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    QUIZ 15: Mystery Incorporated: Term 1st SY 2019 - 2020

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    Adolph Christian Gonzales
    Fred Inc. recorded various equity transactions in July and August 2018 related to the issuance and sale of ordinary and preference shares. Key transactions included the initial issuance of shares, sales of shares for cash, shares issued in exchange for equipment, and shares issued as payment to an attorney. Fred Inc. also earned monthly net income that was transferred to retained earnings.

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    QUIZ 15: Mystery Incorporated: Term 1st SY 2019 - 2020

    Uploaded by

    Adolph Christian Gonzales
    23 views3 pages
    Fred Inc. recorded various equity transactions in July and August 2018 related to the issuance and sale of ordinary and preference shares. Key transactions included the initial issuance of shares, sales of shares for cash, shares issued in exchange for equipment, and shares issued as payment to an attorney. Fred Inc. also earned monthly net income that was transferred to retained earnings.

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    Q15A_Corporations

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    Fred Inc. recorded various equity transactions in July and August 2018 related to the issuance and sale of ordinary and preference shares. Key transactions included the initial issuance of shares, sales of shares for cash, shares issued in exchange for equipment, and shares issued as payment to an attorney. Fred Inc. also earned monthly net income that was transferred to retained earnings.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    23 views3 pages

    QUIZ 15: Mystery Incorporated: Term 1st SY 2019 - 2020

    Uploaded by

    Adolph Christian Gonzales
    Fred Inc. recorded various equity transactions in July and August 2018 related to the issuance and sale of ordinary and preference shares. Key transactions included the initial issuance of shares, sales of shares for cash, shares issued in exchange for equipment, and shares issued as payment to an attorney. Fred Inc. also earned monthly net income that was transferred to retained earnings.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    QUIZ 15: Mystery Incorporated

    Term 1st SY 2019 - 2020

    Name: Date:

    Student No: Score:

    Part I. Fred Inc., Daphne Corp., Velma Co., and Scooby Corporation all fall in the corporate umbrella of
    Mystery Incorporated. You are assigned as the accountant of Fred Inc., the corporate subsidiary of
    Mystery Inc. focusing on selling palm oil. Here are Fred’s relevant equity transactions:

    2018 1 Fred Inc. is authorized by the SEC to issue 100,000 ordinary shares, P12 par
    July and 85,000 preference shares, P15 par, in its lifetime.
    11 Fred sells 12,000 of its ordinary share in cash for P215,000.
    18 A supplier of computer equipment opts to be paid in the form of Fred’s
    preference shares. The supplier supplies Fred a total of 8 computer sets, each
    selling at P17,000 in exchange for 6,000 preference shares of Fred. Fred’s
    preference shares are selling at P14 per share on this date.
    21 Fred decides to pay Atty. Scrappy Du in ordinary shares of the corporation. Fred
    pays Du 5,200 ordinary shares. Fred’s ordinary shares are selling at P18 per
    share on this date.
    30 Fred earns P5,500,000 net income for the month of July 2018. This is
    transferred to Fred’s retained earnings.
    August 5 Fred decides to repurchase 8,000 of its own ordinary shares. Fred paid
    P144,000 for these treasury shares.
    13 15,000 ordinary shares were sold for P15 each.
    22 Fred reissues 5,000 of the shares repurchased on August 5, for P19.50 each.
    24 The Board of Directors of Fred Inc. declares a 6-for-1 share split on the ordinary
    shares.
    30 Fred earns P8,000,000 net income for the month of August 2018. This is
    transferred to Fred’s retained earnings.
    September 8 42,000 ordinary shares were sold for P8.50 each. Alongside this, 11,500
    preference shares were also sold at par.
    14 A 10% share dividend was declared on the ordinary shares and 5% share
    dividend on the preference shares. Ordinary shares were selling at P12 and
    preference shares were selling at P22 that time.
    18 All share dividends declared were distributed.
    19 Cash dividends of P2.00 per ordinary share and P5.00 per preference shares
    are declared and paid by the Board of Directors.

    Required: Record the transactions above in the make-up journal sheets provided. Also, supply the
    following information:

     How many ordinary shares are outstanding as of September 31, 2018?


    July 11: 12,000 shares
    21: 5,200 shares
    Aug. 5: (8,000) shares
    13: 15,000 shares
    22: 5,000 shares
    24: 29,200 x 6 = 175,200 shares
    Sep. 8: 42,000 shares
    18: 217,200 x 110% = 238,920 shares
     How many preference shares are outstanding as of September 31, 2018?
    July 18: 6,000 shares
    Sep. 8: 11,500 shares
    18: 17,500 x 105% = 18,375 shares
     How much is the balance of share premium – ordinary as of September 31, 2018? P382,520
     How much is the balance of share premium – preference as of September 31, 2018? P52,125
     How much is the balance of share premium – treasury as of September 31, 2018? P7,500
     What is the balance of retained earnings at September month-end? P12,650,935
     What is the balance of treasury shares at September month-end? P54,000
     Please present the Shareholder’s Equity of Fred Inc. below (in good form):

    Ordinary share capital (238,920 shares @ P6 par) 1,433,520


    Share premium – ordinary 382,520
    Preference share capital (18,375 shares @ P15 par) 275,625
    Share premium – preference 52,125
    Share premium – treasury 7,500
    Retained earnings 12,650,935
    Treasury shares ( 54,000)
    Total shareholders’ equity 14,748,225

    Part II. Allocate the dividends of Dexter’s Lab Corporation.

    The shareholder’s equity in the statement of financial position of Dexter’s Lab Corporation on December
    31, 2018 showed the following:

    Ordinary share capital, P100 par, 50,000 shares 5,000,000


    Preference share capital, 12%, P100 par, 25,000 shares 2,500,000
    Share premium 600,000
    Retained earnings 3,600,000
    Total shareholder’s equity 11,700,000

    Dividends have been paid on the preference shares up to December 31, 2016 only.

    Required: Using the format I have presented in class, and taking into account that preference shares are
    cumulative and participating and all retained earnings are distributed as dividends, show the allocation of
    the dividends below and answer the following questions:

     How much is the dividend per preference share? P40 per share
     How much is the dividend per ordinary share? P64 per share
     Calculate the total amount received by Deedee, a shareholder of Dexter’s Lab who owns 7,500
    ordinary shares and 12,250 preference shares upon distribution of the dividends.
    Dividends from ordinary shares (7,500 shares x P40) 300,000
    Dividends from preference shares (12,250 shares x P64) 784,000
    Amount received by Deedee 1,084,000

    Participation:
    Ordinary 5,000,000 5,000/7,500 or 5/7.5
    Preference 2,500,000 2,500/7,500 or 2.5/7.5
    Participation 7,500,000

    Ordinary Preference
    Preference dividends
    (12% x 2,500,000) 300,000
    Dividends in arrears
    2017 only, 2018 is given above 300,000
    Remaining: P3,000,000
    To ordinary (3,000,000 x 5/7.5) 2,000,000
    To preference (3,000,000 x 2.5/7.5) 1,000,000
    Total dividends received 2,000,000 1,600,000
    Divide by: no. of shares 50,000 shares 25,000 shares
    Dividend per share P40 per ordinary share P64 per preference share
    Y/M D Particulars Dr. Cr.
    2018
    Jul 1 Fred Inc. is authorized to issue 100,000 ordinary shares at P12 par and 85,000
    preference shares at P15 par. (Memo entry)

    11 Cash 215,000
    Ordinary share capital 144,000
    Share premium – ordinary 71,000

    18 Equipment 136,000
    Preference share capital 90,000
    Share premium – preference 46,000

    21 Legal expense 93,600


    Ordinary share capital 62,400
    Share premium - ordinary 31,200

    30 Income summary 5,500,000


    Retained earnings 5,500,000

    Aug 5 Treasury shares 144,000


    Cash 144,000

    13 Cash 225,000
    Ordinary share capital 180,000
    Share premium - ordinary 45,000

    22 Cash 97,500
    Treasury shares 90,000
    Share premium – treasury 7,500

    24 A 6-for-1 share split occurred. This makes the outstanding ordinary shares of Fred
    become 175,200 shares (29,200 shares x 6) and the par become P2 (P12 par
    divided by 6). (Memo entry)

    30 Income summary 8,000,000


    Retained earnings 8,000,000

    Sep 8 Cash 529,500


    Ordinary share capital 252,000
    Share premium – ordinary 105,000
    Preference share capital 172,500

    14 Retained earnings 260,640


    Share dividends payable 130,320
    Share premium – ordinary 130,320

    Retained earnings 19,250


    Share dividends payable 13,125
    Share premium - preference 6,125

    18 Share dividends payable 143,425


    Ordinary share capital 130,320
    Preference share capital 13,125

    19 Retained earnings 569,715


    Cash dividends payable 569,715

    Cash dividends payable 569,715


    Cash 569,715

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