A. The authorized share capital is P5,000,000 divided into 50,000 shares. How much is the par value?

B. The authorized number of shares is 30,000 with par value of P50 per share. How much is the total authorized s

A Total Authorized share capital ₱ 5,000,000

Authorized number of shares 50,000
PAR VALUE 100

B Authorized number of shares 30,000

Par Value 50
Authorized share capital ₱ 1,500,000
much is the par value?

ow much is the total authorized shares?

PROBLEM 2. Accounting for share capital
Far East Corporation, a newly registered corporation had the following transactions during the year:
a) On January 2, Philippine SEC authorized the entity to issue 500,000 shares with par value of five peso per share.
b) The entity received subscription to 250,000 shares at par.
c) The entity collected 40% on the above subscription.
d) Received full payment for 100,000 shares originally subscribed.
e) The entity then issued the share certificates for 100,000 shares which were fully paid.
f) Received a cash subscription for 6,000 shares at par.

REQUIRED:
1. Journalize the transactions above using:
a. Memorandum entry method
b. Journal entry method
MEMORANDUM ENTRY METHOD
DR CR
a. The Company was authorized by SEC to issue 500,000 shares at
P5 par value.

b. Subscription receivable ₱ 1,250,000

Subscribed share capital ₱ 1,250,000
(250,000 shares x P5)

c. Cash (P1,250,000 x 40%) 500,000

Subscription receivable 500,000

d. Cash 300,000
Subscription receivable 300,000

e. Subscribed share capital (100,000 shares x5) 500,000

Share capital 500,000

f. Cash (6,000 shares x P5) 30,000

Share capital 30,000
 JOURNAL ENTRY METHOD
DR CR
a. Unissued share capital ₱ 2,500,000
Authorized share capital ₱ 2,500,000
(500,000 shares x P5)

b. Subscription receivable ₱ 1,250,000

Subscribed share capital ₱ 1,250,000
(250,000 shares x P5)

c. Cash (P1,250,000 x 40%) 500,000

Subscription receivable 500,000

d. Cash 300,000
Subscription receivable 300,000

e. Subscribed share capital (100,000 shares x5) 500,000

Unissued share capital 500,000

e. Cash (6,000 shares x P5) 30,000

Unissued share capital 30,000
Unissued shares
₱ 2,500,000 500,000
30,000
₱ 2,500,000 ₱ 530,000
₱ 1,970,000

Authorized share capital ₱ 2,500,000

Less: Unissued shares ₱ 1,970,000
Issued shares ₱ 530,000
PROBLEM 2. Accounting for share capital
Far East Corporation, a newly registered corporation had the following transactions during the year:
a) On January 2, Philippine SEC authorized the entity to issue 500,000 shares with par value of five peso per share.
b) The entity received subscription to 250,000 shares at par.
c) The entity collected 40% on the above subscription.
d) Received full payment for 100,000 shares originally subscribed.
e) The entity then issued the share certificates for 100,000 shares which were fully paid.
f) Received a cash subscription for 6,000 shares at par.

REQUIRED:
1. Journalize the transactions above using:
a. Memorandum entry method
b. Journal entry method
Original subscription 250,000

100,000 + 150,000
5 5
500,000 + 750,000 = 1,250,000
300,000 40% 40%
200,000 300,000 = 500,000.0
PROBLEM 3. Issuance of share capital for cash
1 . W ith P ar va lu e
Avalanche Corporation sold 20,000 ordinary shares of P100 par value for P130 per share.

2. Without Par value

Vague Company sold 40,000 ordinary shares with stated value of P80 for P120 each.

Dr
1 Cash ( 20,0000 x P130) 2,600,000
Ordinary shares/ common shares ( 20,000 X P100)
Share premium/ Issuance in excess of Par value/
Additional Paid in Capital (APIC)/

2 Cash ( 40,000 x P120) 4,800,000

Ordinary shares (40,000 xP80)
Share premium
 Cr

2,000,000

600,000

3,200,000
1,600,000
PROBLEM 4. Issuance of shares for noncash consideration
Prepare the journal entries for the following independent situations:

a. Algeria Corp. issued 15,000 ordinary shares of P100 par value in exchange of for land and
building with total fair value of P2,000,000 of which 25% is attributable to the land.

b. Nortek Corporation exchanged 25,000 shares of its P100 par value share for a land. A few months
ago, the land was appraised by an independent appraiser at P4,000,000. Nortek is currently trading
at the Philippine Stock Exchange (PSE) at P140 per share.

c. Atty. Pao received 1,000 ordinary shares of P100 par value from Secador Corp. after rendering
legal services in getting the corporation organized. The fair value of such services is reliably
determined to be P125,000.

d. Dientes Corp. issued 5,000 shares of its P100 par ordinary share to Atty. Harvey as
compensation for 1,200 hours of legal services performed. Atty. Harvey usually bills P500 per hour
for legal services. On this date of issuance, the share was selling at a public trading at P140 per
share.

PARTICULARS DR

a. Land 500,000
Building 1,500,000
Ordinary shares (15,000 *P100)
Share Premium (2M -1.5M)

b. Land (25,000 x P 140) 3,500,000

Ordinary shares (25,000 x P100)
Share Premium ( 3.5M - 2.5M)

c. Organization cost - Professional fee 125,000

Ordinary shares (1,000 x P100)
Share Premium (125,000 - 100,000)

d. Organization Cost - Professional fee (5,000 x P140) 700,000

Ordinary shares (5,000 x P100)
Share Premium
and

w months
ly trading
Is s u a n c e of Sh a r e Ca p it a l fo r Non Ca sh Co n side r at io n
ndering If share capital is issued for non-cash consideration such as tangible or
y inta ngible p roperty or s ervices, th e sh are capital is recorded at a n am ount equal
to the following order of priority:

1. Fair value of non-cash consideration received

per hour 2. Fair value of shares issued
40 per 3. Par value of shares issued

CR
A. Land 2000000 x 25% 500,000
Bulding 2000000 x 75% 1,500,000

1,500,000 Building 2000000*30% 600,000.00

500,000 Land 1,400,000.00

2,500,000
1,000,000

100,000
25,000

500,000
200,000
ngible or
u nt equal