Solution

Jan 15 Cash (650 shares x P40)

28,000
Paid-in capital from treasury share 13,000
Treasury Share
39,000
Cost of treasury share: P72,000/1,210 shares = P60 per share
Cost of shares sold: 650 shares x P60 = P 39,000
Feb 2
Cash (P90,000 x 103)
92,700
Discount on bonds payable
2,700
Bonds payable
90,000
Ordinary share warrants
5,400
Price of bonds without warrants attached: 97 x P90,000 = P87,300
Value of detached warrants: 90 x P60 = P 5,400
Because value of bonds plus value of detachable warrants is equal to the total issuance price
(P87,300 + P5,400 = P92,700), the value assigned to the bonds and warrants is the fair value of
each.
Mar 6
Cash
24,640
Ordinary share subscription receivable
36,960
Ordinary share subscribed
2,800
Paid-in capital in excess of par
58,800
Mar 20 Cash
31,680
Ordinary share subscription receivable
31,680
Mar 20 Ordinary share subscribed
2,400
Ordinary share
2,400
Mar 20 Ordinary share subscribed
400
Paid-in capital in excess of par
8,400
Ordinary share subscription receivable
5,280
Paid in capital from forfeited share subscription
3,520
Nov 1
Cash (550 s P40)
22,000
Ordinary share warrants (55 x P60)
3,300
Ordinary share
1,100
Paid-in capital in excess of par
24,200
Answer:
1. D
2. B
3. C
4. C
5. D
6. B
7. D
8. D

Solution
July 1
Ordinary share, P30 par
3,000,000
Ordinary share, P60 stated value
1,500,000
Exchanged 100,000 shares of old ordinary share with a par value of P30 for 25,000 shares of new ordinary
share with a stated value of P60.
July 1

Retained earnings
900,000
Ordinary share, P60 stated value
900,000
Eliminate dividends in arrears on preference share through issuance of 15,000 shares of new ordinary share.
July 1
Paid-in capital in excess of stated value
1,500,000
Retained earnings
1,500,000
Applied deficit against paid-in capital created through recapitalization
Oct 1
5% Preference share
600,000
Retained earnings
56,250
Cash
556,250
Retired 10,000 shares of preference share
10,000 shares preference share retired:
Amount paid (10,000 shares x P55)
P550,000
Dividends for 3 months (P500,000 x .05 x 3/12)
6,250
P 556,250
Nov 10 Cash
3,900,000
Ordinary share, P60 stated value
3,600,000
Paid-in capital in excess of stated value
300,000
Sold 60,000 shares of ordinary share P65.
Dec 31 Income summary
400,000
Retained earnings
400,000
Recorded earnings for the 6-month period ended December 31.
Dec 31 Dividends (Retained earnings)
100,000
Dividend payable preference
25,000
(20,000 x P50 x .05 x )

Dividend payable ordinary

(100,000 shares x P.75)

75,000

SHAREHOLDERS EQUITY
Contributed Capital
5% preference share
Ordinary share
Paid-in capital in excess of stated value ordinary
Total
Retained earnings (accumulated since July 1, 2002)
Total Shareholders Equity

1,000,000
6,000,000
300,000
7,300,000
243,750
7,543,750

On July 1, 2004, 100,000 shares of ordinary share, P30 par, were exchanged for 25,000 shares of ordinary share
with a P60 stated value, thus creating additional paid-in capital. Such paid-in capital was applied to the elimination
of a P600,00 deficit on this date and also the liquidation of dividends in arrears on preference share of P900,000
through the issue of 15,000 shares of new ordinary. Earnings since July 1, 2004, were P400,000. Charges for
dividends since this date were P106,250, and the call premium on 10,000 shares of preference share redeemed
was P50,000, resulting in a retained earnings balance of P243,750.

Answer:
1. B

2. D

3. B

4. C

Solution
a.

Memo entry

b.

Treasury share

50,000

Cash
c.

50,000

Retained earnings

75,000

Property dividends payable

d.

e.

Cash

75,000

360,000

Ordinary share

100,000

APIC

260,000

Income summary

240,000

Retained earnings

240,000

Answer:
1. C

2. A

3. C

4. B

5. D

Solution
Feb 1

Land

143,000
Ordinary share

13,000

APIC CS
Mar 1

Treasury share

130,000
70,000

Cash
May 10 -

Retained earnings

70,000
600,000

Property dividend payable

Oct 1

Cash

600,000

32,000
Treasury share
APIC TS

28,000
4,000

Nov 4

Retained earnings

165,000

Cash
Dec 20 -

165,000

Retained earnings

12,000

Dividends payable
Dec 31 -

Retained earnings

12,000
14,000

Income tax payable

6,000

Patents
Dec 31 -

20,000

Income summary

838,000

Retained earnings
Answer:
1. D

2. A

3. C

4. A

5. B

838,000