CORPORATIONS: BASIC CONSIDERATIONS

CHAPTER 3
 1. Define corporation.
2. Identify the attributes of a corporation.
3. Identify and explain the advantages and disadvantages of a corporation.
4. Identify and describe the classes of corporations under the Corporation
Code of the Philippines.
5. Identify and describe the other classifications of corporations.
6. Outline the steps in the creation of a corporation.

LEARNING 7. Summarize the essential contents of the articles of incorporation and

the by-laws.
OBJECTIVES: 8. List some of the rights of a shareholder.
9. Detail the components of a corporation.
10. Expound on the necessity of independent directors.
11. Describe the classes of shares in general.
12. Apply the 25%-25% requirement at the time of incorporation.
13. Interpret the basic corporate organizational structure.
14. Name the corporate books and records.
 A corporation is an artificial being created
by operation of law, having the right of
succession and the powers, attributes and
DEFINITION properties expressly authorized by law or
incident to its existence (The Corporation
Code of the Philippines, Sec. 2).
 1. A corporation is an artificial being with a personality
separate and apart from its individual shareholders or
members.
2. It is created by operation of law. It cannot come into
existence by mere agreement of the parties as in the case
of business partnerships. Corporations require special
authority or grant from the State, either by a special
incorporation law that directly creates the corporation or
by means of a general corporation law (ie., The
ATTRIBUTES Corporation Code of the Philippines).
3. It enjoys the right of succession. A corporation has the
OF A capacity of continued existence subject to the period
stated in the Articles of Incorporation. The death,
CORPORATION withdrawal, insolvency or incapacity of the individual
shareholders or members will not dissolve the
corporation. The transfer of ownership of shares of stock
does not dissolve the corporation.
4. It has the powers, attributes and properties expressly
authorized by law or incident to its existence.
ADVANTAGES OF A CORPORATION
 The corporation has the legal capacity to act as a legal entity.
 Shareholders have limited liability.
 It has continuity of existence.
 Shares of stock can be transferred without the consent of the other shareholders.
 Its management is centralized in the board of directors.
 Shareholders are not general agents of the business.
 Greater ability to acquire funds.
DISADVANTAGES OF A CORPORATION
 A corporation is relatively complicated in formation and management.
 There is a greater degree of government control and supervision.
 It requires a relatively high cost of formation and operation.
 It is subject to heavier taxation than other forms of business organizations.
 Minority shareholders are subservient to the wishes of the majority.
 In large corporations, management and control have been separated from ownership.
 Transferability of shares permits the uniting of incompatible and conflicting elements
in one venture.
CLASSES OF CORPORATIONS
Section 3 of the Corporation Code classified private corporations into:
1. Stock corporation. Corporations which have share capital divided into shares and
are authorized to distribute to the holders of such shares dividends or allotments of
the surplus profits on the basis of the shares held.
2. Non-stock corporation. A non-stock corporation is one where no part of its
income is distributable as dividends to its members, trustees or officers. Any profit
that a non-stock corporation may obtain as an incident to its operation shall,
whenever necessary or proper, be used for the furtherance of the purpose or
purposes for which the corporation was organized (The Corporation Code of the
Philippines, Sec. 87). Non-stock corporations may be formed or organized for
charitable, religious, educational, professional, cultural, recreational, fraternal, literary,
scientific, social, civic service, or similar purposes (Sec. 88).
OTHER CLASSIFICATIONS OF CORPORATIONS
1. According to number of persons:
a) Corporation aggregate.A corporation consisting of more than one corporator.
b) Corporation sole or a special form of corporation usually associated with the clergy. It is a
corporation which consists of only one member or corporator and his successors such as a
bishop.
2. According to nationality:
a) Domestic corporation. A corporation organized under Philippine laws.
b) Foreign corporation. A corporation organized under foreign laws.
3. According to whether for public or private purpose:
a) Public corporation. A corporation formed or organized for the government of a portion of the
state (e.g., provinces, cities, municipalities and barangays).
b) Private corporation.A corporation created for private aim, benefit or purpose.
OTHER CLASSIFICATIONS OF CORPORATIONS
4. According to whether for charitable purpose or not:
a) Ecclesiastical corporation. Those organized for religious purposes.
b) Eleemosynary corporation. Those established for public charity.
c) Civil corporation. Those established for business or profit.

5. According to their legal right to corporate existence:

a) De jure corporation. A corporation existing in fact and in law. It is organized in strict conformity
with the law.
b) De facto corporation. A corporation existing in fact but not in law.
OTHER CLASSIFICATIONS OF CORPORATIONS
6. According to degree of public participation with regard to share ownership:
a) A. Close corporation. A corporation whose share ownership is limited to selected persons or members of a
family not exceeding 20 persons.
b) Open corporation. A corporation where the share is available for subscription or purchase by any person.
c) Publicly-held corporation. A corporation with a class of equity securities listed on an exchange or with assets
in excess of P50,000,000 and having 200 or more holders, at least 200 of which are holding at least 100
shares of a class of its equity securities (SRC Rule 3-1.M, Amended IRR of the Securities Regulations Code
(R.A. 8799)).
7. According to their relation to another corporation:
a) A. Parent or holding corporation. A corporation that is related to another corporation that it has the power
to either directly or indirectly elect the majority of the directors of a subsidiary corporation.
b) Subsidiary corporation. A corporation controlled by another corporation known as a parent corporation.
 1. PROMOTION

2. INCORPORATION
STEPS IN THE
CREATION OF A 3. FORMAL ORGANIZATION AND
CORPORATION
COMMENCEMENT OF BUSINESS

OPERATIONS.
 1. Right to be issued certificate of stock or other evidence of
share ownership and to transfer such shares.
2. Right to attend and vote in person or by proxy at shareholders'
meetings.
3. Right to elect and remove directors.
4. Right to adopt, amend or repeal the by-laws.
5. Right to purchase a portion of any new shares issued to
RIGHTS OF A maintain the same percentage of stock ownership. This right is
known as the pre-emptive right. However, this right is not
SHAREHOLDER absolute and may be denied.
6. Right to receive dividends when declared.
7. Right to inspect corporate books and records, and to receive
financial reports of the corporation's operations.
8. Right to participate in the distribution of corporate assets upon
dissolution.
COMPONENTS OF A CORPORATION
1. Corporators are those who compose a corporation whether as shareholders or members, at any
time. This term includes incorporators, shareholders or members (Sec. 5). Note: A corporation or a
partnership can be a corporator, but cannot be an incorporator. A partnership can be a corporator in
a corporation but a corporation cannot be a general partner in a partnership.
2. Incorporators are shareholders or members mentioned in the articles of incorporation as originally
forming and composing the corporation and are signatories to said articles of incorporation (Sec. 5).
They must be natural persons (i.e. human beings) as distinguished from artificial beings (e.g., a
corporation or a partnership). An incorporator will always retain his status as such though no longer
having an interest in the corporation.
3. Shareholders or stockholders are corporators in a stock corporation (Sec. 5). Shareholders may
be natural or juridical persons.
4. Members are corporators of a non-stock corporation (Sec. 5).
5. Subscribers are persons who have agreed to take and pay for original, unissued shares of a
corporation formed or to be formed. Note: All incorporators are subscribers but a subscriber need
not be an incorporator.
COMPONENTS OF A CORPORATION
6. Promoters are persons who bring about or cause to bring about the formation and organization of
a corporation.
7. Underwriters are usually investment bankers who have
a) agreed, alone or with others, to buy at stated terms an entire or a substantial part of an issue of securities; or
b) guaranteed the sale of an issue by agreement to buy from the issuing corporation any unsold portion at a
stated price; or
c) agreed to use his best efforts to market all or part of an issue; or
d) offered for sale shares he has purchased from a controlling stockholder.
8. Independent director is a person who apart from his fees and shareholdings is independent of
management and free from any business or other relationship which could, or could reasonably be
perceived to, materially interfere with his exercise of independent judgment in carrying out the
responsibilities of a director.
CLASSES OF SHARES IN GENERAL
1. Par value shares. One in which a specific amount is fixed in the articles of incorporation and
appearing on the certificate of stock. The par value is the minimum issue price of the shares. Section 6
of the Code states that preference (or preferred) shares of stock may be issued only as par value
shares.
2. No-par value shares. One without any value appearing on the face of the certificate of stock. A no-
par value share may have a stated value which may be fixed in the articles of incorporation or by the
board of directors or the shareholders. Thus, the issue price may vary from time to time as it is
usually fixed based on the book value of the corporation's shares.
3. However, the minimum stated value of a no-par value share is five pesos (P5.00) per share (Sec.
6). In addition, shares issued without par value are deemed fully paid.
Banks, trust companies, insurance companies, public utilities, and building and loan associations are not
permitted to issue no-par value shares of stock.
4. Voting shares.Those issued with the right to vote.
CLASSES OF SHARES IN GENERAL
6. Non-voting shares. Those issued without the right to vote.
7. Ordinary shares. These shares entitle the holder to an equal pro-rata division of
profits without any preference.
8. Preference shares. These shares entitle the holder to certain advantages or
benefits over the holders of ordinary shares.
9. Promotion shares. Those issued to promoters as compensation in promoting the
incorporation of a corporation, or for services rendered in launching or promoting
the welfare of the corporation.
10. Treasury shares. A stock that has been issued by the corporation as fully paid and
later reacquired but not retired.
11. Convertible shares. A stock which is convertible or changeable from one class to
another class.
 At the time of incorporation, at least twenty-five (25%) percent of the
authorized capital stock (or share capital) as stated in the articles of
incorporation must be subscribed and at least twenty-five (25%) percent of
the total subscription must be paid upon subscription, the balance to be
payable on a date or dates fixed in the contract of subscription without need
of a call, or in the absence of a fixed date or dates, upon call for payment by
the Board of Directors. In no case shall the paid-in capital be less than five
thousand (P5,000) pesos (The Corporation Code of the Philippines, Sec. 13).
MINIMUM In practice, the SEC requires higher minimum capital requirements for
particular types of corporations.
SUBSCRIPTION These requirements are mandatory. The Securities and Exchange
AND PAID-IN Commission shall not accept the articles of incorporation of any stock
corporation unless accompanied by a sworn statement of the treasurer
CAPITAL elected by the subscribers showing that the minimum subscription and paid-
in capital requirements have been complied with. Observe that the New
Corporation Code used the term "total" subscription as the basis for the
application of the second 25%. It is not necessary that each and every
subscriber shall pay twenty-five percent of his subscription. It is enough that
25% of the total subscription is paid.
CORPORATIONS: SHARE CAPITAL, RETAINED
EARNINGS AND FINANCIAL REPORTING
CHAPTER 4
 1. Identify the basic components of shareholders' equity.
2. Explain the characteristics of the basic types of shares.
3. Distinguish the terms related to share capital.
4. Differentiate par value from no-par value shares.
5. Record the share issuances for cash.
6. Illustrate the share subscription process including delinquency sale.
7. Define treasury stock.

LEARNING 8. Record purchase, reissuance and retirement of treasury stocks.

9. Define retained earnings and show how it is affected by some
OBJECTIVES: accounting events.
10. Discuss dividends in general.
11. Identify the important dates in the dividends distribution.
12. Analyze and record transactions involving cash dividends and share
dividends
13. Summarize the effects of dividends.
14. Prepare a statement of retained earnings.
15. Prepare a statement of changes in shareholders' equity.
 SHAREHOLDER’S EQUITY – the owners’
equity section of a corporation’s statement of
financial position. It has 2 major components:
a) Share Capital (contributed or paid-in
capital) – reflects the amount of resources
received by a corporation as a result of
DEFINITION investment by shareholders, donations or
OF TERMS other share capital transactions.
b) Retained Earnings (accumulated profits or
losses) – is the amount of capital
accumulated and retained through the
profitable operations of the business
SHAREHOLDERS’ EQUITY
 Legal Capital. Capital contributed by shareholders comes from the sale
of shares of stock. The shares of stock issued are generally referred to as
share capital. Legal capital is that portion of the contributed capital or the
minimum amount of paid-in capital, which must remain in the corporation
for the protection of corporate creditors. The amount of legal capital is
determined as follows:
 In case of par value subscribed shares, legal capital is the aggregate
par value of all issued and subscribed shares.
SHARE  In case of no-par shares, legal capital is the total consideration

CAPITAL received by the corporation for the issuance of its shares to the
shareholders including the excess of issue price over the stated
value (Section 6, par. 3, Corporation Code of the Phils.).

Share Premium (or Additional Paid-In Capital). It is the portion of

the paid-in capital representing amounts paid by shareholders in excess of
par. It may also result from transactions involving treasury stocks,
retirement of shares, donated capital, share dividends and any other "gain"
on the corporation's own stock transactions.
TWO BASIC TYPES OF SHARES
Share capital is divided into transferable shares of stock. A share of stock represents the
interest or right of a shareholder in a corporation and is evidenced by a certificate of
stock. Share capital includes all types of ownership shares in a corporation. Shareholders
acquire either of the following basic types of share capital:
1. Ordinary Share. This share represents the basic ownership class of the
corporation. When only one class of share is issued, it must be ordinary share.
Ordinary shares are the entity's residual equity.
2. Preference Share. This share gives its owners certain advantages over ordinary
shareholders. These special benefits relate either to the receipt of dividends when
declared before the ordinary shareholders (preferred as to dividends) or to priority
claims on assets in the event of corporate liquidation (preferred as to assets).
TERMS RELATED TO SHARE CAPITAL
 Authorized Share Capital. The number of authorized shares indicates the
maximum number of shares the corporation can issue as specified in the article of
incorporation.
 Issued Share Capital. These are shares which have been sold and paid for in full.
Issued shares may include treasury shares.
 Subscribed Share Capital. It is the portion of the authorized share capital that has
been subscribed but not yet fully paid.
 Outstanding Share Capital. These are issued shares, which are in the hands of the
shareholders.
 Treasury Stock. These are issued shares acquired by the corporation but not
retired and are therefore, awaiting to be reissued at a later date.
ACCOUNTING FOR ISSUANCE OF SHARE CAPITAL
The entry to record the issuance of share capital depends on whether the stock is with
or without par value.
 When shares with par value are sold, the proceeds should be credited to the share
capital account to the extent of the par value of the shares, with any excess being reflected
as share premium.
 When shares without par value are sold, the proceeds should be credited to the
share capital account. If the no-par stock has a stated value, the excess proceeds
over stated value may alternatively be credited to share premium.

Corporations set the par value of their ordinary shares at nominal amounts such as P1 per share. The par
value is no indication of its market value; it merely indicates the amount per share to be entered in the
share capital account.
CONSIDERATIONS FOR ISSUANCE OF SHARES
Share capital may be issued in exchange for any of the following considerations:

1. Actual cash paid to the corporation.

2. Tangible or intangible properties actually received by the corporation.
3. Labor already performed for or services actually rendered to the corporation.
4. Previously incurred indebtedness by the corporation.
SHARE OF ISSUANCE FOR CASH (WITH PAR VALUE)
Issuing Share Capital at PAR
Illustration. Narsan Holdings is authorized to issued P1,000,000 ordinary shares divided into 10,000
shares, with a par value of P100 per share. The diversified corporation issued on cash basis of 2,000 shares
at par.The share issuance entry will be:
Cash 200,000
Ordinary Shares 200,000

Issuing Share Capital above PAR

Illustration. Suppose the 2,000 shares were sold at P150 per share, the entry follows:
Cash 300,000
Ordinary Shares 200,000
Share Premium 100,000
SHARE OF ISSUANCE FOR CASH (WITHOUT PAR VALUE)
Issuing No-Par Share Capital
Illustration. Morning Star Travel is domestic Corporation engaged in the business of organizing
tour packages for Asian and European visitors to the Philippines. The entity which is located at J.
Bocobo St., Manila has two classes of shares – preference shares and no-par ordinary shares.
5,000 ordinary shares were issued for P85,000. The entry to record the issue of these no-par
shares will be:
Cash 85,000
Ordinary Shares 85,000
SHARE OF ISSUANCE FOR CASH (WITHOUT PAR VALUE)
Issuing No-Par Share Capital with Stated Value
Illustration. Suppose that Morning Star Travel’s no-par ordinary shares have a stated value of P20.
The entity issued 5,000 shares at P25 per share. The entry will be:
Cash 125,000
Ordinary Shares 125,000

If the no-par stock has a stated value, the excess proceeds over the stated value may
alternatively be credited to share premium.
Cash 125,000
Ordinary Shares 100,000
Share Premium 25,000
SUBSCRIPTION OF SHARES
The subscription contract is legally binding contract which provides for the number of shares
subscribed, the subscription price, the terms of payment and other conditions of the
transactions.

Illustration. Warranty Auto Shop, Inc. is a quality car care center located at St. Paul St., San
Antonio Village, Makati City. Assume that 5,000 shares of P10 par value ordinary shares of the
corporation were sold on subscription at P12 per share on Sept. 1, 2019 to Ashley Langga.
Subscription installments of P24,000 and P36,000 will be due on Sept. 16 an 30, respectively.
SUBSCRIPTION OF SHARES
Subscriptions Receivable 60,000
Subscribed Ordinary Shares 50,000
Share Premium 10,000
To record subscription above par.

Cash 24,000
Subscriptions Receivable 24,000
To record initial installment

Cash 36,000
Subscriptions Receivable 36,000
To record final installment

Subscribed Ordinary Shares 50,000

Ordinary Shares 50,000
To record issuance of stock
certificates
SUBSCRIPTION OF SHARES
Illustration. Assuming the same facts as above except that the subscriber failed to settle part of
his subscriptions in the amount of P48,000. After complying with the legal procedures pertaining
to delinquency sale, a public auction was held. The offer price is P56,000 including P3,009
accrued interest and P5,000 expenses of sale. Three bidders are willing to pay the offer price,
namely:
Lenore Loqueloque 4,300 shares
Luz Un 4,500 shares
Winnie Villanueva 4,700 shares

Loqueloque is the highest bidder. The 5,000 shares are deemed fully paid. Ashely Langga, the
original subscriber, get 700 shares and Loqueloque receives 4,300 shares.
Subscriptions Receivable 60,000 Receivable from Highest Bidder 5,000
Subscribed Original Shares 50,000 Cash 5,000
Share Premium 10,000 To record auction expenses
To record subscriptions above par.

Cash 12,000 Cash 56,000

Subscriptions Receivable 12,000 Receivable from Highest Bidder 8,000
To record partial installment Subscriptions Receivable 48,000
To record sale at public auction.

Receivable from Highest Bidder 3,000 Subscribed Original Shares 50,000

Interest Revenues 3,000 Ordinary Shares 50,000
To record accrued interest in To record issuance of stock
delinquent shares certificates.

Treasury Stock 56,000

Receivable from Highest Bidder 8,000
Subscriptions Receivable 48,000
To record purchase of own shares.
TREASURY SHARES
Treasury stocks are shares of stock which have been issued and fully paid for, but subsequently
reacquired by the issuing corporation either by purchase, redemption, donation or through
other lawful means. Such shares may again be disposed of for a reasonable price fixed by the
board of directors.
Section 41 of Corporation Code provides that a stock corporation has the power to purchase
its own shares for a legitimate purpose provided it has unrestricted retained earnings. Some of
the reasons for the purchase of treasury stock are as follows: (1) to support employee stock
compensation plans; (2) to improve the stock market price by decreasing the supply of shares;
(3) to avoid takeover by an outside party.
Treasury stock is not an asset because the corporation may not own shares of itself. To reiterate,
it is reported as a deduction from the total shareholders' equity. There are two methods of
accounting for treasury stock transactions, namely: (1) par or stated value method and (2) cost
method.
PURCHASE OF TREASURY SHARES
When the cost method is used, treasury stock is recorded at cost regardless of whether the
share is acquired below or above par or stated value. If treasury stock is purchased for cash, the
cost is equal to the cash payment. If the treasury stock is acquired for non cash consideration,
the cost is usually measured by the recorded amount of the non cash assets surrendered or
given in exchange.
Illustration. Plantation Eco Resort is a world class destination in Indang, Cavite. The
operations have been successful. To consolidate control over the enterprise and thus
avoid a corporate takeover by outsiders, the board of directors decided to minimize
outstanding shares by purchasing 1,500 shares with a par value of P1,000 for P2,000. The
entry will be:
Treasury Stock 3,000,000
Cash 3,000,000
REISSUANCE OF TREASURY SHARES
AT COST Cash 3,000,000
Treasury Stock 3,000,000

Cash 3,750,000
ABOVE COST Treasury Stock 3,000,000
Share Premium-Treasury 750,000

BELOW COST Cash 2,250,000

Retained Earnings 750,000
Treasury Stock 3,000,000
RETIREMENT OF TREASURY SHARES
WITH GAIN ON RETIREMENT
Ordinary Shares (1,500 shs x P1,000 par) 1,500,000
Share Premium 375,000
Treasury Stock (1,500 shs x P750 cost) 1,125,000

WITH LOSS ON RETIREMENT

Ordinary Shares (1,500 shs x P1,000 par) 1,500,000
Share Premium 750,000
Retained Earnings 750,000
Treasury Stock (1,500 shs x P750 cost) 3,000,000

The "loss" on retirement of P1,500,000 should be debited to the following accounts in

the order given:
(1) share premium to the extent of the credit when the share is issued;
(2) share premium from treasury stock transactions of the same class of share;
(3) retained earnings.
SUMMARY OF THE EFFECTS ON ASSETS, LIABILITIES AND
EQUITY
DIVIDENDS IN GENERAL
The declaration and payment of dividends involve three important dates and they are:
Date of Declaration - On the date of declaration, the board of directors will adopt a
resolution declaring that a dividend is to be paid. The resolution will specify the amount, type
and date of payment of this dividend. It will also set a date of record. Cash ends are declared
solely by the board of directors while share dividends will necessitate the concurrence of at
least two-thirds of the outstanding shareholders.
Date of Record - A list of shareholders entitled to the declared dividends is prepared at the
date of record. If an investor buys a share of stock after this date, he will not receive the
dividend.The share is said to be traded ex-dividend. No entry is required on this date.
Date of Payment - The corporation settles its liability on this date. An entry is made debiting
the dividend liability or shares distributable account and crediting cash, property distributed or
share capital.
CASH DIVIDENDS
illustration. Made Easy Bookstore, Inc., a nationally-known business books distribution entity, declared a
cash dividend of P12 per share of ordinary shares on July 1. The dividends are payable on August 1 to
shareholders of record on July 21. The entity has 100,000 ordinary shares issued of which 7,000 shares are
held in treasury.The entries to record the dividend declaration and payment are as follows:

Retained Earnings 1,116,000

Cash Dividends Payable 1,116,000

Cash Dividends Payable 1,116,000

Cash 1,116,000
 SHARE DIVIDENDS (LESS THAN 20% OR
SMALL SHARE DIVIDENDS)
illustration. Siobe! Your Japanese Fastfood, Inc. chain is blessed with years of profitable operations for its
commitment to serve affordable and healthy Japanese food favorites. The shareholders' equity before
declaration of a 10% share dividend is as follows:
Ordinary Shares, P50 par, 20,000 shares
issued and outsanding 1,000,000
Share Premium 200,000
Total Share Capital 1,200,000
Retained Earnings 650,000
Total Shareholders' Equity 1,850,000

Retained Earnings 220,000 Shares Distributable 100,000

Shares Distributable 100,000 Ordinary Shares 100,000
Share Premium 120,000 To record issuance of shares dividends
To record declaration of 10% share dividends
SHARE DIVIDENDS (LESS THAN 20% OR
SMALL SHARE DIVIDENDS)
SHARE DIVIDENDS (20% OR MORE OR
LARGE SHARE DIVIDENDS)
Illustration. Assume instead that Siobe! Your Japanese Fastfood, Inc. chain declared a 20% share dividend on
its 20,000 issued and outstanding P50 par value shares. The corporation will issue additional 4,000 shares
due to the share dividend.The entries will be:

Retained Earnings 200,000

Shares Distributable 200,000
To record declaration of 20% share dividends

Shares Distributable 200,000

Ordinary Shares 200,000
To record issuance of share dividends
SHARE DIVIDENDS (20% OR MORE OR
LARGE SHARE DIVIDENDS)
PROBLEM
SOLVING
1) Feb. 12 Cash 100,000 2) Feb. 12 Cash 100,000
Ordinary Shares 100,000 Ordinary Shares 100,000
(P100 x 1,000 shs) (P100 x 1,000 shs)

July 10 Cash 630,000 July 10 Cash 630,000

Ordinary Shares 500,000 Ordinary Shares 630,000
(P100 x 5,000 shs)
Share Premium 130,000

Nov. 5 Cash 1,050,000 Nov. 5 Cash 1,050,000

Ordinary Shares 750,000 Ordinary Shares 1,050,000
(P100 x 7,500 shs)
Share Premium 300,000
3) Same entries in Requirements 2
1)
2019 July 2 Cash 204,000
Ordinary Shares 156,000
Share Premium – Ordinary 48,000

17 Cash 89,600
Preference Shares 88,000
Share Premium – Preference 1,600

2)
Cash P293,600 (204,000 + 89,600)
1)
Cash (25,000 shs x P20) 500,000
Ordinary Shares (25,000 shs x P5) 125,000
Share Premium 375,000

2)
Cash 850,000
Ordinary Shares 850,000

OR

Cash 850,000
Ordinary Shares (25,000 shs x P10) 250 ,000
Share Premium 600,000

3)
Cash (35,000 shs x P25) 625,000
Ordinary Shares 625,000
2019
May 8 Subscription Receivable - Ordinary 420,000
Ordinary Shares Subscribed 420,000
received subscription to 14,000 shares @

8 Cash 273,000
Subscription Receivable - Ordinary 273,000
Received 65% of the subscriptions on May 8
on 14,000 shares (P420,000 x 0.65)

June 7 Cash 84,000

Subscription Receivable - Ordinary 84,000
Received 20% of the subscriptions on May 8
on 14,000 shares (P420,000 x 0.20)

July 6 Cash 63,000

Subscription Receivable - Ordinary 63,000
Received 15% of the subscriptions on May 8
on 14,000 shares (P420,000 x 0.15)
 6 Ordinary Shares Subscribed 420,000
Ordinary Shares 420,000
Issued 14,000 shares

Sept 14 Subscriptions Receivable - Ordinary 137,600

Ordinary Shares Subscribed 129,000
Share Premium - Ordinary 8,600
Received subscriptions to 4,300 shares at
P32 per share

14 Cash 82,560
Subscriptions Receivable - Ordinary 82,560
Received 60% of the subscriptions on Sept.
14 on 4,300 shares (P137,600 x 0.60)
1)
Jan. 1: 100,000 shares issued and outstanding
Mar. 31: 100,000 shares issued, 90,000 shares outstanding
June 30: 100,000 shares issued, 94,000 shares outstanding
Sept. 30: 100,000 shares issued, 96,000 shares outstanding
2)
Mar. 28 Treasury Shares 150,000
Cash 150,000
Apr. 10 Cash 56,000
Retained Earnings 4,000
Treasury Stock 60,000
July 5 Cash 32,000
Treasury Stock 30,000
Share Premium – Treasury 2,000

3)
Companies buy their own shares of stock for employees stock option plans to support the stock
price, to increase earnings per share, and to make a hostile takeover more difficult.
CONTACT!

LITO J. SOLIMA, CPA, CTT, LPT, MBA

+63917-709-8002
[email protected]
NORTHERN BUKIDNON STATE COLLEGE