Scribd
Upload
105 views

Problem-Accounting-for-Shareholders-Equity-

Uploaded by

mglagarde
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
105 views

Problem-Accounting-for-Shareholders-Equity-

Uploaded by

mglagarde
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Accounting for Shareholders' Equity

Problem 1
Mara Company provided the following data at year-end:

Authorized share capital 5,000,000


Unissued share capital 2,000,000
Subscribed share capital 1,000,000
Subscription receivable 400,000
Share premium 500,000
Retained earning unappropriated 600,000
Retained earning appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost 100,000

What total amount should be reported as shareholder's equity?

Solution:
Authorized share capital 5,000,000
Unissued share capital (2,000,000)
Issued share capital 3,000,000
Subscribed share capital 1,000,000
Subscription receivable (400,000)
Share premium 500,000
Total share capital 4,100,000
Retained earning unappropriated 600,000
Retained earning appropriated 300,000
Revaluation surplus 200,000
Treasury shares, at cost (100,000)
Shareholders’ Equity 5,100,000

Problem 2
Glen Company provided the following information at year-end:

Preference share capital, P100 par 3,000,000


Share premium - preference share 500,000
Ordinary share capital, P10 par 6,000,000
Share premium - ordinary share 2,000,000
Subscribed ordinary share capital 4,000,000
Retained earnings 2,500,000
Subscription receivables - ordinary share 1,000,000

What amount should be reported as legal capital?


Solution:
Preference share capital 3,000,000
Ordinary share capital 6,000,000
Subscribed ordinary share capital 4,000,000
Legal Capital 13,000,000

Problem 3
At the beginning of the current year, Ria Company issued 10,000 ordinary shares of P20 par
value and 20,000 convertible preference shares of P20 par value for a total of P800,000. At this
date, the ordinary share was selling for P36 and the convertible preference share was selling for
P27.

1. What amount of the proceeds should be allocated to the preference shares? 480,000
2. What amount of the proceeds should be allocated to the ordinary shares? 320,000
3. What amount should be recorded as share premium from the issuance of preference shares?
80,000
4. What amount should be recorded as share premium from the issuance of ordinary shares?
120,000

Solution
Market value Ratio Allocation PAR Share Premium
Ordinary 360,000 36/90 320,000 200,000 120,000
share (10K×P36) (800K×36/90) (10K×P20) (320K - 200K)

Preference 540,000 54/90 480,000 400,000 80,000


shares (20K×P27) _ (800K×54/90) (20K×P20) (480K - 400K)
900,000

Journal Entries:

Cash 800,000
Preference share capital 400,000
Share Premium - Pref. Share 80,000
Ordinary share capital 200,000
Share Premium - Ord. Share 120,000
Problem 4
At the beginning of the current year, Ashe Company was organized with authorized capital of
100,000 shares of P200 par value.

January 10 Issued 25,000 shares at P220 per share


March 25 Issued 1,000 shares for legal services when the fair value was P240 per share
September 30 Issued 5,000 shares for a tract of land when the fair value was P260 per share

1. What amount should be reported as share capital?


Solution:
Jan 10 (25K×200) 5,000,000
Mar 25 (1K×200) 200,000
Sep 30. (5K×200) 1,000,000
Total share capital 6,200,000

2. What amount should be reported for the share premium?


Solution:
(220 - 200) × 25,000 500,000
(240 - 200) × 1,000 40,000
(260 - 200) × 5,000 300,000
Share Premium 840,000

Problem 5
At year-end, Pack Company canceled 5,000 shares of P50 par value held in treasury at an
average cost of P120 per share. Before recording the cancelation of the treasury shares, the
entity had the following balances:

Share capital issued originally at P75 per share 2,500,000


Share premium 1,250,000
Retained earnings 1,000,000
Treasury shares, at cost 600,000

1. What amount should be reported as adjusted share capital at year- end?


Solution:
Share capital 2,500,000
Treasury Share, at Par ( 5,000×50) (250,000)
Adjusted Share Capital 1,125,000
2. What amount should be reported as adjusted share premium at year- end?
Solution:
Consideration 75 - Par 50) = 25 Share Premium

Share Premium 1,250,000


Share Premium - Treasury (5,000×25) (125,000)
Adjusted Share Premium 1,125,000

3. What amount should be reported as adjusted retained earnings at year-end?


Solution: (1,000,000 - 225,000*) = 775,000 Adjusted Retained Earnings

Share Capital 250,000


Share Premium 125,000
*Retained Earnings (600K - (250K+125K)) 225,000
Treasury Shares, at cost (5,000 shares × 120) 600,000

You might also like