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Chapter 8corporation Formation Exercises
Chapter 8corporation Formation Exercises
Chapter 8corporation Formation Exercises
A. The Banco de Plata was organized on April1, 2018 and is authorized to issue 250,000 shares of Ordinary
Share Capital. Thereafter, 62,500 shares were issued at P 25 per share. Prepare the journal entries to
record the authorization of the share capital and the issuance of the 62,500 shares using the memorandum
entry method and the journal entry method under of the following independent cases:
B. The League Corporation is authorized to issue 100,000 shares of Ordinary Share Capital with a par value of
P 20. The following transactions took place in relation to the share capital:
Prepare journal entries to record the above transactions including authorized capital dated May 2, using the
memorandum method.
C. On March 1, 2018, Plain, Inc. sold 40,000 shares of its P 30 par value Ordinary Share Capital on a
subscription basis at P 50 per share. The corporation received a 30% down payment on the date of
subscription. On March 10, 2018, the corporation collected the balance of the subscription and issued the
certificates.
D. Faith Corporation was organized on January 2, 2018 and is authorized to issue 25,000 shares of 10%
Preference Share Capital, P 50 par and 250,000 shares of Ordinary Share Capital, P 20 stated value.
Jan 2 Issued to incorporators 62,500 ordinary shares at P 25 per share and 6,250 preference shares at
par value.
6 Issued 1,250 shares to corporate promoters. The value of preference share capital on this date is
P 70 per share.
10 Received subscriptions for 85,000 ordinary shares at P 30 per share with a down payment of 60%
of the subscription price.
19 Issued 25,000 ordinary shares in exchange for the following:
Fair value
Merchandise Inventory P 10,000
Land 350,000
Building 200,000
Equipment 20,000
28 Received balance due on the Jan. 10 subscription and issued the certificates.
Required: Prepare the journal entries to record above transactions.
E. Marvel Corporation was authorized to issue 100,000 ordinary shares with a stated value of P 20. The
following transactions have taken place in relation to the share capital:
Aug 1 Received subscriptions for 25,000 shares at 30 receiving a 40% down payment.
5 Received balance due from subscribers of 10,000 shares and issued the certificates to the
subscribers.
12 Received balance due from subscribers of 12,000 shares and issued the certificates to the
subscribers.
20 The subscriber of the remaining shares failed to pay his delinquency and was declared
delinquent.
21 Paid delinquency sale of P 15,000
25 Received payment from the highest bidder and issued the certificates.
F. The Silver Ray Corporation was organized on January 1, 2018 with authorized share capital consisting of
50,000 preference shares with a par value of P 50 and 1,000,000 of no-par ordinary shares with a stated
value of P 10 per share. At December 31, 2018, the ledger included the following balances pertaining to
shareholders’ equity.
10,000 preference shares were issued in exchange for equipment having a fair value of P 550,000. The
remaining preference shares were issued for cash. All ordinary shares were issued for cash.
G. Shown below are account balances found in the ledger of Honesty Corporation at the end of year 2018:
Subscription Receivable-Preference Share P 360,000
Subscription Receivable-Ordinary Share 182,000
8% Preference Share Capital, P 50 par value,
80,000 shares authorized
Issued P 1,440,000
Subscribed 720,000 2,160,000
Ordinary Share Capital, no par, P 10 stated value
320,000 shares authorized
Issued P 1,360,000
Subscribed 280,000 1,640,000
Additional Paid In Capital
Preference Share Premium P 216,000
Paid-In Capital In Excess of Stated Value 328,000 544,000
H. Below is a partial list of account titles and balances for the TNT Corporation as of December 31, 2018.
Cash P 320,000
Notes Receivable 24,000
Preference Share Capital, P 100 par, 10,000 shares authorized 400,000
Ordinary Share Capital, P 20 par, 100,000 shares authorized 1,000,000
Preference share premium 150,000
Ordinary share premium 200,000
Retained Earnings 250,000
Accounts Payable 150,000
Sales 950,000
I. On July 1, 2018, Alaska Corp. issued 6,000 shares of its P 100 par ordinary share to Atty. Black as
compensation for 1,000 hours of legal services performed during incorporation. Atty. Black usually bills
P 500 per hour for legal services. On this date of issuance, the share was selling at a public trading at P 150
per share. By what amount should the Share Premium account of Alaska Corp. increase as a result of the
issuance of those shares? __________________________
J. Carnation Inc. issued 15,000 shares of its P 100 par ordinary share in acquiring a land that was recently
appraised at P 1,700,000. The ordinary share is actively selling at P 120 per share. What is the amount of
Share Premium to be credited on the issuance of shares? _____________________________
K. The shareholder’s equity section of Angel Inc. showed the following data on December 31, 2018:
L. On October 1, 2018, Branded Corporation exchanged 20,000 shares of its P 200 par value of Ordinary Shares
for land. A few months ago, the land was appraised by Mr. Roy, an independent appraiser, at P 5,000,000.
Branded shares are currently traded at the stock exchange at P 300. How much should be debited to land
account? _______________________
M. Suave Inc. was organized on January 1, 2018 with authorized ordinary share capital of P 2.000,000, P 50 par
value. Subsequently, incorporators subscribed for 25,000 ordinary shares at P 54. How much must be paid
up upon subscription to comply with the requirement of the SEC? ________________________