Chapter 9 2019 Edition

CHAPTER 9
Operations, Dividends, Book Value and Earnings per Share
EXERCISES
E 9-1
Contributed Capital:
10% Preference Share Capital, P100 par, cumulative, 10,000 shares
authorized, 4,000 shares issued and outstanding
P 400,000
Ordinary Share Capital, P20 par, 100,000 shares authorized,
50,000 shares issued and outstanding
1,000,000
Ordinary Share Capital Subscribed – 10,000 shares
200,000
Preference Share Premium
150,000
Ordinary Share Premium
200,000
Total Contributed Capital
P1,950,000
Retained Earnings
250,000
Total Shareholders’ Equity
P2,200,000
E 9-2
10% Preference Share Capital, P40 par, 40,000 shares authorized,
P800,000
Preference Share Capital Subscribed P40,000
Less PSC Subscription Receivable 14,000
26,000
Ordinary Share Capital, P10 stated value, 500,000 shares authorized,
2,000,000
Paid-in Capital in Excess of Par – Preference Shares
120,000
Paid-in Capital in Excess of Stated Value – Ordinary Shares
100,000
P3,046,000
Retained Earnings
400,000
P3,446,000
E 9-3
Mar. 1 Retained Earnings
400,000
Dividends Payable
400,000
40,000 sh x P10 = P400,000
Apr. 15 Dividends Payable

400,000
Cash
400,000
Sept. 1 Retained Earnings
800,000
Dividends Payable
800,000
40,000 sh x P20
30 Dividends Payable
800,000
Cash
800,000
E 9-4
Apr. 1 Retained Earnings
200,000
APC – Chapter 9 (2019 edition) page 2
Dividends Payable 200,000

100,000 sh x P2
May 2 Dividends Payable 200,000

Cash 200,000
June 1 Retained Earnings 600,000

Stock Dividends Distributable 500,000
PIC from Stock Dividends 100,000
100,000 sh x 10% x P60
July 15 Stock Dividends Distributable 500,000

Ordinary Share Capital 500,000
E 9-5
1. Retained Earnings 1,875,000
PIC from Stock Dividends 1,125,000
500,000 sh x 15% x P25 = P1,875,000
500,000 sh x 15% x P10 = P 750,000

2. Retained Earnings 2,500,000

Stock Dividends Distributable 2,500,000
500,000 sh x 50% x P10 = P2,500,000
Stock Dividends Distributable 2,500,000

Ordinary Share Capital 2,500,000
E 9-6
Mar. 15 Retained Earnings 10,000
Dividends Payable
10,000
2,000 sh x P5 = P10,000
Apr. 15 Dividends Payable 10,000

Cash
10,000
July 15 Retained Earnings 40,000

Property Dividends Payable
40,000
2,000 sh x P20
Property Dividends Payable 40,000

Investment in Pentagon Corp. Stocks
40,000
Oct. 15 Retained Earnings 15,000

Stock Dividends Distributable
15,000
APC – Chapter 9 (2019 edition)
page 3
2,000 sh x 30% x P25
Dec. 1 Stock Dividends Distributable

15,000
Ordinary Share Capital
15,000
E 9-7
Annual PSC dividend requirement – 100,000 sh x P100 x 12% = P1,200,000
1.
2012 2013
2014
Preference P1,200,000 P1,200,000
P1,200,000
Ordinary 1,300,000 2,300,000
5,300,000
Total P2,500,000 P3,500,000
P6,500,000
Dividends per share:
Preference P12.00 P12.00
P12.00
Ordinary P 2.60 P 4.60
P10.60
2.
Preference Ordinary
Total
2012
Dividends in arrears – 2 yrs. P2,400,000
P2,400,000
Current dividends 100,000 P
----------- 100,000
Total P2,500,000 P
----------- P2,500,000
Dividends per share P25.00 P –0--

2013
Dividends in arrears P1,100,000
P1,100,000
Current dividends 1,200,000
1,200,000
Balance – Ordinary P1,200,000
1,200,000
Total P2,300,000 P1,200,000
P3,500,000
Dividends per share P23.00 P 2.40

2014
Current dividends P1,200,000
P1,200,000
Balance – Ordinary P5,300,000
5,300,000
Total P1,200,000 P5,300,000
P6,500,000
Dividends per share P12.00 P 10.60
3.
Preference Ordinary
Total
2012
Regular dividends P1,200,000 P600,000
P1,800,000
Balance –P700,000
Preference – 10/15 466,667
466,667
Ordinary – 5/15 233,333
233,333
Total P1,666,667 P833,333
P2,500,000
Dividends per share P16.67 P1.67

2013
Regular dividends P1,200,000 P 600,000 P1,800,000
Balance –P1,700,000
Preference – 10/15 1,133,333 1,133,333
Ordinary – 5/15 566,667 566,667
Total P2,333,333 P1,166,667 P3,500,000

2014
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

4.
Preference Ordinary Total
2012
Dividends in arrears – 2 yrs. P2,400,000 P2,400,000
Current dividends 100,000 P ----------- 100,000
Total P2,500,000 P ----------- P2,500,000
Dividends per share P25.00 P –0--

2013
Dividends in arrears P1,100,000 P1,100,000
Regular dividends 1,200,000 P 600,000 1,800,000
Balance – P600,000
Preference – 10/15 400,000 400,000
Ordinary – 5/15 200,000 200,000
Total P2,700,000 P 800,000 P3,500,000

2014
Balance – P4,700,000
Preference – 10/15 3,133,333 3,133,333
Ordinary – 5/15 1,566,667 1,566,667
Total P4,333,333 P2,166,667 P6,500,000

5.
Preference Ordinary Total
2012
Regular dividends P1,200,000 P600,000 P1,800,000
page 5
Balance –P700,000
Preference – 10/15 466,667
466,667
Ordinary – 5/15 233,333
233,333
Total P1,666,667 P833,333
P2,500,000

2013
Regular dividends P1,200,000 P 600,000
P1,800,000
Preference 800,000
800,000
Ordinary 900,000
900,000
Total P2,000,000
P1,500,000 P3,500,000
2014
Regular dividends P1,200,000 P 600,000
P1,800,000
Preference 800,000
800,000
Ordinary
3,900,000 3,900,000
Total P2,000,000
P4,500,000 P6,500,000
E 9-8
1. Total Shareholder’s Equity
P5,000,000
Total Outstanding Ordinary Share Capital 200,000
Book value per share 25
2. Total Shareholders’ Equity

P5,000,000
Equity identified with preference shares (10,000 sh x P120)
1,200,000
Equity identified with ordinary shares
P1,300,000
Book value per share:

Preference 120
Ordinary 38
E 9-9
a. P10,000/60,000 = P.17
b. P70,000/60,000 = P1.17
c. P90,000/60,000 = P1.50
d. P150,000/60,000 = P2.50
e. P180,000/60,000 = P3.00
page 6
E 9-10
Profit P750,000
Less earnings identified with preference share capital 200,000
(20,000 sh x P100 x 10%)
Earnings identified with ordinary shares P550,000
Earnings per share P250,000/300,000 = P1.83
PROBLEMS
P 9-1
1.
2014
Jan. 2 Cash 3,125,000
2,500,000
625,000
125,000 sh x P25
Mar. 2 Cash (62,500 sh x P30) 1,875,000

1,250,000
625,000
Mar. 31 Land 300,000

Building 500,500
500,000
300,500
Dec. 31 Income Summary 750,000

Retained Earnings
750,000
31 Retained Earnings 531,250

Dividends Payable
531,250
125,000 + 62,500 + 25,000 = 212,500 sh x P2.50
2015
Jan. 31 Dividends Payable 531,250
Cash
531,250
Feb. 14 OSC Subscription Receivable (50,000 x P50) 2,500,000

OSC Subscribed
1,000,000
1,500,000
14 Cash 1,000,000
OSC Subscription Receivable
1,000,000
P2,500,000 x 40%
page 7
Mar. 15 Cash
1,500,000
OSC Subscription Receivable
1,500,000
P2,500,000 x 60%
15 OSC Subscribed
1,000,000
1,000,000
Dec. 31 Income Summary

2,000,000
Retained Earnings
2,000,000
31 Retained Earnings
525,000
Dividends Payable
525,000
212,500 + 50,000 = 262,500 x P2
31 Retained Earnings
656,250
Stock Dividends Distributable
525,000
PIC from Stock Dividend
131,250
656,250 x 10% x P25 = 656,250
2. Shareholder’s Equity- December 31, 2014

Ordinary share Capital, P20 par, 500,000 shares authorized,
P4,250,000
1,550,000
P5,800,000
Retained Earnings
218,750
P6,018,750
3.
BCD Corporation
Statement of Changes in Shareholders’ Equity
For the Year Ended December 31, 2014
Ordinary Ordinary
Share Share Retained
Capital Premium Earnings
Total
Issuance of Ordinary Share
125,000 shares@P25 2,500,000 625,000
3,125,000
62,500 shares @ 30 1,250,000 625,000
1,875,000
25,000 shares @ 32 500,000 300,000
800,000
Declaration of cash dividends ( 531,250)
( 531,250)
Profit for 2014 750,000
750,000
Balances, December 31, 2014 P 4,250,000 P 1,550,000 P 218,750
P6,018,750
page 8
P 9-2
MMM Corporation
For the Two Years Ending December 31, 2014
Ordinary Ordinary
Share Share
Retained
Capital Premium
Earnings Total
Balances, January 1 P2,400,000 P 480,000
(P300,000) P2,580,000
Issued 80,000 shares @ P30 1,600,000 800,000
2,400,000
Profit for the year
800,000 800,000
Balances, December 31 P4,000,000 P1,280,000
P500,000 P5,780,000
VVV Inc.
For the Two Years Ending December 31, 2014
5%
Preference
Preference Ordinary Share
Retained
Share Share Premium
Earnings Total
2013:
Issued 6,000 PS @ P120 P 600,000 P 120,000
P 720,000
Issued 200,000 ordinary shares P1,400,000
1,400,000
Profit for the year
P 240,000 240,000
Dividends:
PS – P600,000 x 5%
( 30,000) ( 30,000)
OS – 200,000 shares x P.25
( 50,000) ( 50,000)
Balances, December 31 P 600,000 P1,400,000 P 120,000
P 160,000 P2,280,000
2014:
Issued 5,000 PS @ P130 500,000 150,000
650,000
Issued 100,000 OS @ P10 1,000,000
1,000,000
Profit for the year
600,000 600,000
Dividends:
PS – 1,100,000 x 5%
( 55,000) ( 55,000)
OS - 300,000 shares x P.50
( 150,000) ( 150,000)
Balances, December 31 P1,100,000 P2,400,000 P 270,000
P 555,000 P4,325,000
MMM Corp.
Shareholders’ Equity
December 31, 2014
Ordinary Share Capital, P20 par, 200,000 shares authorized,
all issued and outstanding
P4,000,000
1,280,000 P5,280,000
Retained Earnings
500,000
P5,780,000
page 9
VVV Inc.
December 31, 2014
5% Preference Share Capital, P100 par, 200,000 shares authorized,
11,000 shares issued and outstanding P1,100,000
Ordinary Share Capital, no par, no Stated Value 500,000 shares
authorized,
300,000 shares issued and outstanding 2,400,000
Preference Share Premium 270,000
P3,770,000
Retained Earnings
555,000
P4,325,000
P 9-3 *Hindi ko to sinagutan kasi mahaba kaya di ko to na-check kung tama ba*
DEF Corporation
Balance Sheet
December 31, 2009
Assets
Current Assets:
Cash P
200,000
Accounts Receivable P 100,000
Less Allowance for Doubtful Accounts 10,000
90,000
Merchandise Inventory
210,000
Store Supplies
5,000
Office Supplies
4,000
Prepaid Insurance
12,000
Total Current Assets P
521,000
Noncurrent Assets:
Land P1,000,000
Office Equipment, net of Accumulated Depreciation of P45,000 105,000
Store Equipment, net of Accumulated Depreciation of P75,000 175,000
1,280,000
Total assets
P1,801,000
Liabilities
Current Liabilities:
Accounts Payable P
75,000
Income Tax Payable
163,100
Salaries Payable
12,000
Total Liabilities P
250,100
Ordinary Share Capital, P20 par, 50,000 shares
issued and outstanding P1,000,000
Total Contributed Capital P1,100,000
Retained Earnings 450,900
page 10

1,550,900
Total Liabilities and Shareholders’ Equity
P1,801,000
DEF Corporation
Ordinary Ordinary
Retained
Share Capital Share
Earnings Total
Premium
Balances, Jan. 1 P 980,000 P 95,000 P228,000
P1,303,000
Issuance of CS 20,000 5,000
25,000
Declaration and dist.
of dividends
( 80,000) ( 80,000)
Profit for 2009 302,900
302,900
Balances, Dec. 31 P1,000,000 P100,000 P450,900
P1,550,900
DEF Corporation
Income Statement
Sales (net of discounts of P50,000)
P2,450,000
Cost of Goods Sold:
Merchandise Inventory, Jan. 1 P
150,000
Purchases (net of ret. and allow. of P100,000)
1,300,000
Cost of Goods available for Sale
P1,450,000
Less Merchandise Inventory, Dec. 31
210,000 1,240,000
Gross Profit
P1,210,000
Selling Expenses:
Sales Salaries
P258,000
Advertising
75,000
Delivery
50,000
Store Supplies
10,000
Depreciation – Store Equipment
25,000
Miscellaneous
20,000 (438,000)
Administrative Expenses:
Office Salaries
P189,000
Light and Power
60,000
Insurance
18,000
Depreciation – Office Equipment
15,000
Office Supplies
6,000
Miscellaneous
18,000 (306,000)
Profit before Income Tax
P 466,000
Income Tax (35%)
163,100
Profit
P 302,900
Earnings per share P302,900/ 50,000 shares

P6.058
3. Adjusting Entries
page 11
Merchandise Inventory 210,000

Income Summary
210,000
Income Summary 150,000

Merchandise Inventory
150,000
Store Supplies Expense 10,000

Office Supplies Expense 6,000
Store Supplies
10,000
Office Supplies
6,000
Store Salaries 8,000

Office Salaries 4,000
Salaries Payable
12,000
Depreciation Expense – Store Equipment 25,000

Depreciation Expense – Office Equipment 15,000
Accumulated Depreciation – Store Equipment
25,000
Accumulated Depreciation – Office Equipment
15,000
Insurance Expense 18,000

Prepaid Insurance
18,000
Income Tax 163,100

Income Tax Payable
163,100
Closing Entries
Sales 2,500,000
Purchases Returns and Allowances 100,000
Sales Discount
50,000
Purchases
1,400,000
Sales Salaries
258,000
Advertising
75,000
Delivery
50,000
Store Supplies Expense
10,000
Depreciation Expense – Store Equipment
25,000
Miscellaneous Expenses
20,000
Office Salaries
189,000
Light and Power
60,000
Insurance
18,000
Depreciation Expense – Office Equipment
15,000
Office Supplies Expense
6,000
Miscellaneous Administrative Expenses
18,000
Income Taxes
163,100
Income Summary
242,900
Income Summary 302,900

Retained Earnings 302,900

P9-4
PS OS TOTAL
2012
Regular dividend P200,000 P100,000 P300,000
PS – 2/3; OS –1/3 100,000 50,000 150,000
Total P300,000 P150,000 P450,000
PS OS TOTAL
2013
Regular dividend P200,000 P100,000 P300,000
PS – 2/3; OS –1/3 300,000 150,000 450,000
Total P500,000 P250,000 P750,000
PS OS TOTAL
2014
Regular dividend P 200,000 P100,000 P 300,000
PS – 2/3; OS –1/3 933,333 466,667 1,400,000
Total P1,133,333 P566,667 P1,700,000
2.
PS OS TOTAL
2012
Dividends in arrears P400,000 --- P400,000
Current dividends 50,000 --- 50,000
Total P450,000 P –0-- P450,000
Dividends per share P22.50 P—0--
2013
Dividends in arrears P150,000 ---- P150,000
Current dividends 200,000 200,000
Balance – to Ordinary P400,000 400,000
Total P350,000 P400,000 P750,000
2014
Current dividends P200,000 P 200,000
Balance – to ordinary P1,500,000 1,500,000
Total P200,000 P1,500,000 P1,700,000
3.
2012 PS OS Total
Dividends in arrears P240,000 P240,000
Regular dividends 80,000 P40,000 120,000
Balance – P90,000
page 13
PS – 10/15; OS 5/15 60,000 30,000

90,000
Total P380,000 P70,000
P450,000
2013
Regular dividends P 80,000 P 40,000
P120,000
PS – 10/15; OS 5/15 420,000 210,000
630,000
Total P500,000 P250,000
P750,000
2014
P 120,000
PS – 10/15; OS 5/15 1,053,333 526,667
1,580,000
Total P1,133,333 P566,667
P1,700,000
4.
2012 PS OS
Total
Dividends in arrears P240,000
P240,000
Regular dividends 80,000 P40,000
120,000
Balance – P90,000 50,000 40,000
90,000
Total P370,000 P80,000
P450,000
2013
P120,000
Balance – P630,000 50,000 580,000
630,000
Total P130,000 P620,000
P750,000
2014
P 120,000
Balance – P1,580,000 50,000 1,530,000
1,580,000
Total P 130,000 P1,570,000
P1,700,000
P 9-5
P2,300,000
Less Equity identified with PS (10,000 sh @ P30)
300,000
Equity identified with OS
P2,000,000
BV per share
PS
P 30.00
OS (P2,000,000 / 100,000 sh)
P 20.00

P2,300,000
Less Equity identified with PS
Liquidation value (10,000 sh @ P25) P250,000

Div. in arrears (P25,000 x 5 yrs.) 125,000
375,000
P1,925,000
BV per share
PS P
37.50
OS (P1,925,000,000 / 100,000 sh) P
19.25
P9-6
a. Profit
P2,000
Less Earnings identified with PS (10,000 sh @ P25 x 10%)
25,000
Earnings identified with OS
(5,000)
Earnings per share
(P50,000 / 100,000 sh)
(.05)
b. Profit
P75,000
25,000
P50,000
Earnings per share

(P50,000 / 100,000 sh) P
.50
c. Profit
P120,000
25,000
P95,000
Earnings per share

(P95,000 / 100,000 sh) P
.95
d. Profit
P300,000
25,000
Earnings identified with OS
P275,000
Earnings per share

(P275,000 / 100,000 sh) P
2.75
page 15
P 9-7
10% PS, P100 par, 25,000 shares authorized,
12,000 shares issued and outstanding P
1,200,000
OS, P10 par, 500,000 shares authorized,
300,000 shares issued and outstanding 3,000,000
OS Dividend Distributable, 35,000 shares 350,000
OS Subscribed, 10,000 shares 100,000
Preference share Premium 120,000
Ordinary Share Premium 300,000
PIC from Stock Dividend 105,000
P5,175,000
Retained Earnings
Appropriated for contingencies P250,000
Appropriated for Bond Retirement 300,000
Total P550,000
Unappropriated 600,000
1,150,000
P6,325,000
Multiple Choice
1. B 4. C 7. B 10. B 13. C 16. A 19. A
2. B 5. A 8. C 11. A 14. D 17. B 20. D
3. B 6. A 9. D 12. D 15. B 18. C

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CHAPTER 9

Operations, Dividends, Book Value and Earnings per Share

Apr. 15 Dividends Payable

Dividends Payable 200,000

May 2 Dividends Payable 200,000

June 1 Retained Earnings 600,000

July 15 Stock Dividends Distributable 500,000

Stock Dividends Distributable 750,000

2. Retained Earnings 2,500,000

Stock Dividends Distributable 2,500,000

Apr. 15 Dividends Payable 10,000

July 15 Retained Earnings 40,000

Property Dividends Payable 40,000

Oct. 15 Retained Earnings 15,000

2,000 sh x 30% x P25

Dec. 1 Stock Dividends Distributable

Dividends per share P25.00 P –0--

Dividends per share P23.00 P 2.40

Dividends per share P16.67 P1.67

Dividends per share P23.33 P2.33

Dividends per share P43.33 P4.33

Dividends per share P25.00 P –0--

Dividends per share P27.00 P1.60

Dividends per share P43.33 P4.33

Dividends per share P16.67 P1.67

Dividends per share P20.00 P3.00

Dividends per share P20.00 P9.00

2. Total Shareholders’ Equity

Book value per share:

Earnings per share P250,000/300,000 = P1.83

Mar. 2 Cash (62,500 sh x P30) 1,875,000

Mar. 31 Land 300,000

Dec. 31 Income Summary 750,000

31 Retained Earnings 531,250

Feb. 14 OSC Subscription Receivable (50,000 x P50) 2,500,000

Dec. 31 Income Summary

2. Shareholder’s Equity- December 31, 2014

Total Shareholders’ Equity

Earnings per share P302,900/ 50,000 shares

Merchandise Inventory 210,000

Income Summary 150,000

Store Supplies Expense 10,000

Store Salaries 8,000

Depreciation Expense – Store Equipment 25,000

Insurance Expense 18,000

Income Tax 163,100

Income Summary 302,900

Retained Earnings 302,900

PS – 10/15; OS 5/15 60,000 30,000

2. Total Shareholders’ Equity

Liquidation value (10,000 sh @ P25) P250,000

Earnings per share

Earnings per share

Earnings per share

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