PROBLEM 32-1 Legal Capital, Contributed Capital, Shareholders’ Equity

The shareholders’ equity section of Kristal Mae Company revealed the following information on December 31, 2021:
Estimated Premiums payable 200,000
Share premium on preference shares 300,000
Authorized preference shares at ₱50 par value 1,600,000
Gain on sale of treasury shares 120,000
Unrealized increase in value of FVTOCI securities 20,000
Ordinary share warrants outstanding 70,000
Unissued ordinary shares 1,300,000
Unissued preference shares 300,000
Cash dividends payable – preferences 160,000
Donated capital 80,000
Reserve for bond sinking fund 640,000
Reserve for depreciation 200,000
Revaluation surplus 260,000
Subscription receivable – preference 30,000
Subscription receivable – ordinary shares 40,000
Ordinary shares options outstanding 50,000
Accumulated profits – unappropriated 1,000,000
Bonds payable 2,000,000
Subscribed Ordinary shares 400,000
Long term investments in equity securities 800,000
Share premium on ordinary shares 600,000
Premium on bonds payable 200,000
Share Premium conversion option-bonds payable 80,000
Authorized ordinary shares at ₱10 stated value 2,400,000
Subscribed preference shares 120,000
Treasury shares-ordinary shares (10,000 shares) 150,000
Questions:
Based on the above data, compute for the following:
1. Ordinary share issued
a. ₱1,100,000 c. ₱2,400,000
b. ₱1,300,000 d. ₱2,800,000
2. Preference shares issued
a. ₱300,000 c. ₱1,600,000
b. ₱1,300,000 d. ₱1,720,000
3. Share premium
a. ₱1,100,000 c. ₱1,250,000
b. ₱1,170,000 d. ₱1,300,000
4. Contributed capital
a. ₱2,270,000 c. ₱2,920,000
b. ₱2,400,000 d. ₱4,150,000
5. Total legal capital
a. ₱2,850,000 c. ₱3,520,000
b. ₱2,920,000 d. ₱3,820,000
6. Total shareholders’ equity
a. ₱4,770,000 c. ₱5,920,000
b. ₱4,840,000 d. ₱6,070,000

PROBLEM 32-2 Issuance of Shares for Cash Consideration, Share Issue Cost
Assume the following issuances of ₱50 par value shares of stock:
1. Issuance of 2,000 shares at par for cash.
2. Issuance of 5,000 shares at ₱60 per share for cash. Stock issue costs that were paid by the corporation amounted
to ₱70,000.
3. Issuance of 4,000 shares at ₱40 per share for cash.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-3 Issuance of Shares for Noncash Consideration

Assume the following issuances of ₱50 par value shares of stock:
1. Issued 2,500 shares of stock for machinery. The machinery has a fair value of ₱180,000 while the stock is selling
at ₱65 per share.
2. Issued 1,000 shares of stock for patent (an intangible asset). The stock is selling at ₱65 per share.
3. Issued 400 shares of stock in full payment of organization services rendered from the legal counsel. The fair value
of such services is ₱40,000.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-4 Issuance of Shares for Outstanding Liability

The company issued 2,000, ₱50 par ordinary shares for an outstanding bank loan of ₱150,000. On this date, shares
are quoted at ₱70 per share.
Required: Record the transactions listed above in journal entry form.
PROBLEM 32-5 Issuance of Two Classes of Shares - Shares are Issued Separately
The company issued the following shares of stock:
1. Issued 2,500, ₱200 par value preference share, for ₱216 per share for cash.
2. Issued 500, ₱100 par value ordinary share, for ₱120 per share for cash.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-6 Lump Sum Issuance of Two Classes of Shares - Incremental Method - Proportional Method
The company issued for ₱900,000 cash, 2,500 shares of ₱200 par value Preference share and 500 shares of ₱100 par
ordinary share. The preference and ordinary shares have fair values of ₱216 and ₱120 per share, respectively on the
date of sale.
Required: Record the transactions listed above in journal entry form.
PROBLEM 32-7 Lump Sum Issuance of Two Classes of Shares - Incremental Method
The company issued for ₱900,000 cash, 2,500 shares of ₱200 par value Preference share and 500 shares of P100 par
ordinary share. The preference share has a fair value of ₱216 on the date of sale. No fair value available for the
ordinary share.
Required: Record the transactions listed above in journal entry form.
PROBLEM 32-8 Subscriptions
1) AA subscribed for 7,500, ₱50 par ordinary shares of NCPAR corporation at ₱70 per share.
2) AA paid 30% of the subscriptions price.
3) AA paid the remaining balance.

Required: Record the transactions listed above in journal entry form.

PROBLEM 32-9 Delinquent Subscriptions, Downpayment is Forfeited

1) BB subscribed for 7,500, ₱50 par ordinary shares of NCPAR Corporation at ₱70 per share.
2) BB paid 30% of the subscriptions price.
3) Subsequently, BB was declared delinquent subscriber. In accordance with the subscriptions contract BB’s
downpayment was forfeited.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-10 Delinquent Subscriptions, Down-payment is Not Forfeited with Highest Bidder
1) CC subscribed for 7,500, ₱50 par ordinary shares of NCPAR corporation at ₱70 per share.
2) CC paid 30% of the subscriptions price.
3) Subsequently, CC was declared delinquent subscriber. The delinquent stocks are subsequently offered for
public auction incurring a cost of ₱15,000.
There are three bidders during the auction who are willing to pay the offer price corresponding to shares
of stocks, as follows:
# of shares
willing to be
Bidders received
DD 3,000 shares
EE 3,500 shares
FF 4,000 shares
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-11 Delinquent Subscriptions, Down-payment is Not Forfeited Without Highest Bidder
Use the same PROBLEM 32-10 above, except that there are no bidders and the corporation purchased its own
delinquent shares.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-12 Treasury shares and Donated Capital

The Keep Walking Co. had 100,000 shares of ordinary share capital on December 31, 2021. Its statement of financial
position on that date showed the following shareholders’ equity balances:
Ordinary share capital, ₱20 par ₱2,000,000
Share Premium 600,000
Retained earnings 1,200,000
The following treasury share transactions took place in 2021:
1) Purchased 15,000 ordinary shares at ₱24 per share.
2) Sold 5,000 of the treasury shares at ₱26 per share.
3) Sold 4,000 of the treasury shares at ₱20 per share.
4) Reissued 1,000 treasury shares for an equipment with a fair value of ₱25,000. The shares were selling at
₱35 per share.
5) Retired the remaining treasury shares.
6) A stockholder donated 5,000 shares when the market price is ₱25 per share. Subsequently, the company sold
2,000 shares at ₱28 per share.
7) A stockholder donated Land to the corporation which costs him ₱100,000 five years ago but the land now
has a fair value of ₱250,000. The corporation incurred ₱20,000 for registration and transfer of title.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-13 Retirement of Share Capital

The Shareholders’ equity section of Flordie Co. on December 31 is as follows:
Preference shares ₱100 par, 30,000 shares issued and outstanding ₱3,000,000
Share premium on preference shares 300,000
Ordinary share ₱50 par, 50,000 shares issued and outstanding 2,500,000
Share premium on ordinary shares 100,000
Accumulated profits 15,000,000
Required: Prepare the journal entry assuming 3,000 shares of the preference are redeemed at:
a. ₱140 b. ₱95
PROBLEM 32-14 Conversion of Preference Shares
The Shareholders’ equity section of Divine Grace Co. on December 31 is as follows:
Preference share ₱100 par, 30,000 shares issued and outstanding ₱3,000,000
Share premium on preference shares 300,000
Ordinary share ₱50 par, 50,000 shares issued and outstanding 2,500,000
Share premium on ordinary shares 100,000
Accumulated profits 15,000,000
Required:
Prepare the journal entry assuming that 4,000 shares of preference are converted under each assumption listed:
1) Preference share are convertible into ordinary on a share-for-share basis.
2) Each preference share is convertible into 5 shares of ordinary.

PROBLEM 32-15 Recapitalization, Change from Par to No-Par, Reduction of Par Value and Share Split
The Shareholders’ equity section of Levana Co. on December 31 is as follows:
Ordinary share ₱40 par, 30,000 shares issued and outstanding 1,200,000
Share Premium on Ordinary shares 240,000
Accumulated Profits 20,000,000
Required: Assume the following independent cases; provide the journal entry that is made on the corporation
books:
1) All the 30,000 ordinary shares are called in for cancellation. Instead, the company issued 30,000 no-par
ordinary shares with the following stated value:
a. ₱30 b. 60
2) A recapitalization is effected whereby the par value of the ordinary shares is reduced to ₱35 per share.
3) The company effected a 4 for 1 stock split on the ordinary shares.

PROBLEM 32-16 Share Rights Issued as a Right of Pre-Emption

(Note: Use the same shareholders’ equity of Levana Co. above)
1. On August 1 of the current year, Levana issued one stock right for each share held by the shareholder to
purchase two additional shares of stock for P42 per share. The rights expire on October 31 of the same
year.
2. On September 30, 15,000 stock rights were exercised when the market value of the stock was P45 per
share.
3. The remaining rights expire on October 31.
Required: Prepare all the necessary entries.
PROBLEM 32-17 Share Warrants - Different Cases
The Patacsil Co. issued 2,000 shares of ₱50 par preference shares with detachable warrants. The package sells for
₱200. The warrants enable the holder to purchase 1,000 ordinary shares of ₱20 par at ₱40 per share.
Case No. 1: If Immediately after the issuance of the share, the warrants are selling at ₱20 per share and the market
value of the preference without the warrants is ₱80.
Subsequently, 80% of the warrants is exercised.
Case No. 2: Assume instead that only the market value of the preference without the warrants amounting to ₱80 is
available.
Case No. 3: Assume instead that the warrants and the preference have no known market values but the ordinary
share is trading at ₱50 per share.
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-18 Cash Dividends

On December 1 of the current year, Brayden Corp. declared ₱5 per share dividends on the outstanding ordinary
shares to the shareholders of record on December 15 payable on December 31. Brayden has 20,000 issued
ordinary shares with par value of ₱100. These shares were issued on January 1 of the current year. On February
1 of the current year, the company acquired 2,000 ordinary shares at cost of ₱110 per share which were held
in treasury.
Required: Prepare all the necessary entries at the:
1) Date of Declaration
2) Date of Record
3) Date of Payment

PROBLEM 32-19 Cash Dividends for Preference Shares-Semi-annual Payment

On January 1, of the current year, Chinito issued 30,000, 10% preference shares to the public. The preference
share has a par value of ₱20. On April 1 of the same year, Chinito reacquired 2,000 of its preference shares. On
July 1, the Chinito paid its semi-annual dividends. On October 1 of the same year, Chinito reissued 500 of its
treasury preference shares. On December 31 of the current year, Chinito again declared the semi-annual
dividends of the preference shares.
Required: Prepare all the necessary entries on the date of declaration of dividends.

PROBLEM 32-20 Current Assets as Property Dividends

On November 1, 2021, Tolding Company declared inventory as property dividend payable on February 15,
2022. The carrying amount of the inventory is ₱550,000. Data relating to the fair values of the inventory are as
follows:
 Fair values (assume these are
not materially different with the
Date net realizable values)
November 1, 2021 ₱500,000
December 31, 2021 ₱610,000
February 15, 2022 ₱580,000
Required: Record the transactions listed above in journal entry form.

PROBLEM 32-21 Property, Plant and Equipment as Property Dividends

On November 1, 2021, Rhenz Company declared equipment as property dividend payable on February 15,
2022. The carrying amount of the equipment is ₱550,000. Data relating to the fair values of the equipment are
as follows:
Fair value (assume that the
Date costs to distribute are immaterial)
November 1, 2021 ₱500,000
December 31, 2021 ₱610,000
February 15, 2022 ₱580,000
Required: Record the transactions listed above in journal entry form.

PROBLEM 32- 22 Cash and Noncash Alternative

On January 1, 2021, Drenz Company had twenty outstanding ordinary shares. On December 31, 2021, Drenz
declared dividends on the ordinary shares. The corporation decided to give the ordinary shareholders a choice
between receiving a cash dividend of ₱9,000 per share or a property dividend in the form of a non cash asset.
Each noncash asset has a fair value of ₱9,200 and a carrying amount of ₱8,000. The corporation estimated that
55% of the ordinary shareholders will take the option of the cash dividend and 45% will elect for the noncash
asset.
Required: Prepare all the necessary entries on the:
1) Date of declaration of dividends.
2) Date of payment assuming the shareholders opted to avail of the
a. Cash dividends
b. Noncash dividends- the fair value of the noncash asset on the date of payment is ₱10,000.

PROBLEM 32-23 Share Dividends: Small, Large and Treasury Shares

The Shareholders’ equity section of Myna Ley Co on December 31 is as follows:
Ordinary share ₱40 par, 210,000 shares issued 8,400,000
Share premium on ordinary shares 4,200,000
Treasury shares (10,000 shares) 600,000
Accumulated profits 10,000,000
Required: Assume the following independent cases, provide the journal entry that is made on the corporation
books:
1) The company declared 10% share dividends on the ordinary share when the market value per share is ₱90.
2) The company declared 20% share dividends on the ordinary share when the market value per share is ₱90.
3) A special dividend of preference share was distributed to ordinary shareholders. One hundred shares of
ordinary shares entitled a shareholder to one share of ₱40 preference share. The market value of the
preference share was ₱50 at that time.
4) The company declared and paid ₱10 per share liquidating dividends.
5) Assume instead that the 10,000 treasury shares were declared and issued as share dividends.