SHARE CAPITAL TRANSACTIONS

Exercise 1

1. Dolce Amore Corp. was incorporated on January 1, 2023, and is authorized to issue
the following:
 100,000 shares of P250 par value preference share capital
 150,000 shares of P100 par value ordinary share capital

The following share capital transactions took place during the year:
 Issued for cash 20,000 preference shares and 45,000 ordinary shares. Both
were issued at par.
 Issued for cash 15,000 ordinary shares at P150 per share.
 Issued for cash 25,000 preference shares at P320 per share.
 Issued for cash 30,000 ordinary shares at P175 per share and 15,000
preference shares at P310 per share.

Requirements: Record the transactions using the (a) journal entry method and the (b)
memorandum entry method and compute the following:
1) The balance of the unissued ordinary share capital account.
2) The balance of the unissued preference share capital account.
3) The balance of the Ordinary share capital.
4) The balance of the Preference share capital account.
5) The balance of the Share premium – Preference account.
6) The balance of the Share premium – Ordinary account.
7) Total paid-in capital of the corporation.
8) The average issue price per share received by the corporation on its preference
shares.
9) The average issue price per share received by the corporation on its ordinary
shares.
10) The average premium per share of preference shares.
11) The average premium per share of ordinary shares.

2. Galahad Corporation is authorized to issue 5,000 shares of P200 par value ordinary
share capital. The following transactions occurred in 2023:
 Issued 1,500 shares in exchange for a power plant with market value of
P500,000. At that time, ordinary shares were selling at P350 per share.
 Issued 500 shares in exchange for an equipment. The equipment had no
determinable value, but ordinary shares were selling at P320 per share at that
time.
  Issued 400 shares for advisory services. The firm billed Galahad for P150,000.
At that time, ordinary shares were selling at P325.
 Issued 750 shares to attorneys in payment for their legal services. The value of
the legal services is not determinable but ordinary shares were selling at P330
per share at that time.

1) Record the transactions using the (a) journal entry method and the (b)
memorandum entry method.
2) Based on the foregoing transactions, how much is the total consideration
received by Galahad Corporation during 2023?
3) What is the total amount credited to share premium account as a result of the
foregoing transactions?

3. At the beginning of 2023, German Company was organized with authorized capital of
100,000, P200 par value shares.

January 15 Issued 10,000 shares at P280 per share.

May 1 Issued 5,000 shares in exchange for land with a fair value of
P1,200,000. On this date, fair value of the shares was P250 per
share.

November 23 Issued 2,000 shares for legal services when the fair value was
P260 per share.

1) What amount should be reported as share capital?

a. 3,400,000
b. 3,600,000
c. 4,520,000
d. 4,570,000
2) What amount should be reported as share premium?
a. Zero
b. 1,000,000
c. 1,120,000
d. 1,170,000

4. Shivery Corporation was organized on February 2, 20233. It is authorized to issue

30,000 shares of P220 par value preference share capital, and 75,000 shares of P140
par value ordinary share capital. At year-end, the ledger included the following
accounts pertaining to shareholder’s equity:
Preference Share Capital P4,730,000
Share Premium – Preference 1,877,916
Ordinary Share Capital 5,320,000
Share Premium – Ordinary 1,178,250
 Of the issued preference shares, 20% were issued for a building with a fair market
value of P2,230,000.

Of the issued ordinary shares, five-eighths were issued for cash, the remainder were
issued for another building with a fair market value of P2,480,000.

Compute for the following:

1) Average price per preference share issued for cash.
2) Average price per ordinary share issued for cash.
3) Total share premium arising from issuance for cash considerations.

5. Alpine Corp. completed the following transactions during the year 2023:

Jan. 1 Authorized to issue 100,000 shares of P70 par value preference share
capital and 250,000 shares of P50 par value ordinary share capital.

Mar. 20 Received subscription for preference shares at P150 per share from the
following individuals:
Liza 10,000 shares
Chienna 12,000 shares
Janella 8,000 shares

A 40% down payment was received from the subscribers.

Apr. 5 Received subscriptions for ordinary shares at P110 per share from the
following individuals:
Johnny 22,000 shares
Joey 31,000 shares
Diana 27,000 shares

A 30% down payment was received from the subscribers.

Apr. 19 The subscribers of preference shares paid 60% of their remaining

subscription balance.

May 2 Diana paid the balance of her subscription, and the shares were issued
to her.

May 10 Liza and Chienna paid the balance of their subscriptions, and the
shares were issued to them.

May 31 The remaining subscribers paid the balance of their subscriptions, and
the share were issued to them.
 1) Record the transactions using the (a) journal entry method and the (b)
memorandum entry method.
2) How much cash was received from the subscribers of preference shares on
April 19?
3) How much cash was received on May 10?

6. At the beginning of 2023, Umberto Company issued 20,000 ordinary shares of P20
par value and 40,000 cumulative preference shares of P20 par value for a total of
P1,600,000. At this date, the ordinary share was selling for P36, and the cumulative
preference share was selling for P27.

1) What amount of the proceeds should be allocated to the preference shares?

a. 880,000
b. 960,000
c. 1,080,000
d. 1,200,000
2) What amount of the proceeds should be allocated to the ordinary shares?
a. 400,000
b. 640,000
c. 720,000
d. 800,000
3) What is the share premium from the issuance of preference shares?
a. Zero
b. 160,000
c. 200,000
d. 360,000
4) What is the share premium from the issuance of ordinary shares?
a. Zero
b. 240,000
c. 320,000
d. 400,000

7. Welkin Corp. issued its share capital in exchange for a building valued at P2,400,000.
Relevant information related to share capital as of the exchange date is as follows:

Number of Par value Market value

shares issued per share per share
Preference shares 16,500 P85 P115
Ordinary shares 10,000 P30 -

1) How much of the total consideration was allocated to the preference shares?
2) How much of the total consideration was allocated to the ordinary shares?
3) Journalize the issuance of the shares.
 4) What amount was credited to Share premium – preference?
5) What amount was credited to Share premium – ordinary?

8. Bats Corporation is authorized to issue 500,000 ordinary shares of P10 par value.
During its first year of the operations, the following transactions occurred:

(a) 50,000 ordinary shares were sold for P18 per share.
(b) 50,000 ordinary shares were issued in exchange for a patent worth
P1,000,000.

The total contributed capital at the end of the Bats’ first year was:
a. P 400,000
b. P 900,000
c. P1,000,000
d. P1,900,000

9. Mikasa Company provided the following information at year-end:

Preference share capital, P100 par P460,000

Share premium – Preference 161,000
Ordinary share capital, P10 par 1,050,000
Share premium – Ordinary 550,000
Subscribed ordinary share 10,000
Retained earnings 380,000
Subscription receivable – Ordinary 8,000
Treasury shares – common 12,000

1) What is the amount if legal capital?

a. 1,500,000
b. 1,520,000
c. 2,211,000
d. 2,231,000

2) Assume the same information except that the ordinary share has a P10 stated
value, what is the amount of legal capital?
a. 1,520,000
b. 2,070,000
c. 2,211,000
d. 2,231,000
10. Warren Corp. was authorized to issue 500,000 ordinary shares with a par value of
P20. The following transactions relative to the share capital took place:

a. Received subscription for P125,000 shares at P25 receiving a down payment

of 60%.
b. The subscriber failed to pay his obligation, so his subscription was declared
delinquent.

c. Paid delinquency sale expenses totaling P50,000.

d. Received bids from the following:

Person 1 – 75,000
Person 2 – 80,000
Person 3 – 70,000

e. Received payment from the highest bidder and shares were issued
accordingly.

1) Prepare the journal entries to record the foregoing transactions.

2) Who is the highest bidder?
3) Assuming there were no bidders, prepare the journal entry to record the
issuance of the shares in the name of the corporation.