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  • Issuance of Par Value Share

    Încărcat de

    judesamai
    72 vizualizări12 pagini
    XYZ corporation was organized on January 19,2011 and is auhorized to issue 300,000 shares of P10 par value ordinary shares. Subsequently,75,000 shares were sold. If a share capital is issued in exchange for non-cash assets or property,the asset received : at it's fair value (direct measurement) at the fair value of the share capital issued (indirect measurement)

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    XYZ corporation was organized on January 19,2011 and is auhorized to issue 300,000 shares of P10 par value ordinary shares. Subsequently,75,000 shares were sold. If a share capital is issued in exchange for non-cash assets or property,the asset received : at it's fair value (direct measurement) at the fair value of the share capital issued (indirect measurement)

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPTX, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    72 vizualizări12 pagini

    Issuance of Par Value Share

    Încărcat de

    judesamai
    XYZ corporation was organized on January 19,2011 and is auhorized to issue 300,000 shares of P10 par value ordinary shares. Subsequently,75,000 shares were sold. If a share capital is issued in exchange for non-cash assets or property,the asset received : at it's fair value (direct measurement) at the fair value of the share capital issued (indirect measurement)

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca PPTX, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 12

    Issuance of Par Value Share

    MEMORANDUM ENTRY METHOD AND JOURNAL ENTRY METHOD

    Issuance for cash


    A share capital may be sold for cash :

    1)Equal to its par value 2)Above of the par value 3)Below of the par value

    Illustrative Problem A
    The XYZ Corporation was organized on

    January 19,2011 and is auhorized to issue 300,000 shares of P10 par value ordinary shares. Subsequently,75,000 shares were sold.

    Case 1:The issuance price is P10 (at par)

    Memorandum Entry method Cash 750,000

    Case 1:The issuance price is P10 (at par)

    Cash

    Journal Entry Method


    750,000

    Ordinary share capital 750,000 75,000 share X P10=P750,000

    Unissued Ordinary share capital 750,000

    75,000 share X P10=P750,000

    IF CASH IS EQUAL TO ITS PAR VALUE,CASH IS DEBITED AND SHARE CAPITAL OR UNISSUED SHARE CAPITAL IS CREDITED

    Memorandum Entry method


    CASE 2 :The Issuance price is P15

    Journal Entry Method


    CASE 2 :The Issuance price is P15

    (Above Par) Cash 1,125,000 Ordinary share capital 750,000 Ordinary share Premium 375,000 75,000 Share X P15=1,125,000 75,000 Share X P10= 750,000 75,000 share X P5=375,000

    (Above Par) Cash

    1,125,000

    Unissued Ordinary share capital 750,000 Ordinary share Premium 375,000

    75,000 Share X P15=1,125,000 75,000 Share X P10= 750,000 75,000 share X P5=375,000

    Memorandum Entry method


    Case 3 : The issuance price is P7

    Journal Entry Method

    (Below Par)
    Cash 525,000 Discount on ordinary share capital 225,000 Ordinary share Capital 750,000 75,000 share X P7=525,000 75,000 share X P10=750,000 75,000 share X P2=225,000

    Case 3 : The issuance price is P7 (Below Par) Cash 525,000


    Discount on ordinary share capital 225,000 Unissued Ordinary share Capital 750,000

    75,000 share X P7=525,000 75,000 share X P10=750,000 75,000 share X P2=225,000

    Issuance in exchange for non-cash assets or property


    When a share capital is issued in exchange for non-

    cash assets,the asset received : At its fair value ( direct measurement) At the fair value of the share capital issued (indirect measurement)

    Illustrative problem B
    The ABC Corporation issued 20,000 shares of Its

    P10 par ordinary share capital in exchange in land. The entries to record the issuance of the share capital under the memorandum entry method

    Memorandum entry

    Case 1 :The land has a

    Case 2 : The land known

    fair value of P250,000 250,000

    Land

    market value.The fair value of ordinary share capital on the date of exchange is P15. Land 300,000
    Ordinary share capital 200,000 Ordinary Share Premium 100,000 20,000 shares X P15=P300,000 20,000 shares X P10=P200,000 20,000 shares X P5=P100,000

    Ordinary share capital 200,000 Ordinary Share Premium 50,000


    20,000 share X P10= P200,000 P250,000-P200,000=P50,000

    Issuance in exchange for services rendered


    When a share capital is issued in exchange for

    services rendered : At its fair value ( direct measurement) At the fair value of the share capital issued (indirect measurement)

    Illustrative problem c
    The XYZ Corporation issued 2,000 shares of P10 par

    ordinary share capital in payment for the services of the lawyer rendered during incorporation.

    ENTRIES
    Case 1: The services of the
    Case 2 : There is known fair

    lawyer is valued at P50,000


    Pre-operating expenses 50,000

    market value for the services of the lawyer. The fair market value of the ordinary share capital issued is P15 per share.
    Pre-operating expenses ordinary share capital ordinary share premium 2,000 shares X P15 = P30,000 2,000 shares X P10= P20,000 2,000 shares X P5= P10,000 50,000 20,000 10,000

    ordinary share capital 20,000 ordinary share premium 30,000 2,000 shares X P10 = P20,000 P50,000-P20,000= P30,000

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