CORPORATION PRACTICE PROBLEMS

PROBLEM 1
Ilang-ilang Corporation issued 100,000 shares of its P1 par value ordinary share on July 1, 2020. The
shares have fair value of P5 per share on the same date.

Requirement: In the independent situations that follow, prepare the necessary journal entries to
record the transactions.

(a) The shares were issued for P100,000 cash consideration.

(b) The shares were issued for P500,000 cash consideration.
(c) Assuming the share does not have a par value and instead it has a stated value of P3 per share.
The shares were issued at P5 per share.
(d) The shares were issued for P90,000 cash consideration.
(e) The shares were issued in exchange of land. The fair value of the land is P125,000.
(f) The shares were issued in exchange of land. The fair value of the land cannot be determined
reliably.
(g) The shares were issued in exchange of land. Assume that both the land and the shares’ fair value
cannot be determined reliably.
(h) The shares were issued in exchange of land. The fair value of the land is reliably measured at
P90,000.

PROBLEM 2: Isuance of Share for Cash

Sampaguita Corp. authorized the issuance of 1,000,000 ordinary share capital, Sampaguita sold the
following ordirar share capital during 2020:

Jan. 2 Sold 5,000 shares for P600,000

Mar. 23 Sold 20,000 shares for P2,500,000
June 15 Sold 10,000 shares for P1,000,000
Sept. 1 Sold 1,200 shares for P100,000
Dec. 1 Sold 3,000 shares for P310,000

REQUIRED: Prepare the journal entries to record the issuance of share, assuming that:
A. Shares are issued at P100 par value
B.Shares are issued at P80 stated value
C. Shares has no par or stated value

PROBLEM 3: Issuance of Shares for Non-cash Consideration

Camia Corp. has the following transaction during the year 2020:

a. Camia Corp. exchanged 1,000 ordinary shares of its P100 par value shares for an equipment.
Afew months ago, the equipment has fair value of P120,000. Camia shares are currently trading at
the Philippine Stock Exchange (PSE) at P130 per share.

b. Camia Corp. issued 20,000 ordinary shares of P100 par value in exchange for land and building
with total fair value of P4,000,000 of which 40% is attributable to the land.

c. Atty. Leo received 500 ordinary shares of P100 par value from Camia Corp. after rendering legal
services in getting the corporation organized. The fair value of such services is reliably determined
to be P60,000.

d. Camia Corp. issued 1,200 shares to Atty. Nero as compensation for 1,000 hours of legal services in
getting the corporation organized. Atty. Nero usually bills P1,000 per hour for legal services, On
this date, the shares were selling at P150 per share.

REQUIRED: Prepare the journal entries to record the above transactions.

PROBLEM 4: Issuance of Shares at Stated Value for Cash, Non-cash Assets, and Services

Rosal Corp. is authorized to issue 1,000,000 shares of ordinary share capital with stated value of
P50.

The following transactions of the corporation during the year are as follows:
a. Issued 150,000 shares for cash at stated value.
b. Issued 10,000 shares to Atty. Leignsy for legal services in organizing the corporation. The
fair value of the services was P600,000.
c. Issued 5,000 shares to Reign Lee, the corporate promoter. On this date, the shares are selling
at P60 pershare.
d. Issued 120,000 shares in exchange for equipment valued at P6,200,000.
e. Issued 20,000 shares at P55 per share.

REQUIRED: Prepare the journal entries to record transactions using the memorandum method.