HOMEWORK ON STATEMENT OF CHANGES IN EQUITY

Problem 1
The data given pertains to Blunt Co.

January 1, 2020 balances

Preference share, P20 par value 400,000
Ordinary share, P10 par value 950,000
Share premium 220,000
Retained earnings – free 900,000
Retained earnings – appropriated for ordinary treasury shares 36,000
Treasury share – ordinary (at cost), 6 000 shares 36,000

Transactions from January 1 to December 31, 2020

Issuance of preference share, 18 200 shares 364,000
Subscribed preference share, 10 500 shares 210,000
Subscriptions receivable – preference 75,850
Preference share dividend – 7 585 shares 151,700
Issuance of ordinary share, 74 500 shares 745,000
Subscribed ordinary share, 10 800 shares 108,000
Subscriptions receivable – ordinary 55,800
Ordinary share dividend – 18 390 shares 183,900
Share premium – preference (40% on issued and 60% on 112,200
subscribed)
Share premium – ordinary (80% on issued and 20% on 202,500
subscribed)
Share premium – preference share dividend 37,925
Share premium – ordinary share dividend 36,060
Share premium – ordinary donated shares 12,250
Net income for the year 780,000
Preference cash dividends declared and paid 97,400
Ordinary cash dividends declared and paid 180,300
Reversal of appropriation for cost of treasury shares 36,000
Current appropriations for:
Cost of treasury share – preference 125,000
Contingencies 100,000
Treasury share:
Purchase of 5,000 preference shares at P25/share 125,000
Sale of 6,000 ordinary shares at P7/share 42,000

Required: Prepare the statement of changes in equity for the year ended Dec. 31, 2020. Use the
following format:

Share Capital Retained Treasury

Reserves Total
Preference Ordinary Earnings Shares

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Problem 2

Lawson, Inc.’s equity section of its statement of financial position on Jan. 1, 2020 is as follows:

Account Amount
Preference shares, 9% cumulative, P50 par 12,500,000
Ordinary shares, P20 par 30,000,000
Share premium – preference 22,500,000
Share premium – ordinary 40,000,000
Share premium – treasury share transactions 15,000,000
Unrealized gain – FAFVOCI 2,500,000
Revaluation surplus 40,000,000
Retained earnings 65,000,000
Treasury shares (200,000 ordinary shares at (10,000,000)
cost)

Transactions affecting Lawson’s equity are as follows:

a. Net income for the year was P5,000,000.
b. 50,000 ordinary shares were issued at P80/share.
c. 100,000 preference shares were issued in exchange for an equipment having a depreciated cost of
P12,000,000, and a fair value of P10,000,000
d. The financial asset was acquired at P15,000,000. At the end of the year, the fair value of the
investment was P11,000,000.
e. The revaluation surplus was related to Lawson’s building. It was acquired for cash amounting to
P100,000,000 on Jan. 1, 2015. On Jan. 1, 2017, Lawson revalued the fixed asset to its fair value of
P135,000,000. Lawson estimated that the useful life of the building was 20 years on the date of
acquisition. Revaluation is realized on a piece-meal basis.
f. P3,000,000 worth of dividends were paid by Lawson. Two years’ worth of dividends were in arrears
to preference shareholders.
g. Half of the treasury shares were reissued at P30/share. The rest were cancelled and retired. These
retired shares were originally issued at P80/share.

Prepare Lawson’s statement of changes in shareholders’ equity for the year ended December 31, 2020.

August 2020

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