Financial Accounting 2 Chapter 3 Solman

CHAPTER 3
SHAREHOLDERS EQUITY
PROBLEMS
3-1.
(Budomo Company)
Cash (20,000 x 300)
Ordinary share
6,000,000
6,000,000
Legal expense/Professional fees

Ordinary share (250 x 300)
Share premium - Ordinary
90,000
Land
Building
Ordinary share (12,500 x 300)
1,000,000
2,950,000
Cash (6,500 x 380)

2,470,000
Cash (10,000 x 200)

2,000,000
75,000
15,000
3,750,000
200,000
1,950,000
520,000
3-2.
a.
Share premium-Ordinary
Cash
b.
c.
d.
e.
Land (3,500 x 560)

Share premium Ordinary
Cash
Preference share
Ordinary share
Share premium Preference
MV: Pref 5,000 x 800=4M
Ord 100,000 x 120 = 12M
Allocation:
Pref: 18M x 4/16 = 4.5M
Ord: 18M x 12/16 = 13.5M
Subscription receivable
Cash
Subscribed ordinary share
Land
Cash
Donated capital
1,500,000
500,000
60,000
60,000
1,960,000
700,000
1,260,000
18,000,000
2,500,000
10,000,000
2,000,000
3,500,000
450,000
150,000
500,000
100,000
5,000,000
40,000
4,960,000
Chapter 3 Shareholders Equity
3-3.
(Blazing Red Corporation)

Correction to the problem: RE balance on December 31, 2012, instead
of 2010. Shareholders Equity
Contributed
capital
10% Preference share, cumulative and non-participating, P100 par
30,000 shares authorized; 12,000 shares issued and outstanding
Ordinary share, P10 par, 100,000 shares authorized, 30,000 shares
issued, 29,000 shares outstanding
Subscribed ordinary share, 4,500 shares
Subscription receivable Ordinary
Total contributed capital
Retained earnings
Appropriated for treasury share
P 15,000
Unappropriated
335,000
Treasury shares, 1,000 ordinary shares, at cost
Total shareholders equity
P1,200,000
300,000
45,000
(43,200)
275,000
77,000
P1,853,800
350,000
( 15,000)
P2,188,800
The total amount of P2,048,800 may also be obtained without necessarily

preparing the shareholders equity in good format (if not required) as
follows:
P
350,000
Issue of 30,000 ordinary shares

Issue of preference shares in exchange of
equipment
Subscriptions for 4,500 ordinary shares at 16
Subscriptions receivable (60%)
Purchase of 1,000 treasury shares at 15
Retained earnings
1,475,000
72,000
(43,200)
(15,000)
350,000
P
2,188,800
Total shareholders equity, December 31, 2012

3-4.
(Millennium Company)
(a)
(1)
Treasury share
Cash
(2)
(3)
(4)
(b)
140,000
140,000
Cash
Treasury share
Paid in capital from treasury chare
60,000
Cash
Paid in capital from treasury share
Retained earnings
Treasury share
65,000
4,000
1,000
Ordinary share
Share premium
Retained earnings
Treasury share
Total shareholders equity, December 31,
2011
(1) Purchase of treasury share (10,000 x
14)
10,000
3,000
1,000
56,000
4,000
70,000
14,000
P2,200,000
(140,000)
(2) Sale of treasury share (4,000 x 15)

(3) Sale of treasury share (5,000 x 13)
Net income for the year
60,000
65,000
280,000
26
Dividends declared
(200,000)
Total shareholders equity, December 31,
2012
P2,265,000
The total shareholders equity may also be obtained by determining the
balance of
the shareholders equity accounts, as follows:
Ordinary Share, P10 par (99,000 shares issued and outstanding) P
990,000
Share Premium
297,000
Retained Earnings
978,000
P2,265,00
Total shareholders equity
0
3-5.
(Consuelo Enterprises, Inc.)

Preference share (4,000 x
(a)
20)
Share premium Preference (4,000 x 1.60)
Retained earnings
Cash (4,000 x 22)
(b)
20)
Retained earnings
Cash (4,000 x 26)
(c)
20)
Cash (4,000 x 20.50)
PIC from retirement of preference
80,000
6,400
1,600
88,000
80,000
6,400
17,600
104,000
80,000
6,400
82,000
4,400
Average preference share premium per share

160,000 / 100,000 shares =
1.60
3-6.
(Concepcion Enterprises, Inc.)

(a)
Preference share (3,000 x 20)
Share premium Preference (3,000 x
1.60)
Retained earnings
(b)
3-7.

Share premium Preference (3,000 x
1.60)
Share premium Ordinary share
(Red Stone Company)

(a)
Retained Earnings ( 10,000 shares x P20)
Share Dividends Distributable
Share Premium
Share Dividends
Distributable
Ordinary Share
Capital
(b)
Retained Earnings (30,000 x 10)

60,000
4,800
25,200
90,000
60,000
4,800
45,000
19,800
200,000
100,000
100,000
100,000
100,000
300,000
300,000
Share Dividends
Distributable
Ordinary Share
Capital
300,000
300,000
27
(3)
3-8.
Memo: Effected a 2 for 1 stock split on 100,000 shares P100 par

previously issued and outstanding.
(Dark Red Company)

Capital structure:
Preference
20,000
P2,000,000
Number of shares outstanding

Total par value
(1)
Ordinary
250,000
P2,500,000
Preference share is non-cumulative and non-participating
2011
Current preference dividends (9% x 2,000,000 =
180,000; dividends declared were P150,000 only.
Dividend per share
Preference
2012
Current preference dividends (9% x 2,000,000)
Excess (240,000 180,000)
Dividend per share
Preference
P 180,000
2013
Current preference dividends (9% x 2,000,000)
Excess (540,000 180,000)
Dividend per share
Preference
P 180,000
(2)
P0
P 150,000
P7,50
P9.00
P9.00
P0
Ordinary
P60,000
P0.24
Ordinary
P360,000
P1.44
Preference share is cumulative and non-participating.
2011
Current on preference is P180,000
Arrears, end (P180,000 150,000 = 30,000)
Dividend per share
2012
Arrears, beginning
Current year
Total
Excess to ordinary = 240,000 210,000
Preferen
Ordinar
ce
y
P150,000
Preference
P 30,000
180,000
P210,000
2013
Current year
Excess to ordinary = 540,000 180,000
Dividend per share
P0
P0
P7.50
Ordinary
P210,000
P30,000
Dividend per share
(3)
Ordinary
P10.50
Preference
P180,000
P9.00
P0.12
Ordinary
P360,000
P1.44
Preference share is cumulative and fully participating
2011
Current dividends:
9% x 2,000,000 = P180,000
Arrears, end = 180,000 150,000 = 30,000
Dividend per share
Preference
Ordinary
P 150,000
P0
P 7.50
P0
28
3-9.
2012
Arrears, beginning
P30,000
Current on preference
180,000
To ordinary: initial limit 9% x P2,500,000
= P225,000, but remaining is only
Total dividends
Dividend per share
Preference
2013
Current dividends:
9% x 2,000,000
9% x 2,500,000
Excess: P135,000 x 2.0/4.5
135,000 x 2.5/4.5
Total
Dividend per share
Preference
Ordinary
P 210,000
P210,000
P10.50
P30,000
P30,000
P 0.12
Ordinary
P 180,000
P 225,000
60,000
P240,000
P12.00
75,000
P300,000
P1.20
Additional information: Preference has P100 par value per share.
Capital structure:
Number of shares outstanding
Total par value
(a) Preference is participating up to 14%.
2013
Current dividends:
9% x P2,000,000
9% x P2,500,000
Excess divided by total par
155,000/4,500,000 = 3.44%, which is
less than the limit of additional 5%;
therefore full excess is prorated.
P155,000 x 2M/4.5M
P155,000 x 2.5M/4.5M
Total
Dividend per share
(b) Preference is participating up to 12%.
2013
Current dividends:
9% x P2,000,000
9% x P2,500,000
Excess divided by total par
155,000/4,500,000 = 3.44%, which
exceeds the additional limit of 3%;
therefore, additional to preference is
limited to 3%; remainder goes to ordinary
3% x P2,000,000
P155,000 60,000
Total
Dividend per share
Preference
20,000
P2,000,000
Ordinary
250,000
P2,500,000
Preference
Ordinary
P180,000
P225,000
68,889
P248,889
P12.44
Preference
86,111
P311,111
P1.24
Ordinary
P180,000
P225,000
60,000
P240,000
P12.44
95,000
P320,000
P1.24
29
3-10. (Red Mama Company)

Retained Earnings
50% x 100,000 x 10 = 500,000
3-11
500,000
500,000

Ordinary Shares
Fractional Share Warrants
Outstanding
500,000
Fractional Share Warrants Outstanding

Ordinary Share
PIC from Unexercised Fractional Share
Warrants
100,000
(Red Ball Corporation)

October 31, 2012
Trading Securities
Unrealized Gain on Trading
Securities
10,000 shares x (15 14)
Retained Earnings
Property Dividends Payable
10,000 shares x 15
December 31, 2012
Trading Securities
Unrealized Gain on Trading
Securities
10,000 shares x (17 15)
Retained Earnings
February 28, 2013
Retained Earnings
Trading Securities
Gain on Disposal of Trading
Securities
400,000
100,000
80,000
20,000
10,000
10,000
150,000
150,000
20,000
20,000
20,000
20,000
30,000
30,000
200,000
170,000
30,000
3-12. (Red Chili Company)

10/1/12 Depreciation Expense
Accumulated Depreciation Equipment
450,000/10 x 9/12
33,750
33,750
Retained Earnings
Property Dividends
Payable
190,000
Assets Held for Distribution

Accumulated Depreciation Equipment
Property, Plant and
Equipment
180,000
270,000
190,000
450,000
Cost
P450,000
Acc. Deprn 450,000/10 x
6
270,000
Carrying value
P180,000
30
FV(because it is higher) P190,000

12/31/12 Impairment Loss
Assets Held for
Distribution
180,000 160,000 =
20,000
20,000
20,000
Property Dividends
Payable
30,000
Retained
Earnings
190,000 160,000 = 30,000 decrease
1/31/13
Retained Earnings
Property Dividends
Payable
175,000 160,000 = 15,000
increase

Assets Held for
Distribution
Gain on Disposal of
Assets
3-13. (Red Ribbon
Corporation)
Total SHE
12/31/11
Balances
2010
transactions:
a) 4,000 x 280
b) 8,000 x 75
c) 2:1 share split
d) 6,000 x 45
e) 4,000 x 46
f) 2,000 x 48
g) Profit
12/31/12
balances
*P
60
0,0
00
x
6,0
00/
16,
00
0=
22
5,0
00
(a)
(b)
Total
shareh
olders
equity
Numbe
r of
15,000
15,000
175,000
160,000
15,000
Preference
Shares
Issued
P16,500,000
30,000
(1,120,000)
(600,000)
(4,000)
Ordinary
Shares
Issued
270,000
96,000
2,000,000
26,000
Treasury Share
Shares
Cost
100,000
100,000
P7,146,000
30,000
200,000
8,000
8,000
(6,000)
4,000
(2,000)
P600,000
(225,000)*
12,000
P375,000
P17,146,000
26,000
(c)
prefere
nce
shares
issued
and
outstan
ding
Numbe
r of
ordinar
y
shares
issued
Numbe
r of
ordinar
y
shares
outsta
nding(
200,00
0
12,000)
Cost of
remaini
ng
treasur
y
shares
(d)
3-14.
(Red
Heart
Corporati
on)
0
6/
1
5/
1
1 Cash
200,000
188,000
375,000
6,000,000
Ordin
ary
share
Shar
e
prem
ium
Ordin
ary
0
9/
3
0/
1
1
R
e
t
ai
n
e
d
5,000,000
1,000,000
440,000
e
a
r
ni
n
g
s
(
8
0,
0
0
0
x
5
%
x
1
1
0
)
1
1/
1
0/
1
1
Share
divide
nds
distrib
utable
(4,000
x 100)
400,000
Shar
e
prem
ium
Ordin
ary
40,000
Share
dividen
ds
distribu
table
1
2/
3
1/ Income
1 summar
1 y
400,000
Ordin
ary
share
Retai
ned
earni
ngs
400,000
1,175,000
1,175,000
31
03/01/12
05/01/12
Treasury share (3,000 x 95)

Cash
Cash (1,500 x 120)
Treasury share (1,500 x 95)
PIC from treasury share
285,000
285,000
180,000
142,500
37,500
08/10/12
Issued
09/15/12
Cash (30,000 x 125)

3,750,000
Cash (80,000 x 125)

10,000,000
10/31/12
12/10/12
12/20/12
82,500 rights to shareholders

entitling holders to purchase 2
additional
shares for P125 per share.
Retained earnings
Dividends payable (192,500 x 5)
Share premium Ordinary (1,000 x
10)*
Paid in Capital from Treasury Shares
Treasury share
*Share premium per share
300,000/30,000 = 10
12/31/12
Income summary
Retained earnings
3,000,000
750,000
8,000,000
2,000,000
962,500
962,500
100,000
10,000
15,000
95,000
1,200,000
1,200,000
3-15. (Red Carpet Company)

(1)
Total lump sum price is P147,000 (1,500 x 98), allocated as follows:
Securities
Preference
Warrant
Entry
(b)
Market value
90
10
Allocation
147,000 x 90/100
147,000 x 10/100
Cash
Share warrants outstanding
Cash (600 x 40)
Share warrants outstanding
Ordinary
share
Allocated Price
132,300
14,700
147,000
45,000
87,300
14,700
24,000
11,760
6,000
29,760
32
3-16. (Red Hot Company)

(a)
Value of each option
Number of shares granted
Total value assigned to share
options
Required service period
Annual compensation expense
P8
x 30,000
P240,000
3years
P 80,000
(b)
1/1/12
12/31/12
12/31/13
12/31/14
12/31/15
Memo: Granted share options to

selected
senior employees for the purchase
of
30,000 ordinary shares at P50 per
share,
from January 1 to December 31, 2015.
Compensation Expense
Share Options
Outstanding
80,000
80,000
Share Options
Outstanding
80,000
Share Options
Outstanding
80,000
Share options outstanding

Cash (30,000 x 50)
Ordinary share (30,000 x
20)
80,000
80,000
240,000
1,500,000
600,000
1,140,000
3-17. (Fire Red Company)

Memo: granted 40,000 share options
certain officers for
01/02/12 to
the
purchase of the companys P100 par ordinary shares at P430
per share.
12/31/12
12/31/13
2014
12/31/14
Compensation expense
Share options
outstanding
(40,000 x 80) 4 years
800,000
Share options
outstanding
(40,000 x 80) 4 years
Memo: 8,000 share options were
cancelled.
800,000
800,000
440,000
Total accrued compensation
expense
(34,000 x 80) x 3/4
2,040,000
Less: previously accrued
1,600,000
440,000
Compensation expense-2008
800,000
440,000
12/31/15
(34,000 x 80) / 4
680,000
680,000
01/01/14 Cash (34,000 x 430)

14,620,000
Share options outstanding (34,000 x 80) 2,720,000
Ordinary shares (34,000 x
100)
3,400,000
13,940,000
33
3-18. (Red Fox

Corporation)
(a) Compensation Expense
200 10 15 = 175 employees x 100
2012
options=17,500
17,500
x
32 = 560,000; 560,000 x 1/3
2013
2014
(b)
01/01/12
12/31/12
12/31/13
12/31/14
2015
2016
186,667
20010125=173 employees x 100 options=17,300

17,300
x
32 x 2/3 = 369,067; 369,067 186,667
182,400
200-10-12-8=170 employees x 100 options=17,000

17,000
x
32 = 544,000; 544,000 369,067
174,933
Granted 100 share options to each of its 200 employees to buy

P100 par ordinary share at P220 per share. The options
are
exercisable starting January 1, 2011 provided that the
employees
are still in the service. Options expire on December 31, 2012.
186,667
182,400
174,933
Cash (140 x 100 x 220)

Share options outstanding (14,000 x
32)
Share Premium - Ordinary
Cash (10 x 100 x 220)
32)
32)
PIC from forfeited share options
186,667
182,400
174,933
3,080,000
448,000
2,800,000
728,000
220,000
32,000
200,000
52,000
64,000
64,000
3-19. (Cherry Red Company)

(a)
01/01/12 Memo: Granted 10,000 share options for the purchase of P100
par ordinary shares at P120 per share. The options vest once
the market price of ordinary shares reached P200, up to Dec.
31, 2014 Options expire at the end of 2015.
12/31/12 Compensation Expense
Share Options Outstanding
66,667
66,667
(10,000 x 20) / 3 years

(10,000 x 20) - 66,667
133,333
133,333
34
2014
Cash (10,000 x 120)

Ordinary Share Capital (10,000 x
100)
Share Premium-Ordinary
1,200,000
200,000
1,000,000
400,000
(b)
01/01/12
12/31/12
12/31/13
12/31/14
2015
(3)
Memo: Granted 10,000 share options for the purchase of P100

par
ordinary shares at P120 per share. The options vest once the
market
price of ordinary shares reached P200. Options expire at the
end of
2013.
(10,000 x 20) / 3 years
66,667
66,667
66,666
Cash (8,000 x 120)

Share Options Outstanding (80% x
200,000)
Ordinary Shares (8,000 x 100)
Share Premium-Ordinary
Share Options Outstanding (20% x
200,000)
PIC from Forfeited Share Options
66,667
66,667
66,666
960,000
160,000
800,000
320,000
40,000
40,000
If the stock price reached P200 by June 2015, the same entries will be
made for year 2012 through 2014, as given in (b) The recorded share
options, however, will be cancelled at the end of 2015, as the options
already expire.
12/31/15 Share Options Outstanding

PIC from Forfeited Share Options
200,000
200,000
3-20. (Red Day Company)

(a)
01/01/12 Granted 80 share options to each of 400 employees for the
purchase of P100 par ordinary shares at P140 per share.
Options shall vest in 2012 if earnings increase by 15% or at
the end of 2013 if average annual earnings for 2012 and
2013 increased by an average of 12%.
12/31/12
12/31/13
400 x 80 x 22 = 704,000
704,000/2 = 352,000
352,000
352,000
352,000
352,000
2014
Cash (32,000 x 140)
4,480,000
35

Ordinary Share (32,000 x 100)
Share Premium Ordinary
(2)
704,000
3,200
1,984
The full amount of P704,000 is recognized as

compensation expense since the options vest already
in 2012.
3-21. (Bloody Red Company)

01/01/12
Memo: Issued to its CEO share options for the purchase of ordinary
shares at a strike price of P50. The options are exercisable beginning
January 1, 2015 and expire on December 31, 2016. The number of
share options will be based on the level of sales for 2014.

15,000 sh x 30 x 1/3
150,000

150,000
15,000 sh x 30 x 2/3
Less: previously
accrued
18,000 sh x 30 x 3/3
Less: previously
accrued
150,000
150,000
300,000
150,000
150,000
240,000
240,000
540,000
300,000
240,000
3-22. (Striking Red

Corporation)
(a)
Share Appreciation Rights Payable
66,667
66,667
10,000 x (140 -120) x 1/3

133,333
133,333
10,000 x (150 - 120) x 2/3 = 200,000

200,000 66,667 = 133,333

10,000 x (165 - 120) = 450,000
450,000 200,000 = 250,000
250,000
250,000
(2) (1) Assuming that the rights were exercised on January 1, 2015, when
the market price is P165.
01/01/15 Share Appreciation Rights Payable
Cash
450,000
450,000
(2) (2) Assuming that the rights were exercised on December 31, 2015,
when the market price is P172.
36
12/31/15 Share Appreciation Rights Payable

Compensation Expense 10,000 (172
165)
Cash 10,000 x (172-120)
450,000
70,000
520,000
3-23. (Red Bull Corporation)

(a) Liability at December 31, 2012 = P89,333
December 31, 2013 = P208,000
December 31, 2014 = P394,000
12/31/12
12/31/13
10,000 x 26.80 x 1/3
89,333
118,667
89,333
118,667
10,000 x 31.20 x 2/3 = 208,000

208,000 89,333 = 118,667
12/31/14
186,000
186,000
10,000 x 39.40 = 394,000

394,000 208,000 = 194,000
2015

Cash 10,000 x (165-120)
394,000
56,000
3-24. (Ruby Red Company)

(1)
Fair value of the equity alternative
4,000 shares x 150
Fair value of debt component
3,600 shares x 158
Fair value of equity component 1/1/12
(b)
450,000
600,000
568,800
31,200
2012: 3,600 x 160=576,000; 576,000/3

31,200/3
Total compensation expense
192,000
10,400
202,400
2013: 3,600 x 165 x 2/3 = 396,000

396,000 192,000
31,200/3
204,000
10,400
214,400
2014: 3,600 x 168 = 604,800

604,800 396,000
31,200/3
208,800
10,400
219,200
2013: 2,700 x (172-168)
10,800
37
(2) Correction to the problem: One executive exercised his right to

receive the cash alternative on December 31, 2014, instead of
2012.
01/01/12
Granted each of the four executives the right to choose either

1,000 ordinary shares or to receive cash payment equal to 900
shares, conditional upon the completion of three years of
service.
12/31/12
Share Appreciation Rights
Payable
202,400
Payable
214,400
Payable
Share Options Outstanding x 31 ,
200
Cash
PIC from Unexercised Share
Options
31,200 / 4 = 7,800
604,800 / 4 =151,200
219,200
12/31/13
12/31/14
12/31/14
12/31/15
12/31/13
3-25
Payable
900 x 3 x (172 168)
Ordinary Share (3,000 x 100)
Share Premium Ordinary
31,200 x
(Red Santa Company)

RE, January 1, 2012
2012 Transactions
(1) 200,000 x 70%
(2) Dividends
On preference: 200,000 x P100 x 8%
On ordinary: 300,000 x P5
(3) 10,000 (150 130)
(4) Release of appropriation
(5) 45,000/300,000 = 15% bonus issue
45,000 x P150
(6) Appropriation for bond redemption
10,400
192,000
10,400
204,000
10,400
208,800
7,800
151,200
151,200
7,800
10,800
10,800
23,400
464,400
300,000
187,800
Appropriated
P 4,000,000
Unappropriate
d
P9,000,000
(140,000)
(4,000,000)
(1,600,000)
(1,500,000)
(200,000)
4,000,000
2,000,000
(6,750,000)
(2,000,000)
(7) Profit for the year

Balance, December 31, 2012
Total retained earnings, (P2,000,000
unavailable
for dividends)
P2,000,000
3,000,000
P3,810,000
P5,810,000
38
3-26. (Red Hat Company)

Retained earnings balance as of December 31,
2012
3,900,000 600,000 240,000
Total shareholders equity as of December 31,
2012
6,000,000 + 8,000,000 + 3,060,000
P 3,060,000
P17,060,000
(a)
Preference
Ordinary
Par value of preference share
P6,000,000
Dividends in arrears (6,000,000 x 9% x 3 yrs.)
1,620,000
Excess to ordinary (17,060,000 7,620,000)
P9,440,000
Total equity
P7,620,000 P9,440,000
Divide by the number of shares outstanding
60,000
800,000
Book value per share
P 127
P 11.80
(b)
Liquidation value (60,000 shares x P105)
Dividends in arrears (P6,000,000 x 9% x 3
yrs.)
Excess to ordinary (17,060,000 7,920,000)
Total equity
Divide by the number of shares outstanding
Book value per share
3-27. (Red, Inc.)
Retained Earnings
Inventory
Preference
P6,300,000
Ordinary
1,620,000
P9,140,000
P7,920,000 P9,140,000
60,000
800,000
P132
P11.425
300,000
300,000
Land
Buildings
Machinery and Equipment
Accum. Depreciation Buildings
Accum. Depreciation Machinery &
Equipment
Revaluation Surplus
1,500,000
1,875,000
350,000
Revaluation Surplus
Retained Earnings
2,300,000
3-28. (Skinny Red Company)

(a) Retained Earnings
Accumulated Depreciation
Current Assets
Building
875,000
150,000
3,700,000
2,300,000
400,000
75,000
100,000
375,000
Ordinary Share
Ordinary Share
Share Premium
6,000,000
Share Premium
Retained Earnings
1,400,000
4,000,000
2,000,000
1,400,000
39
Skinny Red Company

Statement of Financial Position
Current Assets
Land
Building
Accumulated Depreciation
Total
P 400,000
1,500,000
4,625,000
( 925,000)
P5,600,000
Liabilities
Ordinary Share
Share Premium
P1,000,000
4,000,000
600,000
Total
P5,600,000
3-29. Same as 3-27.
MULTIPLE CHOICE QUESTIONS

Theory
MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
MC11
C
D
B
B
B
C
C
C
A
C
C
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20
MC21
MC22
A
C
C
A
D
B
D
C
D
C
C
Problems
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
MC38
MC39
MC40
MC41
C
B
D
D
B
A
A
C
B
A
B
C
B
B
D
C
B
D
D
MC42
MC43
B
A
MC44
MC45
A
A
230,000 + 525,000 + 5,000 = 760,000

480,000 x 110/120 = 440,000; 440,000-400,000 = 40,000
(60,000 x 2) (5,000 x 2) = 110,000
125,000 x 3 = 375,000
375,000 [(12,000 x 3) + 5,000] = 334,000
20,000 x 9 = 180,000; 180,000/2 = 90,000 x 1/2 = 45,000
600,000 x 5 = 3,000,000
1,000,000 + (10,000 x 20) (2,000 x 20) = 1,160,000
7,000,000 + (35,000 x 70) = 9,450,000
2,000 x 8 = 16,000
70 (70/2) = 35
(5,000 x 80) (5,000 x 40) = 200,000
600 x 10 x 60% = 3,600; 6,000 3600 = 2,400
Interest expense for 2009 = 100,000 x 10% x 9/12 = 7,500
2,120,000 (2,000 bonds x 1,040) = 40,000
945,000/ 70 = 13,500; 13,500/90,000 = 15%
80,000 + (2,000,000 x 8%) = 240,000; 300,000 240,000 = 60,000
(3,000,000 x 5% x 2 years) 100,000 = 200,000 arrears, end
(110,000 + 10,000) x 2 = 220,000 issued; 220,000 (4,000 x 2) =
212,000
24,000+48,000=72,000; 108,000-72,000-24,000 = 12,000
72,000 + (12,000 x 4/6) = 80,000; 24,000 + (12,000 x 2/6) =28,000
80,000/4,000 = 20; 28,000/20,000 = 1.40
8,000,000 (10,000 x 70) 1,200,000 = 6,100,000
(15 x 2)/5 = 6.00
40
MC46
MC47
MC48
MC49
MC50
MC51
C
A
D
C
MC52
MC53
MC54
MC55
MC56
MC57
B
B
D
B
B
B
MC58
MC59
MC60
25,000 x 40 = 1,000,000; 10% x 2,500,000 = 150,000

1,000,000 + 250,000 = 1,250,000
(40,000x 105) (600 x 110) + (400 x 95) + 830,000 200,000 =
4,802,000
5,520,000 25,000 170,000 + 40,000 + 900,000 = 6,265,000
(2,000 x 85) (800 x 42.50) = 136,000
[3,000 x (50-20)] / 3 years = 30,000
4,500,000 x 95% = 4,275,000; 4,275,000/3 = 1,425,000
4,500,000 x 94% x 2/3 = 2,820,000; 2,820,000
1,425,000=1,395,000
(4 x 200=120,000x3) x
(90% x 7 x 200 x 300) 120,000 = 258,000
360,000 70,000 = 290,000; 290,000/5,000 = 58
3,150,000/ 50,000 = 63
3,150,000 (5,000 x 120) = 2,550,000; 2,550,000/50,000 = 51
RE = 1,000,000; cumulative dividends in arrears = 5,000,000 x 8% x
3
years = 1,200,000, but dividends are limited to the extent of RE
balance of
P1,000,000; Thus, equity of ordinary share is 13,500,000 5,000,000
1,000,000 = 7,500,000; 7,500,000/ 750,000 shares = P10

13,500,000 (50,000 x 106) 1,000,000 = 7,200,000 ;
7,200,000/750,000
shares = 9.60
(200,000 x 2) + (200,000 x 5) 950,000 = 450,000
41

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CHAPTER 3

Legal expense/Professional fees

Cash (6,500 x 380)

Cash (10,000 x 200)

Land (3,500 x 560)

Chapter 3 Shareholders Equity

(Blazing Red Corporation)

The total amount of P2,048,800 may also be obtained without necessarily

Issue of 30,000 ordinary shares

Total shareholders equity, December 31, 2012

(2) Sale of treasury share (4,000 x 15)

Chapter 3 Shareholders Equity

(Consuelo Enterprises, Inc.)

Average preference share premium per share

(Concepcion Enterprises, Inc.)

Preference share (3,000 x 20)

(Red Stone Company)

Retained Earnings (30,000 x 10)

Chapter 3 Shareholders Equity

Memo: Effected a 2 for 1 stock split on 100,000 shares P100 par

(Dark Red Company)

Number of shares outstanding

Preference share is non-cumulative and non-participating

Preference share is cumulative and non-participating.

Dividend per share

Preference share is cumulative and fully participating

Chapter 3 Shareholders Equity

Additional information: Preference has P100 par value per share.

Chapter 3 Shareholders Equity

3-10. (Red Mama Company)

Share Dividends Distributable

Fractional Share Warrants Outstanding

(Red Ball Corporation)

3-12. (Red Chili Company)

Assets Held for Distribution

Chapter 3 Shareholders Equity

FV(because it is higher) P190,000

Property Dividends Payable

Chapter 3 Shareholders Equity

Treasury share (3,000 x 95)

Cash (30,000 x 125)

Cash (80,000 x 125)

82,500 rights to shareholders

3-15. (Red Carpet Company)

Chapter 3 Shareholders Equity

3-16. (Red Hot Company)

Memo: Granted share options to

Share options outstanding

3-17. (Fire Red Company)

01/01/14 Cash (34,000 x 430)

Chapter 3 Shareholders Equity

3-18. (Red Fox

20010125=173 employees x 100 options=17,300

200-10-12-8=170 employees x 100 options=17,000

Granted 100 share options to each of its 200 employees to buy

Cash (140 x 100 x 220)

3-19. (Cherry Red Company)

(10,000 x 20) / 3 years