1. Components of SHE
Problem
Mara Company provided the following data at year-end:
Authorized share capital
Unissued share capital
Subscribed share capital
Subscription receivable
Share premium
Retained earnings unappropriated
Retained earnings appropriated
Revaluation surplus
Treasury' shares, at cost
5000000
2000000
1000000
400000 is due in 3 mos.
500000
600000
300000
200000
100000
What total amount should be reported as shareholders' equity?
2. Legal Capital
Problem
Glenn Company provided the following information at year-end:
Preference share capital, P100 par
Share premium – PS
Ordinary share capital, P10 par
Share premium - ordinary share
Subscribed ordinary share capital
Retained earnings
Subscription receivable - ordinary share
3000000
500000
6000000
2000000
4000000
2500000
1000000
3. Allocation of Single Price to 2 Securities
Problem
At the beginning of the current year, Ria Company issued 10,000 ordinary shares of P20 par value and
20,000 convertible preference shares of P20 par value for a total of P800,000.
At this date, the ordinary share was selling for P36 and the convertible preference share was selling for
P27.
1. What amount of the proceeds should be allocated to the preference shares?
2. What amount of the proceeds should be allocated to the ordinary shares?
3. What amount should.be recorded as share premium from the issuance of preference shares?
4. What amount should be recorded as share premium from the issuance of ordinary shares?
4. Measurement of Share Capital & Share Premium
Problem
At the beginning of current year, Ashe Company was organized with authorized capital of 100,000
shares of P200 par value.
January 10
Issued 25,000shares at P220 a share.
March 25
Issued 1000 shares for legal services when the fair value was P240 a share.
September 30 Issued 5000 shares for a tract of land when the fair value was P260 a share
1. What amount should be reported as share capital?
2. What amount should be reported for share premium?
5. Total Contributed Capital
Problem
On January 1,2019,Negros Company was incorporated with the following authorized capitalization:
Ordinary share capital, 200,000 shares no par P100 stated value
20000000
Preference share capital 200,000' shares, 10% fixed rate, P50 Par value 10000000
During 2019,the entity issued 150000 ordinary shares for a total of P18,000,000 and 50,000 preference
shares at P60 per share.
In addition, on Dec.15,2019, subscriptions for 20,000 preference shares were taken at a purchase price
of P100. These subscribed shares were paid for on January 15,2020.
Net income for 2019 was P5,000,000.
What amount should be reported as total contributed capital on December 31,2019?
6. Conversion of Shares
Problem
During the current year, Hyatt Company issued for P110 per share, 15,000 convertible preference shares
of P 100 par value.
One preference share may be converted into three ordinary shares of P25 par value at the option of the
preference shareholder.
At year-end, all of the preference shares were converted into ordinary shares. The market value of the
ordinary share at the conversion date was P40.
1. What amount should be credited to ordinary share capital as a result of conversion?
2. What amount should be credited to share premium as a result of conversion?
7. Computing TSHE
Problem
On January 1, 2019, Penn Company began operations by issuing at P15 per share one-half of the
950,000 ordinary shares of P1 par value that had been authorized for issue.
In addition, the entity had 500,000 authorized preference shares of P5 par value.
During 2019, the entity had P1,025,000 of net income and declared P230,000 of dividend.
During 2020,the entity had the following transactions:
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Issued 100,000 ordinary shares for P 17 per share.
Issued 150,000 preference shares for P8 per share.
Authorized the purchase of a custom-made machine to be delivered in January 2021 . The entity
restricted P300,000 of retained earnings for the purchase of the machine.
Issued additional 50,000 preference shares for P9 per share.
Reported P 1,215,000 of net income and declared on December 31,2020 a dividend of P635,000
to shareholders of record on January 15,2021to be paid on February 1,2021.
1. What amount should bc reported as total shareholders' equity on December 31,2019?
2. What amount should be reported as total shareholders' equity on December 31,2020?
8. Accounting for Treasury shares.
Problem
Day Company held 10,000 shares of P10 par value as treasury reacquired for P120,000. At year-end, the
entity reissued all 10,000 shares for P190,000.
What is credited for the excess of the reissue price over the cost of treasury shares?
9. Retirement of Shares
Problem
At the beginning of current year, Rona Company issued 50,000 shares of P10 par value for P100 per
share.
During the year, the entity reacquired 2,000 shares at P150'per share and immediately canceled these
2,000 shares.
1. In connection with the retirement of shares, what amount should be debited to share
premium?
2. In connection with the retirement of shares, what amount should be debited to retained
earnings?
10. SP,SC,TSHE
Problem
At the beginning of current year, Hanna Company reported following shareholders' equity:
Share capital, P1O par, outstanding 225,000 shares
2250000
Share premium
1500000
Retained earnings:
2000000
During the current year, the entity had the following transactions:
* Acquired 10,000 treasury shares for P50 per share or P500,000.
* Sold 5,000 treasury shares at P60 a share.
*Sold 2,000 treasury shares at P45 per share.
* Net income for the year was P2,500,000.
1. What amount should be reported as total amount of share premium atyear-end?
2. What amount should be reported as share capital at year-end?
3. What amount should be reported as total shareholders' equity at year-end?
11. Issued, outstanding shares
Problem
At the beginning of current year, Vey Company-had 125,000 shares issued which included 25,000 shares
held as treasury.
January 1 through October 31 - 13,000 treasury shares were distributed to officers as part of a share
compensation plan.
November 1 -A 3-for-1 share split took effect.
December 1 - The entity purchased 5,000.of its own shares to discourage an unfriendly takeover. These
shares were not retired.
1. How many shares were issued at year-end?
2. How many shares were outstanding at year-end?
12. Effect of TS and split to issued & outstanding shares
Problem
At the beginning of current year, Nest Company issued 100,000 ordinary shares. Of these, 5,000 shares
were held as treasury.
During the current year, the entity reported the following Transactions:
May 1 1,000 shares of treasury were sold.
Aug 1 10,000 unissued shares were sold.
Nov. 15 A2-for-1 share split took eftect.
1. How many shares were issued at year-end?
2. How many shares were outstanding at year-end?
13. Outstanding shares- effects of SD,TS, & split
Problem
At the beginning of current year, Rudd Company had 700,000 ordinary shares authorized and 300,000
shares outstanding.
January 31 Declared 10% share dividend
Jure 30 Purchased 100,000shares
August 1 Reissued 50,000 shares
November 30 Declared2-for-1 share split
How many ordinary shares are outstanding at year-end?
14. SHE
Problem
Newton Company was organized on January l, 2019. On that date, it issued 200,000 ordinary shares of P
10 par value at P15 per share. The entity was authorized to issue 400,000 ordinary. shares.
During the period January 1,2019 through December 31,2020, the entity reported net income of
P750,000 and paid cash dividend of P380,000.
On January 5, 2020, the entity purchased 12,000 ordinary shares at P12 per share.
On December 31, 2020,8,000 treasury shares weep sold at P8 per share and the remaining treasury
shares were retired. The entity used the cost method of accounting for treasury shares,
What amount should be reported as total shareholders' equity on December 31,2020?
15. Basic Earnings Per Share
Problem
Ute Company had the following capital structure during 2018 and 2019:
Preference share capital, P 10 par 4%.cumulative, 25,000 shares issued and outstanding 250000
Ordinary share capital, P5 par,200,000 shares issued and outstanding
1000000
The entity reported net income of P500,000 for the year ended December 31,2019.
The entity paid no preference dividends during 2018 and paid P16,000 in preference dividends during
2019.
What amount should be reported as basic earnings per share?
16. Problem
Smart Company reported profit before tax of P5,800,000 and income tax expense of P 1,500,000 for the
current year.
The entity paid during the year an ordinary dividend ofP400,000 and a preference dividend of P500,000
on the preferences shares.
The entity had P1,000,000 of P5 par value ordinary shares in issue.
1. What amount should be reported as basic eamings per share if the preference shares are
redeemable?
2. What amount should be reported as basic earnings per share if the preference shares are
nonredeemable?