NATIONAL COLLEGE OF BUSINESS AND ARTS

ACCOUNTING FOR BUSINESS ORGANIZATION

Chapter 15 - Accouting for Corporation

Memorandum Method
Problem 3: Journal Entries

1. Entity B was Incorporated at the start of the current period. The following were Entity B's a. Memorandum Entry
share capital transactions during the year:
b. Cash (10,000,000 x 50% x 25%) 1,250,000
a. the SEC approved entity B's authorized capitalizationof P10,000,000 divided Subscription Receivable 3,750,000
into 1,000,000 share with par value of P10 per share. Subscribed Share Capital

b. fifty percent (50%) of the authorized capitalization was subscribed at par value C. Cash 937,500
and twenty five percent (25%) of the subscription was paid on subcription date. Subscription Receivables

c. Received full payment for 250,000 subscribed shares and issued the related share Subscribed Share Capital (250,000 x 10) 2,500,000
certificates Share Capital

d. Cash (50,000 x 15) 750,000

Share Capital (50,000 x 10)
Share Premium (50,000 x 5)

d. Received cash subcription for 50,000 additional shares for P15 per share
e. Subscription Receivable (100,000 x 20) 2,000,000
e. Received subscription for P100,000 additional shares for P20 per share. Subscribed Share Capital
Share Premium
f. collected the full payment on the subcription in e' above and issued the related
share certificates. f. Cash (100,000 x 20) 2,000,000
Subscription Receivable
Requirements:
Subscribed Share Capital (100,000 x 10) 1,000,000
a. Provide the Journal entries under (1.)Memorandum Method and (2) Journal Entry Method Share Capital

b. Prepare the Shareholder's equity of Entity B as of the end of the period.

Share Capital 4,000,000

Share Premium 1,250,000
Subscribed Share Capital 2,500,000
Subcription Receivable (1,875,000)
Total 5,875,000
 Journal Entry Method

Unissued Share Capital 10,000,000 Cash Cash

Authorized Share Capital 10,000,000 1,250,000 1,250,000
937,500 937,500
Cash (10,000,000 x 50% x 25%) 1,250,000 750,000 750,000
Subscription Receivable 3,750,000 2,000,000 2,000,000
5,000,000 Subscribed Share Capital 5,000,000 4,937,500 4,937,500

Cash 1,875,000 Subscription Receivable Subscription Receivable

937,500 Subscription Receivables 1,875,000 3,750,000 1,875,000 3,750,000 1,875,000
2,000,000 2,000,000 2,000,000 2,000,000
Subscribed Share Capital (250,000 x 10) 2,500,000
2,500,000 Unissued Share Capital 2,500,000 5,750,000 3,875,000 5,750,000 3,875,000
1,875,000 1,875,000
Cash (50,000 x 15) 750,000
500,000 Unissued Share Capital (50,000 x 10) 500,000 Subscribed Share Cap. Subscribed Share Cap.
250,000 Share Premium (50,000 x 5) 250,000 2,500,000 5,000,000 2,500,000 5,000,000
1,000,000 1,000,000 1,000,000 1,000,000

Subscription Receivable (100,000 x 2 2,000,000 2,500,000 2,500,000

1,000,000 Subscribed Share Capital 1,000,000
1,000,000 Share Premium 1,000,000 Share Capital Unissued Share Cap.
2,500,000 10,000,000 2,500,000
Cash (100,000 x 20) 2,000,000 500,000 500,000
2,000,000 Subscription Receivable 2,000,000 1,000,000 1,000,000
4,000,000
Subscribed Share Capital (100,000 x 10) 1,000,000 10,000,000 4,000,000
1,000,000 Unissued Share Capital 1,000,000 Share Premium 6,000,000
250,000 Authorized Share Cap
1,000,000 10,000,000

1,250,000
Authorized Share Cap 10,000,000 10,000,000
Unissued Share Cap. (6,000,000)
Subscribed Share Cap. 2,500,000 Share Premium
Subscription Receivable (1,875,000) 250,000
Share Premium 1,250,000 1,000,000
Total 5,875,000
1,250,000
NATIONAL COLLEGE OF BUSINESS AND ARTS
ACCOUNTING FOR BUSINESS ORGANIZATION
Chapter 15 - Accouting for Corporation

Assignment:

2. Entity A issued 3,000 shares with par value of P100 for P140 per share. Share issuance cost
amounted to P6 per share. How much is the net share premium arising from the share issuance?

Provide the Journal Entry. Shared Premium

Dr Cr
Cash (3,000 x 140) 420,000 120,000
Share Capital (3,000 x 100) 300,000 18,000
Share Premium (3,000 x 40) 120,000 102,000 Net share Premium

Share Premium (3,000 x 6) 18,000

Cash (3,000 x 6) 18,000

Net Share Premium ###

Net share Premium
NATIONAL COLLEGE OF BUSINESS AND ARTS
ACCOUNTING FOR BUSINESS ORGANIZATION
Chapter 15 - Accouting for Corporation

Assignment:

Use the following information for the next three questions:

Entity A's statement of financial position as of the beginning of the period shows the following
information:

Share capital (P10 par value) 1,000,000

Share premium 200,000
Retained Earnings 180,000
Total Shareholder's equity 1,380,000

1. Entity A reacquires 1,000 shares for P30 each. Provide the journal entries, including the related
appropriation of retained earnings.

Treasury Shares (1,000 x 30) 30,000

Cash 30,000

Retained Earnings- unrestricted 30,000

Retained Earnings- restricted 30,000
2. Entity A reissued 500 treasury shares for P40 each. Provide the journal entries, including the rela
ted reversal of appropriation of retained earnings.

Cash (500 x 40) 20,000

Treasury Shares (500 x 30) 15,000
Share Premium- Treasury 5,000

Retained Earnings- unrestricted 15,000

Retained Earnings- restricted 15,000

3. Entity B reissues 500 shares for P20 each. Provide the journal entries, including the related reversal
of appropriation of retained earnings

Cash (500 x 20) 10,000

Share Premium- Treasury -
Retained Earnings 5,000
Treasury Shares (500 x 30) 15,000

Retained Earnings- unrestricted 15,000

Retained Earnings- restricted 15,000
 No. of Shares issued Par value per share Amount
Share Capital (P10 par value 100,000 10 1,000,000
Share Premium 100,000 2 200,000
Total 100,000 12 1,200,000
NATIONAL COLLEGE OF BUSINESS AND ARTS
ACCOUNTING FOR BUSINESS ORGANIZATION
Chapter 15 - Accouting for Corporation

Assignment:

Use the following information for the next two questions:

Number of Share
Entity B's statement of financial position as of the beginning of the period shows the following Share Capital (P10 par value)
information: Share Premium
Total
Share capital (P10 par value) 1,000,000
Share premium 200,000
Retained Earnings 180,000
Total Shareholder's equity 1,380,000

1. Entity B reacquires P1,000 shares at P 11 per share and immidiately retires them. Provide
the journal Entry
Treasury shares (1,000 x 10) 10,000
Cash 10,000
2. Entity B reacquires 1,000 shares at P15 per share on January 1, 20x1 and retires them on
March 1, 20x1 provide the journal entries (you may ignore entries for the automatic appropriation
of retained earnings)

January 1, 20x1

Treasury shares (1,000 x 15) 15,000

Cash in Bank 15,000

March 1, 20x1

Share capital (1,000 x 10) 10,000

Share premium (1,000 x 2) 2,000
Treasury shares (1,000 x 8) 8,000
Share Premium- Retirement 4,000
 10

Number of Shared issued Par value per share Amount

100,000 10 1,000,000
100,000 2 200,000
100,000 12 1,200,000
NATIONAL COLLEGE OF BUSINESS AND ARTS
ACCOUNTING FOR BUSINESS ORGANIZATION
Chapter 15 - Accouting for Corporation

Assignment:

Entity B receives the following donation from a shareholders on February 14, 20x1

> Cash of P200,000

> Building with historical cost of P3,000,000 and fair value of P900,000
> 20,000 shares with par value of P10 and fair value of P22 the shares were
reissued on July 5, 20x2 for P32 each.

Provide the Journal Entries.

February 14, 20x1

Cash 200,000
Share premium - Donated capital 200,000

Building 900,000
Share premium - Donated capital 900,000

MEMORANDUM ENTRY

July 5, 20x2

Cash ( 20,000 x 32 ) 640,000

Share premium - Donated capital 640,000