TRANSACTION
Jan. 2 Makati Corporation is
authorized to issue 10,000
common shares, no par, stated
value P100.00 and 18%
cumulative 5,000 preferred
shares, with par value of P200.
The incorporators subscribed
the 25% of the P/S at par and
30% C/S at stated value.
They were required to make
downpayment of 25% on each
class of stock.
The unpaid balance was due in
two equal installments on Feb
28 and March 30.
JOURNAL ENTRIES
Authorized to issue 5,000 18% cumulative
preferred shares ,par value of P200 and
10,000 common shares, no par but with
stated value of P100.
Subscription Receivable –P/S 250,000
Subscription Receivable-C/S 300,000
Subscribed P/S
250,000
Subscribed C/S
300,000
Cash
62,500
75,000
137,500
Subscription Receivable-P/S
Subscription Receivable-C/S
LEGAL CAPITAL
•
Aggregate of the par value of all issued par value
shares
• Aggregate of the cash and the value of any
contributions paid for all issued no par value shares.
For example, if Sunny incorporates Sunny Sunglasses Shop
and issues 25,000 common stock shares at $1 par value.
If Sunny receives $2 per share: Entries as follows:
Account
Debits
Cash
$50,000
Credits
-
Common Stock @ Par,
$1, 25,000 Shares
-
$25,000
Common Share
Premium
-
$25,000



Legal capital is the amount of the total
proceeds received from the issuance of stock.
In this example, legal capital would equal
$50,000.
In other words, Corporation Code does not
allow the payment of dividends and stock
buybacks in excess of Retained Earnings.

When stock subscription is not paid on call
date or on the date fixed by the Board.

The Law provides for a 30-day period from
subscription date or from call date

When not paid within the period, the whole
subscription will be declared delinquent

The unpaid subscription will be sold in a public
auction to the highest bidder.

Highest bidder is the one who is willing to
pay the full amount of unpaid subscription
for the least number of shares and will also
pay the accrued interest, advertising and
selling cost of delinquent shares
A subscribed to 100 Subscription Receivable-C/S 10,000
common shares at
Subscribed C/S
10,000
P100 par.
25% Downpayment Cash
by A. Balance due in
Subscription Receivable-C/S
equal installments
on June 30 and July
30.
2,500
Payment of 1st
installment.
Cash
Subscription Receivable-C/S
3,750
After 30 days
notice, A failed to
pay the balance.
Due from Highest Bidder
3,750
Subscription Receivable-C/S
Incurred P500
advertising cost.
Due from Highest Bidder
Cash
500
2,500
3,750
3,750
500
The highest bidder, E
bids for 75 shares
and paid the amount
due including interest
of P425.
Cash
4,675
Due from Highest Bidder
Interest
Issued certificates to A Subscribed C/S
10,000
for 25 shares and E 75
Common Share Capital
shares.
4,250
425
10,000


TREASURY STOCK
a. recorded at cost
b. acquired through purchase or donation
c. sold at cost , above cost and below cost.
d. sufficient retained earnings before
acquiring own stock



Common Shares P50 par
Share Premium C/S
Retained Earnings
P 500,000
100,000
200,000
Reacquired 500 shares
at P60
Treasury Shares
Cash
Sold 100 Treasury
Shares for P60.
Cash
Sold 100 Treasury
Shares for P10,000
Cash
Sold 100 Treasury
Shares at P40
Cash
Treasury Share Premium
Treasury Share
Treasury Shares
30,000
6,000
10,000
Treasury Shares
Treasury Share Premium
4,000
2,000
30,000
6,000
6,000
4,000
6,000
Sold 100 Treasury
shares at P30
Cash
Treasury Share Premium
Retained Earnings
Treasury Shares
3,000
2,000
1,000
Sold 10 shares at
P50 per share
Cash
Retained Earnings
Treasury Shares
500
100
Appropriation of RE
for unsold TS
Retained Earnings
Appropriated for TS
5,400
Retired the unsold
90 shares of TS
Common Share Capital
Share Premium-C/S
Treasury Shares
4,500
900
Reversal of
appropriation
Appropriated for TS
Retained Earnings
5,400
6,000
600
5,400
5,400
5,400