 200,0 00 Unissued Ordinary Shares 800, ...

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ACCOUNTING FOR STOCK CORPORATION HANDOUT NO. 02 PROBLEM 1 The following accounts are found in the trial balance of Goodwill Trading Corporation at December 31, 2021: Authorized Ordinary Shares, P50 par Subscription Receivable - collectible on Jan, 31, 2022 Unissued Ordinary Shares Subscribed Ordinary Shares Share Premium - Ordinary

P2,000,000 200,000 800,00 400,000 300,000

1. What is the total number of shares issued? Answer: 24,000 shares Number of Issued Shares (P2,000,000 - P800,000) / P50 = 24,000 shares 2. What is the total number of shares still available for subscription? Answer: No. Of authorized shares (P2,000,000/P50) Issued shares (P2,000,000 - P800,000) / P50 Subscribed Shares (P400,000/P50) Shares still available for subscription

40,000 (24,000) (8,000) 8,000 shares

3. What is the total contributed capital? Answer: P1,900,000 Contributed Capital: Ordinary Share Capital (P2,000,000 - P800,000) Subscribed Ordinary Shares Capital Share Premium - Ordinary Total Contributed Capital

P1,200,000 400,000 300,000 P1,900,000

PROBLEM 2 The shareholders’ equity of Janet Corporation at the end of 2021 and 2020 are as follows: 2021 12% Preference Share Capital, P100 par

2020

P1,000,000

P600,000

2,000,000

1,800,000

Ordinary Share Capital, P20 par Share Premium - Preference Share Premium - Ordinary

160,000 800,00

400,000

4. What is the total number of ordinary shares issued at December 31, 2021? Answer: 100,000 shares P2,000,000 / P20 = 100,000 shares 5. How many preference shares were issued during 2021? Answer: 4,000 shares (P1,000,000 - P600,000) / P100 = 4,000 shares 6. What is the average issue price per share of the preference issued in 2021? Answer: P140 per share Increase in Preference Share Capital (P1,000,000 - P600,000) Increase in Share Premium - Preference Total issue price of PS in 2021 Divide by no. of shares issued in 2021 Average issue price per share

P400,000 160,000 P560,000 4,000 P 140

7. How many ordinary shares were issued in 2021? Answer: 10,000 shares (P2,000,000 - P1,800,000) / P20 = 10,000 shares 8. What is the average issue price per share of the ordinary shares issued in 2021? Answer: P60 per share Increase in Ordinary Share Capital (P2,000,000 - P1,800,000) Increase in Share Premium - Ordinary (P800,000 - P400,000) Total issue price of OS in 2021 Divide by no. of ordinary shares issued in 2021 Average issue price per ordinary share

P200,000 400,000 P600,000 10,000 P 60

PROBLEM 3 On July 1, 2020, Nokia Corp. issued 1,000 of P10 par ordinary shares and 2,000 of P10 par convertible preference shares for a lump-sum price of P45,000. At this date, Nokia’s ordinary and preference were selling at P18 and P14 per share, respectively. Ordinary Share Capital (1,000 x P18) Preference Share Capital (2,000 x P14) Total

P18,000 28,000 P46,000

9. What is the amount credited to Share Premium - Ordinary? Answer: P7,609 Allocated amount (P45,000 x 18/46) Total par Value ( 1,000 x P10) Share Premium - Ordinary

P17,609 (10,000) P 7,609

10. What is the amount credited to Share Premium - Preference? Answer: P7,391 Allocated amount (P45,000 x 28/46) Total par value (2,000 x P10) Share Premium - Preference

P27,391 20,000 P 7,391

PROBLEM 4 Fortune Company prepared this journal entry on June 30, 2021: Cash 140,000 Ordinary Share Capital 130,000 Share Premium - Ordinary 10,000 Issued ordinary shares at P140 per share. 11. What is the par value of the shares? Answer: P130 Par Value (P130,000 / 1,000) P130 12. How many shares were issued? Answer: 1,000 shares No. Of shares issued (P140,000/P140)

1,000

PROBLEM 5 Global Company exchanges a piece of equipment for 4,000 shares of International Company’s ordinary share capital that has a P100 par value. The equipment costs Global P1,000,000 when purchased five years ago, and currently has a fair value of P560,000. The equipment has a recorded accumulated depreciation of P550,000 in the books of Global. 13. What is the amount credited to Share premium - Ordinary as a result of this exchange? Answer: P160,000 Fair market value of equipment Total Par Value of Ordinary Shares issued (4,000 x P100) Share Premium

P560,000 400,000 P160,000

PROBLEM 6 Worldwide Company was authorized to issue 10,000 preference shares of P200 par value and 100,000 ordinary shares of P20 par value. Subscription for 4,000 preference shares was received at P225 per share with a downpayment of 25%. The balance is payable after 60 days. 14. What is the amount of Share Premium - Preference recognized by Worldwide upon receipt of the preference shares subscription? Answer: P100,000 Total Subscription price (4,000 x P225) Total Par Value (4,000 x P200) Share Premium - Preference

P900,000 800,000 P100,000

PROBLEM 7 On January 31, 2021, Mendoza Corp. was incorporated with an authorized share capital of P3,000,000 divided into 100,000 shares of P30 par. In February, 30,000 shares were sold for P40 per share. In March, 20,000 shares were sold on a subscription basis at a price of P45 per share. As of December 31, 2021, one-half of the subscriptions in March was collected. 15. What amount will appear on December 31, 2021 statement of financial position as Ordinary Share Capital? Answer: P900,000 Ordinary Share Capital (30,000 x P30)

P900,000

PROBLEM 8 On January 31, 2021, Sebastian Corp. was incorporated with an authorized share capital of P3,000,000 divided into 100,000 shares of P30 par. In February, Daniel subscribed to 30,000 shares at P40 per share. In March Daniel paid one-half of the total subscription price, but subsequently failed to pay the balance on due date. Sebastian Corp. declared the shares as delinquent and advertised them in a public auction, paying P10,000. Coleco was the highest bidder for a bid of 14,000 shares. 16. How much did Coleco pay the corporation? Answer: P610,000 Unpaid subscription (30,000 x P40) x 1/2 Advertising cost Total

P600,000 10,000 P610,000

17. How many shares did Daniel receive from the subscription? Answer: 16,000 shares 30,000 - 14,000 = 16,000 shares

PROBLEM 9 The following is a list of selected account balances taken from the December 31, 2021 general ledger of Marcel Corporation: Accounts Payable Accounts Receivable Ordinary Share Capital Share Premium - Ordinary Shares Share Premium - Preference Shares Preference Share Capital 500,000 Subscribed Preference Share Capital Retained Earnings Subscriptions Receivable - Preference Shares

P1,400,000 2,357,000 1. ,260,000 1,082,750 92,100 140,000 191,950 105,000

18. What is the total contributed capital for Marcelo Corp. at December 31, 2021? Answer: P2,969,850 Ordinary Share Capital Share Premium - Ordinary Share Premium - Preference Preference Share Capital Subscribed Preference Share Subscription Receivable Total Contributed Capital

P1,260,000 1,082,750 92,100 500,000 140,000 (105,000) P2,969,850

19. What is the total shareholders’ equity of Marcelo Corp. at December 31, 2021? Answer: P3,161,800 Total Contributed Capital Retained Earnings Total Shareholders’ Equity

P2,969,850 191,950 P3,161,800

PROBLEM 10 World Class Corp.’s records included the following shareholders’ equity accounts: Preference Share Capital, P15 par, 200,000 shares authorized Share Premium - Preference Ordinary Share Capital, no par, P50 stated value, 100,000 shares authorized

P2,550,000 340,000 3,000,000

20. What was the average issue price of the preference shares? Answer: P17 per share No. Of Issued Preference Shares (P2,550,000/P15) Total Issue Price of Preference Shares (P2,550,000 + P340,000) Average issue price per share (P2,890,000/170,000)

170,000 P2,890,000 P17 per share

21. How many ordinary shares were issued? Answer: 60,000 shares No. Of Ordinary Shares Issued (P3,000,000/P50)

60,000 shares

PROBLEM 11 Shown below is information to the shareholders’ equity of Pop Corp. as of December 31, 2021: 12% Cumulative Preference Share Capital, P100 par Ordinary Share Capital, P30 par, 300,000 shares authorized, 100,000 shares issued and outstanding Share Premium - Ordinary Retained Earnings (deficit)

P820,000 3,000,000 3,300,000 (500,000)

22. What was the original issue price per share of the ordinary shares? Answer: P63 per share Original issue price per ordinary share (P3,000,000 + P3,300,000) / 100,000)

P63

23. What is the total paid-in capital? Answer: P7,120,000 Paid-in Capital: 12% Cumulative Preference Share Capital, P100 par Ordinary Share Capital, P30 par, 300,000 shares authorized, 100,000 shares issued and outstanding Share Premium - Ordinary Total Paid-in Capital 24. What is the total shareholders’ equity? Answer: P6,620,000 Shareholders’ Equity: Total Paid-in Capital Retained Earnings (Deficit) Total Shareholders’ Equity

P7,120,000 (500,000) P6,620,000

P 820,000 3,000,000 3,300,000 P7,120,000...