Shareholder Equity-Contributed JRPA

PROBLEMS
STRAIGHT PROBLEM During 2010, the company entered into the following
transactions:
The following data were compiled prior to preparing the
Jan. 16 - Issued 1,300 ordinary shares at P25 per
statement of financial position of the Conviction
share.
Corporation.
Mar. 21 - Exchanged 12,000 ordinary shares for a
Authorized share capital, P100 par value P4,000,000 building. The ordinary shares were selling at
Cash dividends payable 160,000 P27 per share.
Donated capital 800,000 May 7 - Reacquired 500 ordinary shares at P26 per
Gain on sale of treasury shares 80,000 share to be held in treasury.
Net unrealized loss on available for sale 96,000 July 1 - Accepted subscriptions to 1,000 ordinary
securities shares at P28 per share. The contract called
Premium on share capital 320,000 for 10% down payment with the balance due
Premium on bonds payable 240,000 on December 1.
Reserve for bond sinking fund 400,000 Sept. 20 - Sold 500 treasury shares at P29 per share.
Reserve for depreciation 600,000 Dec. 1 - Collected the balance due on July 1
Revaluation increment on property 800,000 subscriptions and issued the shares.
Retained earnings, unappropriated 720,000
Total contributed capital for December 31, 2010 is
Subscribe share capital 480,000
a. P615,000 c. P613,500
Subscriptions receivables 120,000
b. P818,000 d. P816,500
Share warrants outstanding 200,000
Treasury shares, at cost 144,000
4. The following balances are shown in the shareholders'
Unissued share capital 800,000
equity of tamarind company on December 31, 2009:
REQUIRED: Preference share capital, P10 par,
100,000 shares P1,000,000
Compute for the following: Ordinary share capital, P10 par,
1. Total share premium 500,000 shares, 5,000,000
2. Contributed capital Share premium - preference 50,000
3. Appropriated retained earnings Share premium – ordinary 200,000
4. Total shareholders’ equity Retained earnings 100,000
5. Legal capital
During 2010, the following transactions pertaining to
the shareholders' equity were completed:
MULTIPLE CHOICE PROBLEMS  Retirement of 5,000 preference shares at P11 per
share.
1. Dayron Co. had 8,000 ordinary shares outstanding in  Purchase of 5,000 ordinary shares at P12 per
January 2010. The company distributed a 15% share share.
dividend in March and a 10% share dividend in June  Share split, ordinary, 2 for 1.
2010. After acquiring 1,000 treasury shares in July 1,  Reissue of 2,000 treasury shares at P8 per share.
the company split its shares 4 for 1 in December 2010.  Profit for 2010, P300,000.
How many ordinary shares are outstanding as of The total shareholders' equity on December 31, 2010
December 31, 2010? is
a. 36,480 c. 49,800 a. P6,556,000 c. P6,350,000
b. 48,800 d. 35,480 b. P6,551,000 d. P6,251,000
2. Helu Corporation was organized on January 1, 2010, 5. The December 31, 2009 condensed balance sheet of
with an authorization of 1,000,000 ordinary shares Ambani Services, an individual proprietorship, follows:
with a par value of P5 per share.
Current assets P140,000
During 2010, the corporation had the following equity Equipment (net) 130,000
transactions: P270,000
Jan. 4 - Issued 200,000 shares @ P5 per share. Liabilities P 70,000
April 8 - Issued 100,000 shares @ P7 per share. Mukesh Ambani, Capital 200,000
June 9 - Issued 30,000 shares @ P10 per share P270,000
July 29 - Purchased 50,000 shares @ P4 per
share. Fair values at December 31, 2009 are as follows:
Dec. 31 - Sold 50,000 shares held in treasury @ P8 Current assets P160,000
per share. Equipment 210,000
What should be the total Share Premium as of Liabilities 70,000
December 31, 2010? On January 2, 2010, Ambani Services was incorporated
a. P400,000 c. P500,000 with 5,000, P10 par value, ordinary shares issued.
b. P450,000 d. P550,000 How much should be credited to share premium?
RPCPA 1095 a. P320,000 c. P230,000
3. The N Corporation is authorized to issue 100,000 b. P250,000 d. P200,000
ordinary shares, P17 par value. At the beginning of
2010, 18,000 ordinary shares were issued and 6. On December 1, 2010, Gates Corp. received a
outstanding. These shares had been issued at P24. donation of 2,000 shares of its P5 par value ordinary
shares from a shareholder. On that date, the share’s

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 fair value was P35 per share. The share was originally December 31, 2011. The proceeds to be allocated to
issued for P25 per share. By what amount would this the preference shares on December 31, 2010 is
donation cause total shareholders’ equity to decrease? a. P25,000,000 c. P21,000,000
a. P70,000 c. P20,000 b. P22,000,000 d. P20,000,000
b. P50,000 d. P 0
10. Entity B issued (written) a call option that gives the
Use the following information for the next two questions. holder the right to purchase 10,000 shares of the
entity for a fixed price of P100 per share. If the
On March 1, 2010, Mall Company issued 60,000, P50 par
proceeds from issuing the call option is P90,000, the
value, ordinary shares and 20,000, P100 par value,
entity’s equity should increase by
preference shares for a total consideration of P7,500,000.
a. P1,000,000 c. P90,000
At this date, the ordinary share was selling for P100 per
b. P1,090,000 d. P 0
share and the preference share was selling for P150 per
share.
11. Entity C purchased a call option that gives the entity
7. What amount of the proceeds should be allocated to the right to repurchase 1,000 shares of the entity for a
the preference shares? fixed price of P100 per share. If the price for
a. P2,000,000 c. P1,875,000 purchasing the call option is P9,000, the entity’s equity
b. P2,500,000 d. P3,000,000 should decrease by
a. P100,000 c. P9,000
8. What amount of the proceeds should be allocated to b. P190,000 d. P 0
the preference shares, if the shares are redeemable at
the option of the holder after 5 years? 12. On January 1, 2010, Entity D enters into a forward
a. P2,000,000 c. P1,875,000 contract that requires the entity to repurchase 1,000
b. P2,500,000 d. P3,000,000 shares for P60,000 on December 31, 2010. No
consideration is paid or received at the inception of the
9. On December 31, 2010, Palau Company issued contract. The market interest rate is 10% on January
200,000 shares of P100 par, 10% cumulative 1, 2010 and 12% on December 31, 2010. The forward
preference shares for P25,000,000. One detachable contract decreased Entity D’s equity on January 1,
warrant was attached to each preference share issued. 2010 by
Each warrant gives the holder the right to purchase a. P60,000 c. P53,574
one ordinary share, P50 par value, for P100. The b. P54,546 d. P 0
market value of the warrant after the preference
shares were issued was P15. The warrants expire on
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DO-IT-YOURSELF (DIY) DRILL

1. The equity section of Buffett Company revealed the its own ordinary shares for P100,000. On June 15,
following information on December 31, 2010: 2010, 2,000 of the treasury shares were sold at P24
Preference share capital, P100 par P5,000,000 per share.
Share premium-preference shares 2,000,000 How much is the total share premium of Beauty Corp.
Ordinary share capital, P50 3,200,000 on June 30, 2010?
Share premium-ordinary shares 500,000 a. P108,000 c. P 58,000
Subscribed ordinary share capital 800,000 b. P 88,000 d. P100,000
Retained earnings-appropriated 250,000 RPCPA 1087
Unrealized loss on available for sale
securities 600,000
Subscription receivable-ordinary 3. ATC Company issued all of its outstanding shares for
shares 400,000 P150 in 2008. On January 10, 2009, ATC acquired
Retained earnings- unappropriated 3,500,000 100,000 treasury shares at P120 per share. ATC
Treasury shares-ordinary 1,000,000 reissued 50,000 treasury shares for P7,500,000 on
How much is the contributed capital of Buffett June 30, 2010 and retired the rest on December 31,
Company as of December 31, 2010? 2010. ATC’s equity accounts as at December 31, 2009
a. P10,100,000 c. P11,100,000 follow:
b. P11,500,000 d. P10,500,000 Share capital, P100 par value P150,000,000
Share premium 75,000,000
2. On July 1, 2009, the Beauty Corporation was Retained earnings 25,000,000
registered with the SEC. Its authorized share capital Total P250,000,000
consists of 100,000 ordinary shares with par value
What shall be the balance of share capital account on
P20.00 per share.
December 31, 2010?
On July 15, 2009, it issued 10,000 shares at P23 per a. P140,000,000 c. P145,000,000
share. On October 15, 2009, the Beauty Corp. paid to b. P144,000,000 d. P150,000,000
the majority shareholder the sum of P80,000 for a
certain parcel of land; and issued 5,000 ordinary 4. The capital accounts of Kamprad, Inc. on December
shares for the building on the land. The land was 31, 2009, were as follows:
appraised at P130,000. The building has a cost of Preference share capital,
P150,000 and its depreciated value is P90,000. It was 20,000 shares, P20 par P 400,000
appraised at P120,000. Share premium - preference 160,000
On April 15, 2010, the corporation purchased 5,000 of Ordinary share capital,

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 50,000 shares, P80 par 4,000,000
Share premium – ordinary 600,000 5. Anil Company was organized on January 1, 2008. On
Retained earnings 360,000 that date it issued 500,000, P10 par value, ordinary
shares at P15 per share. During the period January 1,
During the year ending December 31, 2010, the
2008 through December 31, 2010, Anil reported profit
following summarizes the transactions affecting the
of P3,000,000 and paid cash dividends of P500,000.
shareholders’ equity
On January 5, 2010, Anil purchased 50,000 ordinary
April 30 - 1,000 preference shares were retired at P25 shares at P20 per share. On December 31, 2010,
per share. 45,000 treasury shares were sold at P30 per share and
June 15 - 2,000 treasury shares, ordinary, were retired the remaining treasury shares. What is the
purchased at P85 per share total shareholders’ equity on December 31, 2010?
June 30 - A two-for-one ordinary share split was a. P10,350,000 c. P10,250,000
declared. b. P10,850,000 d. P10,500,000
July 31 - 800 treasury shares were reissued at P50 per
share. 6. Pudtol Corporation was organized on January 3, 2010.
Dec. 31 – Profit for 2010 was P300,000. Pudtol was authorized to issue 50,000 ordinary shares
with a par value of P10 per share. On January 4,
What was the total share premium on December 31, Pudtol issued 30,000 ordinary shares at P25 per share.
2010? On July 15, Pudtol issued an additional 10,000 shares
a. P760,000 c. P755,000 at P20 per share. Pudtol reported income of P33,000
b. P766,000 d. P761,000 during 2010. In addition, Pudtol declared a dividend of
RPCPA 1091-amp P.50 per share on December 31, 2010. The amount
reported on Pudtol Corporation's December 31, 2010,
balance sheet as shareholders' equity was
a. P400,000 c. P550,000
b. P950,000 d. P963,000

7. Tekka Corporation was incorporated on June 1, 2010

with an authorized 200,000, no-par, ordinary shares,
stated value P10 and 10,000, 9% par value P30,
preference shares. Transactions affecting company’s
equity as of July 31, 2010 were as follows:
June 1 50,000 ordinary shares were issued at
P10.
June 5 Assets with a total appraised value of
P600,000 were acquired in exchange for
50,000 ordinary shares.
June 15 Subscriptions were received for 100,000
ordinary shares at P15 and for 5,000
preference shares at P35.
June 25 Payments in full for the ordinary and
preference shares subscribed June 15
were received and the corresponding
shares were issued.
The total shareholders’ equity as of July 31, 2010 is
a. P2,875,000 c. P2,750,000
b. P2,300,000 d. P2,775,000
RPCPA 1086

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