FAR II FINALS PROBLEM

CHAPTER 6-9

In 2019, Real Company issued 6,000 shares of P100 par value for P110 per
share. In 2020, Real acquired 3,000 of its shares at P140 per share and
immediately cancelled these 3,000 shares. In connection with the retirement
of these 3,000 shares, Real should be debit
P30,000 Share Premium; P90,000 Retained Earnings

* Share Capital [3,000 retired shares x P100 par] 300,000

Share Premium [3,000 retired shares x P10] 30,000
Retained Earnings 90,000
Cash [3,000 retired shares x P140 per share] 420,000

Boss Corporation was organized on May 5, 2020 with authorized shares of

500,000, P20 par value ordinary shares. On May 1 2020 Issued 4,500
shares with a fair value of P25, in payment of services of Atty. Yap a lawyer.
The journal entry method of recording for the payment of legal service would
include which the following?
Credit Unissued Ordinary Share P90,000

*Legal Service Expense[ 4,500 x P25] 112,500

Unissued Ordinary Share[ 4,500 x P20 par] 90,000
Share Premium 22,500

JR Marketing Corp. has outstanding bonds payable.

Bonds payable P5,200,000
Accrued interest payable 100,000
The company issued 200,000 ordinary share capital P20.00 par and market
value of P 25 per share in full settlement of the bonds payable and the
accrued interest. The entry using journal entry method would include which of
the following?
Credit to Gain on extinguishment of debt P300,000

Bonds payable 5,200,000

Accrued interest payable 100,000
Ordinary Share Capital [20 x 200,000] P4,000,000
Share Premium [5 x 200,000] 1,000,000
Gain on Extinguishment of Debt 300,000
The directors of Toy Company whose P50 par value share capital have
decided to issue a stock dividend. Toy Company, which has an authorization
for 1,000,000 shares, had issued 500,000 shares, of which 100,000 shares
are now held as treasury.
In order to capitalize P4,000,000 of the retained earnings balance, what
percentage should be declared as a stock dividend by the directors?

20%

*500,000 issued shares - 100,000 treasury shares = 400,000 shares

400,000 shares x P50 par = P20,000,000
P4,000,000 of the retained earnings balance / P20,000,000 = 0.2 x 100%=
20%

Joy subscribed for 40,000 shares of P 10 par value ordinary share for P12 per
share. She paid 60% of the subscription as her initial payment. She was not
able to pay the balance and her stocks were declared delinquent. Interest
P10,000 and other expenses for sale totaled to P8,000. On the bidding day
nobody came to bid. The journal entry would include the following?
Credit Receivable from the highest bidder P 210,000

Joy
Subscription receivable [40,000 x P12 per share] 480,000
Subscribed ordinary share capital [40,000 x P10 par] 400,000
share premium 80,000
*paid 45%
Subscribed ordinary share capital[ 480,000 x 60%] 288,000
Subscription receivable 288,000
*Remaining shares [ delinquent shares]
480,000shares - 288,000paid shares= 192,000shares delinquent shares
192,000shares delinquent shares + P10,000 interest + P8,000 other
expense = 210,000
Treasury Shares 210,000
Receivable from highest bidder 192,000
interest expense 10,000
Miscellaneous expense 8,000
The AYZ Corporation shareholders’ equity of includes the
following:

Preference share capital, P 50 par P 5,000,000

Share premium - preference 500,000

Subscribed preference share capital 1,000,000

Ordinary share capital, P25 pa 10,000,000

Share premium -Ordinary 550,000

Notes payable 1,000,000

Retained earnings 2,000,000

Subscribed ordinary share capital 300,000

Subscription receivable - ordinary 200,000

How much is the legal capital? 16,300,000

Preference share capital P 5,000,000

Subscribed preference share capital 1,000,000

Ordinary share capital 10,000,000

Subscribed ordinary share capital 300,000

*LEGAL CAPITAL 16,300,000

On September 30, 2013, Green Company issued 5,000 shares of its P100 par
share capital in connection with a stock dividend. The market value per share
on the date of declaration was P150. Green’s shareholders’ equity accounts
immediately before the issuance of the stock dividend shares were as follows:
Share Capital, P100 par, 50,000 shares authorized,
30,000 shares outstanding .....................................................P3,000,000
Share
Premium .................................................................................. 1,000,000
Retained
Earnings............................................................................ 1,400,000
What should be the retained earnings balance immediately after the stock
dividend?

650,000
*Retained Earnings {5,000 X P150 } 750,000
Stock dividends payable 750,000

Retained Earnings ...... 1,400,000

DECLARED {750,000}
*650,000
The shareholders’ equity section of the Yellow Bell Company as of December
31, 2013 was as follows:
Ordinary Share, P10 par, 20,000 shares authorized.
10,000 shares issued and outstanding ................................P100,000
Share Premium.......................................................................... 30,000
Retained Earnings..................................................................... 90,000
Total ................................................................................ P220,000
On February 1, 2014, the Board of Directors declared a 10% stock
dividend. On this date, the market value of the ordinary share was P15 per
share. On March 31, 2014 the date of issuance the market value of the
ordinary share is P20 par. How much is the retained earnings balance after
the of issuance of dividend?
P75,000
*Retained Earnings {10%x15/sharex10,000} 15,000
Stock dividends payable {10%x10parx10,000} 10,000
share premium 5,000

Retained Earnings ................................................ 90,000

Less: *Retained Earnings {10%x15/sharex10,000} 15,000
75,000
Kelly subscribed for 40,000 shares of P 12 par value ordinary share for P15
per share. She paid 60% of the subscription as her initial payment. She was
not able to pay the balance and her stocks were declared delinquent. Interest
and other expenses for sale totaled to P20,000. How much the would be the
total offered price for delinquent shares? P260,000

Subscription receivable [40,000 x P15 per share] 600,000

Subscribed ordinary share capital [40,000 x P12 par] 480,000
share premium 120,000
*paid 60%
Subscribed ordinary share capital[ 600,000 x 60%] 360,000
Subscription receivable 360,000
*Remaining shares [ delinquent shares]
600,000shares - 360,000 paid shares= 240,000shares delinquent shares
240,000shares delinquent shares + P20,000 interest & other expense =
260,000
Sunflower Company had authorized shares at P20 par, 70,000 ordinary
shares issued and outstanding on December 31, 2012. During 2012, no
additional ordinary share was issued but 10,000 share were reacquired as
treasury at cost P22 per share.
On January 1, 2013, Rose issued no par with stated value of P10, 40,000
shares of 10% preference shares. During 2013, The board of director of
Sunflower did not declared dividend. Net income for 2013 was P450,000.
What should be the 2013 earnings per share?
P7.50
December 31, 2012- 70,000 ordinary shares issued and outstanding
Less:Treasury Shares 10,000 shares
60,000 ordinary shares and outstanding

*Basic EPS= 450,000 [net income] / 60,000 [ordinary shares] = P7.50

Ocean Corporation issued 10,000 shares of ordinary share capital, par value
P20 in exchange for a Land P220,000 fair value. At the date of the
exchange, the shares are selling at P25,. How will the exchange be recorded
in the books of Ocean Corporation?
Debit Land P220,000; Credit Ordinary share capital P200,000; Credit Share
Premium P20,000

* Land 220,000
ordinary share capital [ 10,000sh x P20 par] 200,000
Share Premium 20,000
The SampaguitaCompany shareholders’ equity on December 31, 2013
follows:
10% Preference Share Capital, P50 par, 10,000 shares
issued and
outstanding ................................................... P 500,000
Ordinary Share Capital, P30 par, 50,000 shares
issued and outstanding..........................1,500,000
Share Premium -
Preference ......................................................... 25,000
Share Premium -
Ordinary ............................................................. 125,000
Retained Earnings ........................................( 100,000)
Total Shareholders’
Equity ........................................................... P2,050,000
Preference share is preferred as to dividend. Dividend unpaid for 3 years at
the beginning of 2013, and with liquidation value of P60 per share.
Book values per share on preference share and ordinary share, respectively
are: P50 and P29.50

Total shareholders’ equity P2,050,000

Less: Equity identified with preference shares:
Liquidation value (10,000 x P60) 600,000
Share in the deficit (1/4 x P100,000) [ 25,000 ] 575,000
Equity for ordinary shares 1,475,000

Book values per share:

Preference share ( 575,000/10,000) = P 57.50
Ordinary share (1,475,000 /50,000) = P 29.5
The Calla Lily Company was organized on January 2, 2013, and issued the
following shares:
100,000 shares of P10 par ordinary share, at P24 per share
25,000 shares of P20 par, 6% cumulative preference share, at P25 per
share
The net income for 2013 was P420,000 and cash dividends of P300,000 were
declared and paid in 2013.
What were the dividends paid on the preference share and ordinary share,
respectively and assuming there is 2 years unpaid arrears?
P90,000 and P210,000

TotaL Preference Ordinary

Total Dividends 300,000
Regular (6% x P20 par x 25,000) ( 30,000) 30,000
Dividends (6% x P20 par x 25,000
X 2 yrs) ( 60,000) 60,000
Balance – to Ordinary (210,000) 210,000
Total - 90,000 210,000
Shares outstanding 25,000 100,000
Dividend per share (a/b) P3.6 P 2.1

On January 12, 2021, Blue Corporation issued 30,000 shares of its P100 par
value ordinary share capital in exchange for a piece of land to be held for a
future plant site. Blue Corporation’s ordinary share was listed and traded at
P108 per share on the same date. The land has fair value of P3,200,000
value. The journal entry for the land would include which the following?
Credit to Ordinary share P3,000,000

*Land 3,200,000
ordinary share capital [ 30,000sh x P100 par] 3,000,000
Share Premium 200,000
The Orange Star Company shareholders’ equity section of the as of
December 31, 2013 was as follows:
Ordinary Share, P10 par, 40,000 shares authorized.
20,000 shares issued and outstanding ……………………....... P200,000
Share
Premium …………………………………………………………… 20,000
Retained
Earnings ……………………………………………………….. 100,000

On February 1, 2014, the Board of Directors declared a 20% stock

dividend. On this date, the market value of the ordinary share was P15 per
share. On March 31, 2014 the date of issuance the market value of the
ordinary share is P20 par. How much is the total shareholders’ equity after
the issuance of dividend. 2014?
P280,000
Retained Earnings [ 20% x 20,000 shares x P20par] 80,000
Ordinary Share Capital[ 20% x 200,000 shares] 40,000
Share Premium 20,000

Ordinary shares P200,000 + 40,000 [declared] = 240,000

Share premium P20,000 + P20,000[excess] 20,000
Retained Earnings 100,000 - 80,000 [declared]= 20,000
* 280,000
Sam Company was incorporated on January 1, 2020. The following
information pertains to ordinary share capital transactions:
January 1 - Number of shares authorized ........................ 110,000
February 1 - Number of shares issued ...........…................... 80,000
July 1 - Number of shares reacquired but not cancelled 20,000
December 1 - Three for two share split on December 31, 2020,
What is the number of ordinary shares outstanding?
90,000

February 1 - Number of shares issued 80,000

July 1 - Number of shares reacquired but not cancelled [ 20,000]
60,000
December 1 - Three for two share split x3
180,000
/ Two
90,000
Black Company, a calendar year entity, had sufficient retained earnings in
2013 as a basis for dividends but was temporarily short of cash. Black
declared a dividend of P100,000 on April 1, 2013 and issued promissory
notes to its shareholders in lieu of cash. The notes, which were dated April 1,
2013, had a maturity date of March 31, 2014 and a 10% interest rate.
How should Black account for the scrip dividend and related interest?
Debit retained earnings for P100,000 on April 1, 2013 and debit interest expense
for P7,500 on December 31, 2013.
* April 1
Retained Earnings 100,000
Scrip Dividends Payable 100,000

Dec. 31
Interest Expense (P100,000 x 10% x 9/12) 7,500
Interest Payable 7,500
*April to december is 9 mos
The shareholders’ equity of JXN Corporation includes the following:

Preference share capital, P 50 par P 5,000,000

Share premium - preference 800,000

Subscribed preference share capital 1,000,000

Ordinary share capital, P25 par 10,000,000

Subscribed Ordinary share capital 300,000

Subscription Receivable-Ordinary share

100,000
cap.

Share premium -Ordinary 600,000

The average selling price of ordinary share capital will be______________.

P26.46

Ordinary share capital 10,000,000/P 25 par = 400,000

Subscribed ordinary share capital 300,000/P 25 par = 12,000
412,000
average selling price=
10,000,000{���� ���)+600,000{�������}+300,000{���������}
412,000
=26.46
The shareholders’ equity of XYZ Corporation includes the following:

Preference share capital, P 50 par P 5,000,000

Share premium - preference 800,000

Subscribed preference share capital 1,000,000

Ordinary share capital, P25 par 10,000,000

Subscribed Ordinary share capital 500,000

Subscription Receivable-Ordinary share

100,000
cap.

Share premium -Ordinary 600,000

Treasury Share - at cost P30 90,000

How many ordinary shares were outstanding? 417,000

Ordinary share capital, [10,000,000/P25] 400,000

Subscribed Ordinary share capital[500,000/P25] 20,000
less: treasury shares
{90,000/P30} {3,000}
417,000

A company issued 3,000 shares of P5.00 par value of ordinary shares for
P12,000. The journal entry to record the transaction would include which of
the following?
debit of P3,000 to discount on ordinary share capital
Cash 12,000
Discount 3,000
Ordinary Share Capital[ 3,000 x 5] 15,000
B Corporation issued 12,000 ordinary shares, par value P 10 in exchange for
equipment. At the date of exchange, stocks are selling at P 15 and no market
value is known for the equipment. The journal entry include which of the
following? credit to share premium equipment P60,000

*EQUIPMENT {12,000 X P 15/SSHARE} 180,000

ORDINARY SHARE CAPITAL {12,000 X P 10PAR} 120,000
SHARE PREMIUM- EQUIPT 60,000

Zinc Corporation was organized on January 1, 2020 with authorized share

capital of 100,000 shares of P20 par value ordinary shares. During 2020,
Zinc Corporation had the following transactions affecting the shareholders’
equity:
Jan. 10 - Issued 25,000 shares at P23 per share.
May. 16 - Issued 1,000 shares for legal services when the fair value
was P24 per
share.
Oct. 15 - Issued 5,000 shares for a piece of equipment when the fair
value was
P25 per share.
What amount should be reported as share premium? P104,000

Jan 10- Cash [25,000 x 23] 575,000

Ordinary Share Capital [25,000 x 20] 500,000
Share premium 75,000
May 16 Legal service expense [1,000 x 24] 24,000
Ordinary Share Capital [1,000 x 20] 20,000
Share premium 4,000
Oct. 15 Equipment[5,000 x 25] 125,000
Ordinary Share Capital [5,000 x 20] 100,000
Share premium 25,000
Summary:
Jan 10 [ 25,000 SHARES X 3] 75,000
May 16 [ 1,000 SHARES X4] 4,000
Oct 15 [ 5,000 SHARES X 5] 25,000
SHARE PREMIUM *104,000
MULTIPLE CHOICE FINALS A

BAM Company issued 100,000 ordinary shares when it began operations in

2018 and issued an additional 60,000 ordinary shares in 2019. Then also
issued 80,000 ordinary shares in exchange with 50,000 convertible
preference shares. In 2020, purchased 70,000 ordinary shares and held as
treasury. On December 31, 2020, how many ordinary shares were
outstanding? 170,000

*2018 100,000 ordinary shares

2019 60,000 ordinary shares
80,000 ordinary shares
240,000 SHARES
2020 {70,000} ordinary shares and held as treasury
170,000

ABC Corporation issued 20,000 ordinary shares,par value P 10 in exchange

for equipment. At the date of exchange, stocks are selling at P 15 and no
market value is known for the equipment. How much would be the value of
the equipment after the issuance of the 20,000 ordinary shares? P300,000

*EQUIPMENT {20,000 X P 15/SSHARE} 300,000

ORDINARY SHARE CAPITAL {20,000 X P 10PAR} 200,000
SHARE PREMIUM 100,000
Vision’ s shareholders’ equity accounts immediately before issuance of the
share split shares were as follows:

Share capital, par value P20; 100,000 P1,000,000

shares authorized; 50,000 shares issued

Share premium (P3 per share on issuance) 150,000

Retained earnings 1,450,000

On June 1, 2020, the shareholders of Vision’s Company approved a two-for-

one split of the entity’s share capital. What should be the effect of the share
split immediately after to retained earnings accounts? No effect

On October 12, 2020, Jay Corporation issued 20,000 shares of its P118
par value ordinaryshare capital in exchange for a piece of land to be
held for a future plant site. Blue Corporation’s ordinary share was listed
and traded at P125 per share on the same date. The land has fair value
of P2,480,000 value. How much was the value of the land recorded?

P2,480,000

Land 2,480,000
Ordinary Share Capital{ 20,000 X P118} 2,360,000
Share Premium 120,000

Wise Corporation. was authorized to issue 100,000 shares of P 10 no par

value preference shares and 100,000 shares P 10 par value ordinary shares.
A total of 50% ordinary shares were subscribed at P15 and full payment was
received. Fifty percent of preference shares were subscribed at
P20 and were paid in full. How much is the legal capital ?
P1,500,000
PREFERENCE SHARE
[100,000 X 50% =50,000 X 20 PER SHARE] 1,000,000

ORDINARY SHARES
[100,000 X 50% =50,000 X P10 PAR] 500,000
1,500,000
On July 15, 2019, James Company declared a 1 for 4 reverse share split,
when the market
value of share was P50. Prior to the split, Perry had 50,000 shares of P20
par value issued and outstanding. What is the par value of share after the
share split? P80
1 for 4 reverse share split
P20 par value X 4 = P80

A company issued 4000shares of P1 par value ordinary shares for P5,000.

The journal entry to record the transaction would include which of the
following?credit of P1,000 to share premium
Cash P5,000
Ordinary share Capital [4,000shares x P1] 4,000
Share premium-ordinary 1,000
On May 31, 2013, Star Company’s board of directors declared a 10% stock
dividend. The market price of Star’s 30,000 outstanding shares of P20 par
value was P50 per share on that date. The stock dividend was distributed on
July 31, 2013, when the stock’s market price was P80 per share.
What amount should Star credit to share premium for this stock dividend?
P90,000
Retained Earnings {10%x50/share x 30,000} 150,000
Stock dividends payable {10%x20par x 30,000} 60,000
share premium 90,000

On December 1, 2013, Gray Corporation received a donation of 2,000 shares

of its P50 par value ordinary share from a shareholder. On that date, the fair
value of the share was P350 per share. The share was originally issued for
P250 per share. By what amount would this donation cause total
shareholders’ equity to decrease? Zero
* They do not affect the corporation’s assets, liabilities and shareholders’ equity
Grace subscribed for 40,000 shares of P 20 par value .She paid 60% of the
subscription as her initial payment. She was not able to pay the balance and
her stocks were declared delinquent. Interest and other expenses for sale
totaled to P15,000. There are three bidders to pay the offered price who
for the following number of shares to be acquired.
Bidders Bid
Myla 14,000 shares
Bela 23,000 shares
Vina 18,500 shares
After the payment of the delinquent shares by the highest bidder, how
many shares would Grace received upon issuance of stock certificates?
26,000 shares

Highest Bidder: Myla 14,000 shares

40,000 subscribed shares - 14,000 shares [Myla]= 26,000 shares Myla

Joy subscribed for 40,000 shares of P 10 par value ordinary share for P12
per share. She paid 60% of the subscription as her initial payment. She was
not able to pay the balance and her stocks were declared delinquent. Interest
P10,000 and other expenses for sale totaled to P8,000. On the bidding day
nobody came to bid. How many ordinary shares would be received by Joy?

ZERO
If there is no bidder, the corporation may bid. Title to all the shares of
stocks shall be vested in the corporation as treasury shares.