Problem 8 ACCOUNTING

Problem 8-6
1 Memo entry in the ledger
Ordinary shares
The company was authorized to issue 100,000 ordinary shares
at P50 par value per share.
Preference shares
The company was authorized to issue 40,000 preference
shares at P100 par value per share.
1 Cash 312,500
Subscriptions receivable – ordinary shares 937,500
Subscribed ordinary shares 1,250,000
Cash 250,000
Subscriptions receivable – preference shares 750,000
Subscribed preference shares 1,000,000
Incorporators: Ordinary shares Preference shares

Villanueva, Eddie 5,000 2,000
Enrile, Jack 5,000 2,000
Gordon, Dick 5,000 2,000
Alcantara, Samson 5,000 2,000
Seneres, Christian 5,000 2,000
25,000 10,000
Par value P50 P100
Subscribed capital stock P1,250,000 P1,000,000
Percent of payment 25% 25%
Subscriptions paid P 312,500 P 250,000
10 Pre-operating expenses 10,000

Cash 10,000
10 Cash (P60 x 3,000) 180,000

Ordinary share capital (P50 x 3,000) 150,000
Share premium – ordinary share 30,000
13 Land 400,000
Preference share capital (P100 x 4,000) 400,000
13 Cash 337,500
Subscriptions receivable – ordinary (P50 x 5,000 x 75%) 187,500
Subscriptions receivable – preference (P100 x 2k x 75%) 150,000
Subscribed ordinary shares 250,000

Subscribed preference shares 200,000
Ordinary share capital 250,000
Preference share capital 200,000
18 Cash 37,500
Delivery truck 300,000


Accounts payable – lawyer 30,000

Preference share capital (P100 x 500) 50,000
24 Subscriptions receivable – ordinary shares (P50 x 2k x 120%) 120,000

Share premium – ordinary shares 20,000
24 Cash 137,500
Merchandise inventory 200,000

26 Cash (P120,000 x 80%) 96,000

Subscriptions receivable – ordinary shares 96,000
26 Cash 715,000
Preference share capital (P100 x 3,000) 300,000
Share premium – ordinary (P50 x 5,000 x 30%) 75,000
Share premium – preference (P30 x 3,000) 90,000
27 Accounts payable – lawyer 30,000

Preference share capital (P100 x 250) 25,000
Share premium – preference 5,000
28 Cash 337,500

28 Cash 24,000
Subscriptions receivable – ordinary (P120,000 – P96,000) 24,000

28 Cash 187,500
Office equipment 150,000

30 Land 2,500,000
Ordinary share capital (P50 x 20,000) 1,000,000
Preference share capital (P100 x 10,000) 1,000,000
Share premium – ordinary 200,000
Ordinary share (P50 x 20,000 x 120%) P1,200,000

Preference share (P100 x 10,000 x 130%) 1,300,000
Total P2,500,000
Problem 8-7
1. Adjustments of accounts in the partnership books:
a. Santos, Capital 32,000
Gallardo, Capital 24,000
Valencia, Capital 24,000
Allowance for doubtful accounts 80,000
b Merchandise inventory (P2.4M x 20%) 480,000
.
Santos, Capital 192,000
c. Land 1,000,000
d Supplies 10,000
.
e. Santos, Capital 8,000

Prepaid insurance 20,000
2. Journal entries – transactions of corporation

a. Pre-operating expenses 50,000
Cash 50,000
b Memo entry:
.
SGV Enterprises was authorized to issue 1,000,000
ordinary shares divided into 10,000 shares with a par
value of P100 per share.
c. Cash (20,000 x 2 x P100) 4,000,000

Ordinary share capital 4,000,000
d Santos, Capital 4,556,000

.
Gallardo, Capital 4,417,000
Valencia, Capital 4,417,000
Ordinary share capital (30,000 x 3 x P100) 9,000,000
Cash 4,390,000
Problem 8-8
PARTNERSHIP CORPORATION
a. Cash 1,400,000 a. Cash 1,400,000
Receivable from partner 1,100,000 Subscriptions receivable 1,100,000
A, Capital 500,000 Subscribed capital 2,500,000
B, Capital 500,000
C, Capital 500,000
D, Capital 500,000
E, Capital 500,000
b Revenue 5,000,000 b Revenue 5,000,000

. .
Expenses 3,000,000 Expenses 3,000,000
Tax expense 600,000 Tax expense 600,000
Income summary 1,400,000 Income summary 1,400,000

A, Capital 252,000 Accumulated profits 1,400,000
B, Capital 252,000
C, Capital 252,000
D, Capital 252,000
E, Capital 252,000
Withholding tax payable 140,000
c. A, Capital 252,000 c. Accumulated profits 1,400,000
B, Capital 252,000 Dividend payable 1,260,000
C, Capital 252,000 Withholding tax payable 140,000
D, Capital 252,000
E, Capital 252,000 Dividend payable 1,260,000
Withholding tax payable 140,000 Withholding tax payable 140,000
Cash 1,400,000 Cash 1,400,000
Problem 8-9
PARTNERSHIP CORPORATION
a. Cash 1,800,000 a. Cash 1,800,000
Receivable from partner 200,000 Subscriptions receivable 200,000
A, Capital 600,000 Subscribed capital 1,000,000
B, Capital 500,000 Share capital 1,000,000
C, Capital 400,000
D, Capital 300,000
E, Capital 200,000
b Revenue 7,000,000 b Revenue 7,000,000

. .
Expenses 4,000,000 Expenses 4,000,000
Tax expense 900,000 Tax expense 900,000

A, Capital 567,000 Accumulated profits 2,100,000
B, Capital 472,500
C, Capital 378,000
D, Capital 283,500
E, Capital 189,000
Withholding tax payable 210,000
c. A, Capital 540,000 c. Accumulated profits 2,000,000

B, Capital 450,000 Dividend payable 1,800,000
C, Capital 360,000 Withholding tax payable 200,000
D, Capital 270,000
E, Capital 180,000 Dividend payable 1,800,000
Withholding tax payable 210,000 Withholding tax payable 200,000
Cash 2,010,000 Cash 2,000,000
Problem 8-10
Memo Method Journal Entry Method
1/1 Memo entry (in the ledger) Unissued ordinary shares 4,000,000
Authorized ordinary shares 4,000,000
(40,000 x P100)
1/1 Cash 1,000,000 Cash 1,000,000

Ordinary shares 1,000,000 Unissued ordinary shares 1,000,000
2/2 Cash 1,800,000 Cash 1,800,000

Ordinary shares 1,500,000 Unissued ordinary shares 1,500,000
Share premium 300,000 Share premium 300,000
12/ Cash 150,000 Cash 150,000

9
Ordinary shares 120,000 Unissued ordinary shares 120,000
Problem 8-11
1. Cash 5,000,000
2. Cash 7,000,000
Share premium – ordinary 2,000,000
3. Cash 4,500,000
Discount on share capital 500,000
Ordinary shares 5,000,000
Problem 8-12
a. Land 500,000
Ordinary shares 500,000
b Land 500,000
.
Discount on share capital 500,000
Problem 8-13
a. @ P10 par
1. Memo entry
2. Cash 312,500
Subscription receivable 997,500
3. Cash 997,500
Subscriptions receivable 997,500

4. Land 500,000
5. Subscriptions receivable 1,250,000

b Stated at P20
.
1. Memo entry
2. Cash 312,500
Subscription receivable 2,187,500
3. Cash 2,187,500
Subscriptions receivable 2,187,500

4. Land 500,000

Problem 8-14
a. Par value P100
1. Cash 625,000
2. Cash 1,875,000


4. Cash 6,000,000

5. Receivable from highest bidder 10,000

Cash 10,000
Treasury shares 1,510,000

Receivable from highest bidder 10,000

b Stated at P120
.
1. Cash 625,000
2. Cash 1,875,000

3. Subscription receivable 7,500,000

4. Cash 6,000,000


Cash 10,000


c. No par and no stated value

1. Cash 625,000
2. Cash 1,875,000




Cash 10,000


Problem 8-15
Memorandum entry Unissued ordinary shares 100,000,000
Authorized ord. shares 100,000,000
1. Pre-operating expenses 150,000 1 Pre-operating expenses 150,000

.
Cash 50,000 Cash 50,000
Ordinary shares 100,000 Ordinary shares 100,000
2. Cash 1,200,000 2 Cash 1,200,000

.
Ordinary shares 1,000,000 Unissued ord. shares 1,000,000
Share premium – ordinary 200,000 Share premium – ord. 200,000
3. Land 600,000 3 Land 600,000

.
Ordinary shares 500,000 Unissued ord. shares 500,000
4. Cash 30,000,000 4 Cash 30,000,000

.
Ordinary shares 30,000,000 Unissued ord. shares 30,000,000
5. Cash 2,000,000 5 Cash 2,000,000

.
Subscriptions receivable 600,000 Subscriptions receivable 600,000
Subscribed ord. shares 2,000,000 Subscribed ord. shares 2,000,000
Share premium – ordinary 600,000 Share premium –ord. 600,000
6. Share premium – ordinary 5,000 6 Share premium – ord. 5,000

.
Cash 5,000 Cash 5,000
Problem 8-16
CASE 1 – Par value is P100.

a. Memo entry (in the ledger) Unissued ordinary shares 5,000,000

Authorized ord. shares 5,000,000
(50,000 x P100)
b Subscriptions receivable 2,400,000 Subscriptions receivable 2,400,000

.
Share premium – ordinary 400,000 APIC (P20 x 20,000) 400,000
(P20 x 20,000)
c. Cash 1,200,000 Cash 1,200,000

Subscriptions receivable 1,200,000 Subscriptions receivable 1,200,000
Subscribed ord. shares 800,000 Subscribed ord. shares 800,000

Ordinary share capital 800,000 Unissued ord. shares 800,000
(2,000,000 x 40%)
d Cash 1,200,000 Cash 1,200,000
.

Ordinary share capital 1,200,000 Unissued ord. shares 1,200,000
(2,000,000 x 60%)
e. Cash 1,500,000 Cash 1,500,000

Ordinary share capital 1,000,000 Unissued ord. shares 1,000,000
(10,000 x P100)
APIC 500,000 Share premium – ord. 500,000
f. Cash 50,000 Cash 50,000

Subscribed ord. shares 300,000 Subscribed ord. shares 300,000
CASE 2 – Stated value is P50

a. Memo entry (in the ledger) Unissued share capital 2,500,000

Authorized share capital 2,500,000
(50,000 x P50)

.
Subscribed share capital 1,000,000 Subscribed share capital 1,000,000
Share premium (P70 x 20,000) 1,400,000 Share premium (P70 x 20,000) 1,400,000
c. Cash 1,200,000 Cash 1,200,000

Subscribed share capital 400,000 Subscribed share capital 400,000

Share capital (1,000,000 x 40%) 400,000 Unissued share capital 400,000
d Cash 1,200,000 Cash 1,200,000

.

Share capital (1,000,000 x 60%) 600,000 Unissued share capital 600,000
e. Cash 1,500,000 Cash 1,500,000

Share capital (10,000 x P50) 500,000 Unissued share capital 500,000
Share premium 1,000,000 Share premium 1,000,000
f. Cash 50,000 Cash 50,000

CASE 3 – No par, no stated value

a. Memo entry (in the ledger) Memo entry (in the ledger)

.
c. Cash 1,200,000 Cash 1,200,000


Share capital 480,000 Unissued share capital 480,000
(P1,200,000 x 40%)
d Cash 1,200,000 Cash 1,200,000

.

Share capital 1,920,000 Unissued share capital 1,920,000
e. Cash 1,500,000 Cash 1,500,000

Share capital 1,500,000 Unissued share capital 1,500,000
f. Cash 50,000 Cash 50,000

Problem 8-17
Jan 1 Memo entry (in the ledger) Unissued ordinary shares 2,500,000
Jan 1 Cash (2,500,000 x 25% x 40%) 250,000 Cash (2,500,000 x 25% x 40%) 250,000
Subscribed ordinary shares 625,000 Subscribed ordinary shares 625,000
Jan 15 Organization expense 50,000 Organization expense 50,000

Ordinary share capital 50,000 Unissued ordinary shares 50,000
Jan 25 Land 200,000 Land 200,000

Share premium – OS 50,000 Share premium – OS 50,000
Feb 14 Equipment (2,500 x P65) 162,500 Equipment (2,500 x P65) 162,500

Mar 2 Cash 375,000 Cash 375,000


Aug 25 Cash 100,000 Cash 100,000

Problem 8-18 Memo Method

1. Land 110,000
Share premium – OS 10,000
2. Legal expense (P110 x 100) 11,000

Ordinary share capital (P100 x 100) 10,000
3. Professional fee expense 30,000

4. Investments in securities (P20,000 + P50,000) 70,000

5. Accounts payable 100,000

Problem 8-19
1. Journal entries
a. Memo entry (in the ledger)
b. Cash 2,400,000
Share premium – OS 1,400,000
c. Machinery 820,000
Equipment 380,000
d. Subscriptions receivable 1,800,000

Subscribed ordinary shares (P5 x 150,000) 750,000
Share premium – OS 1,050,000
e. Organization expense 100,000

Cash 100,000
f. Cash 1,320,000
Preference shares (P100 x 12,000) 1,200,000
Share premium – PS 120,000
g. Cash 1,800,000

h Income summary 125,000

.
Accum. profits 125,000
2. Shareholder’s equity
ITS Corporation
Shareholders’ Equity
December 31, first year
Share capital:
Preference shares P1,200,000
Ordinary shares 2,250,000 P3,450,000
Reserves:
Share premium – PS P 120,000
Share premium – OS 3,150,000 3,270,000
Accum. profits 125,000
Total shareholders’ equity P6,845,000
Problem 8-20
1. Journal entries
1. a. Memo entry
2. a. Cash 600,000
Subscribed ordinary shares (6,000 x P100) 600,000
Subscribed ordinary shares (600,000 x 75%) 450,000

b Cash 260,000
.
Subscribed preference share (5,000 x P50) 250,000
APIC – preferred 50,000
Subscribed preference share (250,000 x 80%) 200,000

3. Income summary 1,000,000

Accum. profits 1,000,000
4. a. Treasury share – ordinary (500 x P80) 40,000

Cash 40,000
b Treasury share – preferred (1,000 x P60) 60,000
.
Cash 60,000
5. Cash 27,000
Treasury stock – ordinary (300 x P80) 24,000
Share premium – treasury stock - OS 3,000
6. Preference share capital 40,000

Share premium – PS 4,000
Cash (800 x P55) 44,000
2. Amounts and number of shares issued and outstanding
Preference Ordinary
Number Amount Number Amount
Issued 4,000 P200,000 4,800 P480,000
Subscribed 1,000 50,000 1,500 150,000
Total 5,000 P250,000 6,300 P630,000
Treasury shares (1,000) ( 50,000) ( 500) ( 50,000)
Retired ( 800) ( 40,000) . .
Outstanding 3,200 P160,000 5,800 P580,000
1. Shareholders’ equity
Diamond Company
December 31, 200x
Share capital:
10% Preference shares, at par P50 P160,000
Subscribed preference shares P 50,000
Less: Subscriptions receivable 40,000 10,000
Ordinary shares, at par P100 450,000

Subscribed ordinary shares P150,000
Less: Subscriptions receivable – OS 120,000 30,000 P650,000
Reserves:
Share premium – Preference (original issue) P 46,000
Share premium – Ordinary (original issue) 120,000
Share premium – Treasury shares 3,000
Appropriation reserve – treasury shares (preferred) 60,000
Appropriation reserve – treasury shares (ordinary) 16,000 245,000
Accum. profits – unappropriated 924,000

Total P1,819,000
Less: Treasury shares – PS P 60,000
Treasury shares – OS 16,000 76,000
Problem 8-21
1. Journal entries
a. Unissued preference shares 3,000,000

Unissued ordinary shares 5,000,000
Authorized preference shares 3,000,000
b. Cash 2,400,000
Share premium – ordinary shares 400,000
c. Cash 1,200,000
Unissued preference shares 1,000,000
Share premium – preference shares 200,000
d. Subscriptions receivable – preference 1,000,000

Subscribed preference shares 1,000,000
e. Cash 400,000
Subscriptions receivable – preference 400,000
f. Organization expense 100,000

Unissued preference shares 100,000
g. Property, plant and equipment 1,300,000

h. Subscriptions receivable – OS 750,000

Subscribed OS 750,000
i. Cash 300,000
Subscriptions receivable – OS 300,000
j. Cash 600,000
Subscribed PS 1,000,000
Unissued PS 1,000,000
k. Treasury shares – OS 200,000

Cash 200,000
l. Accum. profits 200,000

Appropriation reserve – treasury shares 200,000
m. Income summary 2,800,000

Accum. profits 2,800,000
2. Shareholders’ equity
JULITA Co
December 31, 200A
Share capital:
Preference shares:
Authorized preference shares P3,000,000
Less: Unissued preference shares 900,000 P2,100,000
Ordinary shares:
Authorized ordinary shares P5,000,000
Less: Unissued ordinary shares 2,000,000 3,000,000
Subscribed ordinary shares P 750,000

Less: Subscriptions receivable 450,000 300,000
Reserves:
Share premium – ordinary P 700,000
Appropriation reserve for treasury stock 200,000 1,100,000
Accum. profits – unappropriated 2,600,000

Total P9,100,000
Less: Treasury shares – ordinary 200,000
Problem 8-22
1 Journal entries
.
a. Authorization - memo
b. Cash 1,500,000
Subscribed share capital 6,000,000
Cash 6,000,000
Share capital 6,000,000
2 Share capital issued P 6,000,000

.
Add: Subscribed share capital at par 6,000,000
Total amount of legal capital P12,000,000
Problem 8-23
1 With par value: Ordinary at P50 par; Preference at P100
. par
Issued:
Ordinary(2,000 x P50) P100,000
Preference (3,000 x P100) 300,000
Subscriptions:
Ordinary (500 x P50) 25,000
Preference (300 x P100) 30,000
Total legal capital P455,000
Note: If the share capital has par value, the legal capital includes the aggregate par value and/or issued
value of the outstanding share capital, the premium or excess over par is not to be considered as legal
capital. (Hector de Leon, Law on Partnerships and Private Corporations, p. 182)
2 No par value
.
Issued:
Ordinary (2,000 x P120) P240,000
Preference (3,000 x P150) 450,000
Subscriptions:
Ordinary (500 x P130) 65,000
Preference (300 x P200) 60,000
Total legal capital P815,000
Note: If the share capital has no par value, the entire consideration received forms part of the legal capital
and shall not be available for distribution as dividends. (Sec. 6, par. 3, Corporate Code)
Problem 8-24
Journal entries:
Treasury shares (P1,000,000 – P240,000 + P20,000) 780,000

Problem 8-25
1. Alban is the highest bidder because he is willing to
receive the least shares.
2. Shares to the delinquent subscriber (100,000 – 40,000) 60,000
3. Cash (P500,000 – P200,000 + P20,000) 320,000

Receivable from the highest bidder 20,000
4. Subscribed ordinary shares 500,000

5. Treasury shares 320,000

Receivable from the highest bidder 20,000

Problem 8-26
1. Land 2,000,000
Ordinary shares (3,000 x P50) 150,000
Share premium – Ordinary 250,000
Preference shares (8,000 x P100) 800,000
Share premium – Preference 800,000
Allocation:
Ordinary (2,000,000 x 300,000/1,500,000) 400,000
Preference (2,000,000 x 1,200,000/1,500,000) 1,600,000
Total 2,000,000
Problem 8-27
1. Land 1,000,000
Allocation:
Ordinary (5,000 x 150) 750,000
Preference – excess 250,000
Fair value of land 1,000,000
Problem 8-28
1. Land 1,500,000
Share premium – Preference 600,000
Allocation:
Ordinary (P1,500,000 x 200/500) 600,000
Preference (P1,500,000 x 300/500) 900,000
Fair value of land 1,500,000
Problem 8-29
Preference Ordinary
shares shares
1. Total authorized shares
Preference (P5,000,000/P100) 50,000
Ordinary 20,000
2. Issued shares
Preferred (50,000 – 18,000) 32,000
Ordinary (20,000 – 2,000) 18,000
3. Unissued shares
Preference (P1,800,000/P100) 18,000
Ordinary (20,000 – 18,000) 2,000
4. Subscribed shares
Preference (P300,000/P100) 3,000
Ordinary (P270,000/P150) 1,800
5. Shares available for subscription

Unissued shares 18,000 2,000
Less: Subscribed shares 3,000 1,800
15,000 200
6. Total shareholders’ equity Preference Ordinary Total

Authorized P5,000,000 P2,700,000 P7,700,000
Unissued (1,800,000) . (1,800,000)
Issued P3,200,000 P2,700,000 P5,900,000
Subscribed 300,000 270,000 570,000
Subscriptions receivable (200,000) (170,000) (370,000)
APIC 150,000 950,000 1,100,000
Retained earnings 2,000,000
Treasury shares (600,000) . (600,000)

Problem 8 ACCOUNTING

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Problem 8 ACCOUNTING

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Problem 8-6

1 Memo entry in the ledger

Incorporators: Ordinary shares Preference shares

10 Pre-operating expenses 10,000

10 Cash (P60 x 3,000) 180,000

Subscribed ordinary shares 250,000

Subscribed ordinary shares 250,000

22 Pre-operating expenses 30,000

22 Pre-operating expenses 50,000

24 Subscriptions receivable – ordinary shares (P50 x 2k x 120%) 120,000

Subscribed ordinary shares 250,000

26 Cash (P120,000 x 80%) 96,000

27 Accounts payable – lawyer 30,000

Subscribed ordinary shares 250,000

Subscribed ordinary shares 100,000

Subscribed ordinary shares 250,000

Ordinary share (P50 x 20,000 x 120%) P1,200,000

e. Santos, Capital 8,000

2. Journal entries – transactions of corporation

c. Cash (20,000 x 2 x P100) 4,000,000

d Santos, Capital 4,556,000

b Revenue 5,000,000 b Revenue 5,000,000

Income summary 1,400,000 Income summary 1,400,000

b Revenue 7,000,000 b Revenue 7,000,000

Income summary 2,100,000 Income summary 2,100,000

c. A, Capital 540,000 c. Accumulated profits 2,000,000

1/1 Cash 1,000,000 Cash 1,000,000

2/2 Cash 1,800,000 Cash 1,800,000

12/ Cash 150,000 Cash 150,000

Subscribed ordinary shares 1,250,000

5. Subscriptions receivable 1,250,000

Subscribed ordinary shares 2,500,000

5. Subscriptions receivable 1,250,000

Subscribed ordinary shares 2,500,000

3. Subscriptions receivable 7,500,000

Subscribed ordinary shares 4,000,000

5. Receivable from highest bidder 10,000

Treasury shares 1,510,000

Subscribed ordinary shares 1,000,000

Subscribed ordinary shares 2,500,000

3. Subscription receivable 7,500,000

Subscribed ordinary shares 4,800,000

5. Receivable from highest bidder 10,000

Treasury shares 1,510,000

Subscribed ordinary shares 1,200,000

c. No par and no stated value

Subscribed ordinary shares 2,500,000

4. Subscription receivable 6,000,000

Subscribed ordinary shares 6,000,000

5. Receivable from highest bidder 10,000

Treasury shares 1,510,000

Subscribed ordinary shares 1,500,000

1. Pre-operating expenses 150,000 1 Pre-operating expenses 150,000

2. Cash 1,200,000 2 Cash 1,200,000

3. Land 600,000 3 Land 600,000

4. Cash 30,000,000 4 Cash 30,000,000

5. Cash 2,000,000 5 Cash 2,000,000

6. Share premium – ordinary 5,000 6 Share premium – ord. 5,000

CASE 1 – Par value is P100.

a. Memo entry (in the ledger) Unissued ordinary shares 5,000,000

b Subscriptions receivable 2,400,000 Subscriptions receivable 2,400,000

c. Cash 1,200,000 Cash 1,200,000