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Acctg 162 – Material 019 (SHE)

1. The cost of a noncash asset acquired in exchange for ordinary shares should be either the fair value of the
consideration given up, or the fair value of the consideration received, whichever is more clearly
2. The par value of ordinary shares must always be equal to its fair value on the date the shares are issued.
3. Organization costs are capitalized by debiting an intangible asset entitled Organization Costs.
4. When ordinary shares are issued for services or non-cash assets, cost should be either the fair value of the
consideration given up or the consideration received, whichever is more clearly evident.
5. The cash proceeds from issuing par value shares may be equal to or greater than, but not less than par
6. When no-par ordinary shares that have a stated value are issued, the stated value is credited to Share
7. When no-par value shares do not have a stated value, the entire proceeds from the issuance of the shares
becomes legal capital.
8. The acquisition of treasury shares by a corporation increases total assets and total equity.
9. Treasury shares purchased for P25 per share that are reissued at P20 per share, result in a Loss on Sale of
Treasury Shares being recognized on the income statement.
10. Under the cost method, Treasury Shares is debited at the price paid to reacquire the shares, and the same
amount is credited to Treasury Shares when the shares are sold.
11. The number of ordinary shares outstanding can never be greater than the number of shares issued.
12. When treasury shares are purchased, the cost is debited to Share Capital - Ordinary.
13. A 3-for-1 ordinary share split will increase total equity but reduce the par or stated value per share.
14. Dillon Corporation splits its ordinary shares 2 for 1, when the market value is P30 per share. Prior to the split,
Dillon had 50,000 ordinary shares with a P10 par value issued and outstanding. After the split, the par value
of the shares remains the same.
15. The share capital category on the statement of financial position includes both preference and ordinary

16. Dailey Company is a publicly held corporation whose P1 par value ordinary shares are actively traded at P22
per share. The company issued 3,000 shares to acquire land recently advertised at P82,000. Record the
17. Simon Company issued 3,000 ordinary shares with a P5 par value in payment of its attorney's bill of P60,000.
The bill was for services performed in helping the company incorporate. Simon should record this transaction
by debiting
18. Kerwin Packaging Corporation began business in 2016 by issuing 60,000 ordinary shares with a P5 par for
P8 per share and 15,000 preference shares of 6%, P10 par at par. At year end, the common share had a
market value of P10. On its December 31, 2017, statement of financial position, Kerwin Packaging would
report shareholders’ equity at
19. Andrews, Inc. paid P60,000 to buy back 12,000 shares of its P1 par value ordinary shares. These shares
were sold later at a selling price of P7 per share. The entry to record the sale
20. King George Company was authorized to issue 100,000 ordinary shares. The company issued 54,000 shares
and later purchased 10,000 treasury shares. The number of outstanding ordinary shares is:
21. Elton Manufacturing Corporation purchased 8,000 shares of its own previously issued P10 par ordinary
shares for P230,000. As a result of this event, Elton’s total equity is
22. On December 31, 2015, the stockholders' equity section of ABC Co. was as follows:
Ordinary stock, par value P10; authorized, 60,000 shares; issued and outstanding, 18,000 shares
Share premium 232,000
Retained earnings 192,000
On March 31, 2016, ABC declared a 10 percent stock dividend, and accordingly 1,800 additional shares
were issued, when the fair market value of the stock was P16 per share. For the three months ended March
31, 2016, ABC sustained a net loss of P64,000. The balance of ABC's Retained Earnings as of March 31,
2016, should be
23. Kendrick Corporation was organized on January 2, 2017. During 2017, Kendrick issued 20,000 shares at
P32 per share, purchased 4,000 treasury shares at P26 per share, and had net income of P500,000. What
is the total amount of equity at December 31, 2017?
24. ABC Corporation was organized on January 1, 2014, at which date it issued 100,000 shares of P10 par
ordinary stock at P15 per share. During the period January 1, 2014, through December 31, 2016, ABC
reported net income of P450,000 and paid cash dividends of P230,000. On January 10, 2016, ABC
purchased 6,000 shares of its ordinary stock at P12 per share. On December 31, 2016, ABC sold 4,000
treasury shares at P8 per share. ABC uses the cost method of accounting for treasury shares. What is ABC's
total stockholders' equity on December 31, 2016?
25. Oxford Inc. was authorized to issue 200,000 P10 par value ordinary shares. As of December 31, 2017, the
company had issued 88,000 shares at an average price of P22 per share. During 2017, the company felt
that the shares were undervalued so it purchased 20,000 treasury shares at P18 per share. When the share
price rebounded later in the year, the company sold 8,000 of the treasury for P25. Retained earnings was
P829,000 at December 31, 2017. The balance in Treasury Shares at December 31, 2017 is
26. Oxford Inc. was authorized to issue 200,000 P10 par value ordinary shares. As of December 31, 2017, the
company had issued 88,000 shares at an average price of P22 per share. During 2017, the company felt
that the shares were undervalued so it purchased 20,000 treasury shares at P18 per share. When the share
price rebounded later in the year, the company sold 8,000 of the treasury shares for P25. Retained earnings
was P3,316,000 at December 31, 2017. The amount of Share Premium reported on the December 31, 2017
statement of financial position is
27. Irwin, Inc. had 200,000 ordinary shares outstanding before a share split occurred, and 600,000 shares
outstanding after the share split. The share split was
28. The entity issued 10,000 callable preference shares with par value of P100 at P120 per share. Subsequently,
the preference shares are called in at P150 per share. Prepare the journal entry to call

(FOR THE NEXT 2 ITEMS: ) An entity issued 10,000 preference shares at the par value of P100 per share. The
preference shares have a mandatory redemption by the issuer feature for P1,200,000. The issuance was
recorded correctly.
29. The current year’s dividend of P100,000 paid to the redeemable preference shares shall be recorded as
30. If the preference shares are redeemed by the issuer for P1,200,000, the journal entry shall be

31. The following information are available: Preference share capital 10,000, P100 par – 1M; Ordinary share
capital, 200,000 authorized, 100,000 issued, P30,par; Share premium – PS 200,000; Share premium – OS,
1,000,000; Retained earnings, 2M. If the preference share is converted into ordinary share in the ratio of 1
preference share for 5 ordinary share, the entry would be

32. During the current year, an entity issued 20,000 preference shares of P100 par value for P3,250,000 with
20,000 warrants to acquire 10,000, P50 par value ordinary shares at P60 per share. On the date of the
issuance the market values are 120 for preference and 10 for warrant. If subsequently, 75% of the warrants
were exercised, prepare the journal entry.
PRACTICE JOURNAL ENTRY: ABC was organized on January 1. 2017 with 100,000 authorized shares of
P100 par value. Under memorandum entry, record the following transactions. On January 1, ABC sold 30,000
shares at P150 per share. On February 14, ABC issued 2000 shares for legal services with a fair value of
P300,000. The shares on this date are quoted at P160 per share. On March 27, ABC purchased 5000 treasury
shares at a cost of P12 per share. On October 31, ABC issued P4,000,000 convertible bonds at 110. The bonds
are quoted at 97 without conversion feature. On November 5, ABC declared a 2-for-1 share split when the market
value of the share was P160. On December 25, ABC sold 10,000 shares at P75 per share.


ABC Corporation began operation on January 1, 2015. The company was authorized to issue 60,000 share of
P10 par value ordinary stock and 120,000 shares of 10% P100 par value convertible preference stock. In
connection with your examination of the company’s financial statements, your noted the following transactions
involving stockholders’ equity during 2015:
Jan. 1 Issued 1,500 shares of ordinary stock to the corporation promoters in exchange for property
valued at P510, 000 and services valued at P210,00. The property costs P270,00 3 years ago
and was carried on the promoters’ books at P150,000.
Jan. 31 Issued 30,000 shares of convertible preference stock at P150 per share. Each share can be
converted to five shares of ordinary stock. The corporation paid P225,000 to an agent for selling
the shares.
Feb. 15 Sold 9,000 shares of ordinary stock at P390 per share. The corporation paid issue costs of
May 30 Received subscriptions for 12,000 shares of ordinary stock at P450 per share.
Aug. 30 Issued 2,100 share of ordinary stock and 4,200 shares of preference stock in exchange for a
building with a fair market value of P1,530,000. The building was originally purchased for
P1,140,000 by the investors and has a book value of P660,000. In addition, 1,800 shares of
ordinary stock were sold for
P720,000 cash.
Nov. 15 Payments in full for half of the subscriptions and partial payments for the rest of the subscriptions
were received. Total cash received was P4,200,000. Shares of stock were issued for the fully paid
Dec. 1 Declared a cash dividend of P10 per share on preference stock, payable on December 31 to
stockholders of record on December 15, and 20 per share cash dividend on ordinary stock,
payable on January 15, 2016 to stockholders of record on December 15.
Dec. 31 Paid the preference stock dividend.
Net income for the first year of operation was P1,800,000.

Based on the above, determine the following as of December 31, 2015:

1. Ordinary stock
2. Share premium of preference stock
3. Share premium of ordinary stock
4. Retained earnings
5. Total stockholders’ equity


You were able to obtain the following information pertaining to the corporation’s equity accounts. ABC
Corporation has 32,000 shares of P2 par value common stock authorized. Only 75% of these shares have been
issued, and of the shares issued, only 22,000 are outstanding. On December 31, 2015, the stockholders’ equity
section revealed that the balance in Paid-In Capital in Excess of Par Value – Common was P832,000, and the
Retained Earnings balance was P220,000. The Treasury stock was purchased at an average price of P37.50
per share.

During 2016, ABC had the following transactions:

Jan. 15 ABC issued at P55 per share, 1,600 shares of P50 par 5% cumulative preferred stock; 4,000
shares are authorized.
Feb. 01 ABC sold 3,000 shares of newly issued P2 par value common stock at P42 per share.
Mar. 15 ABC declared a cash dividend on common stock of P0.15 per share, payable on April 30 to
all stockholders of record on April 1
Apr. 15 ABC reacquired 400 shares of its common stock for P43 per share.
Employees exercised 2,000 stock options granted in 2010. When the options were granted, each
option entitled the employees to purchase 1 share of common stock for P50 per share. The share
price on the date of grant was also P50 per share. ABC issued new shares to the employees.
May 01 ABC declared a 10% stock dividend to be distributed on June 1 to stockholders of record on May
7. The market price of the common stock was P50 per share on May 1.
31 ABC sold 300 treasury shares reacquired on April 15 and an additional 400 shares costing
P15,000 that had been on hand since the beginning of the year. The selling price was P57 per
Sept.15 The semi-annual cash dividend on common stock was declared, amounting to P0.15 per share.
ABC also declared the yearly dividend on preferred stock. Both are payable on October 15 to
stockholders of record on October 1.
Net income for 2016 was P100,000. Determine the balances of the following as of December 31, 2016:
1. Preferred stock
2. Common stock
3. Additional paid in capital
4. Treasury stock
5. Total retained earnings