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Shareholders Equity
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FINANCIAL ACCOUNTING

SHAREHOLDERS EQUITY

1. An enty issued 10,000 ordinary shares of P 100 par value in exchange for land wih a fair value
of P 1,500,000. The fair value of he shares issued is P 180 per share or a oal of P 1,800,000.

If he fair value of he land is used, he enry is:

Land 1,500,000
Ordinary share capial 1,000,000
Share premium 500,000

If he fair value of he share is used, he enry is:

Land 1,800,000
Ordinary share capial 1,000,000
Share premium 800,000

If he par value of he share is used, he enry is:

Land 1,000,000
Ordinary share capial 1,000,000

2. For insance, if 1,000 ordinary shares of P 100 par value are issued o lawyers for heir legal
services in geng he corporaton organized, and he fair value of such services is reliably
deermined o be P120,000, he enry is:

Legal expenses 120,000

Ordinary share capial 100,000
Share premium 20,000

3. The accouns shown below appear in he December 31, 2014 rial balance of Hollow
Corporaton:
Preference share, auhorized, P 50 par 10,000,000.00
Unissued preference share 3,600,000.00
Ordinary share, auhorized, P 20 par 4,000,000.00
Unissued ordinary share 2,000,000.00
Subscripton receivable, pref erence share 380,000.00
Subscripton receivable, ordinary share 360,000.00
Subscribed preference share 600,000.00
Subscribed ordinary share 440,000.00
Treasury share, preference, a cos 1,360,000.00
Share premium 1,700,000.00
Accumulaed pros and losses 2,000,000.00
All subscripton receivables are due in year 2015

How much is he oal shareholders’ equiy of Hollow Corporaton?

a. P 11,040,000 c. P 12,400,000
b. P 11,780,000 d. P 13,760,000
 

FINANCIAL ACCOUNTING

Answer: B

Preference share issued (P10,000,000 - P 3,600,000) 6,400,000.00

Ordinary share issued (P4,000,000 - P 2,000,000) 2,000,000.00
Subscribed preference share 600,000.00
Subscribed ordinary share 440,000.00
Share premium 1,700,000.00
Accumulaed pro 2,000,000.00
Treasury share (1,360,000.00)
Shareholders' equiy 11,780,000.00

Types of Share Capial:

Ordinary shares  – are normal shares issued by a company. The normal righs of ordinary
shareholders are o voe a company meetngs and o receive dividends from pros. Ordinary
shares are oen referred o as equiy shares. The ordinary shareholders are he real owners of 
he business.

Preference shares  – are shares carrying a xed rae of dividend, he shareholders have a prior
claim o any company pros available for disributon. They may also be called preferred
shares.

Subscripton receivable and oher receivable from sale of share should be reeced in he
shareholders’ equiy secton as a reducton from he relaed subscribed share capial. However,
subscriptons receivable collectble wihin one year may be shown as curren asses.

4. Seam Company disclosed he following informaton for he year ended December 31, 2014:
Bonds Payable 300,000.00
Share premium on ordinary share 50,000.00
Donaed capial 40,000.00
Treasury share a cos 20,000.00
Ordinary share capial, par P100 500,000.00
Ordinary share opton warrans 100,000.00
In vesmens in A vailable f or sale securites 7 0,0 00. 00
Share premium from reasury share 15,000.00
Accumulaed pros and losses 135,000.00

Wha is he oal shareholders’ equiy of Seam Company or he year ended December 31,
2014?

a. P 720,000 c. P 820,000
b. P 760,000 d. P 860,000
Answer: C
 

FINANCIAL ACCOUNTING

Ordinary share capial, par P100 500,000.00

Share premium, ordinary share 50,000.00
Share premium, reasury share 15,000.00
Ordinary share opton warrans 100,000.00
Donaed capial 40,000.00
Accumulaed pros and losses 135,000.00
Treasury share, a cos (20,000.00)
Toal Shareholders' Equiy 820,000.00

5. Corridor Company issued 6,000 shares of is P 100 par ordinary share o Max L. as compensaton
for 1,000 hours of legal services performed. Max L. usually bills P 500 per hour for legal services.
On his dae of issuance, he share was selling a a public rading a P 150 per share. By wha
amoun should he share premium accoun of Corridor Company increase as a resul of he
issuance of hose shares?

a. P 300,000 c. P 900,000
b. P 600,000 d. P 3,000,000
Answer: A

V alue of he service ( 6,0 00 shares x P 1 50) 9 00,0 00 .00

Less: par value of he share ( 6,0 00 x P 1 00 ) 6 00,0 00 .00
Share premium 300,000.00

PFRS 2, paragraph 10: “For equiy-seled share based paymen ransactons, he enty shall
measure he goods or services received, and he corresponding increase in equiy, direcly, a
he fair value of he goods or services received, unless ha fair value canno be estmaed
reliably. If he company canno estmae reliably he fair value of goods or services received, he
enty shall measure heir value and he corresponding increase in equiy, indirecly, by
reference o he fair value of he equiy insrumens graned.”

Journal enry o record he ransacton:

Professional fee 900,000

Ordinary share capial 600,000
Share premium 300,000

6. On July 1, 2014, Boom exchanged 20,000 shares of is P 200 par value of equiy shares for land.
A few monhs ago, he land was appraised by an independen appraiser a P 5,000,000. Boom
shares are currenly raded a he sock exchange a P 300. The earnings per share is P 40. How
much should be debied o land accoun?

a. P 4,000,000 c. P 6,000,000
b. P 5,000,000 d. P 7,000,000

7. Maryr Company issued 15,000 shares of is P100 par ordinary share in acquiring a land ha was
recenly appraised a P 1,700,000. The ordinary share is actvely selling a P 120 per share. Wha
is he amoun of share premium o be credied on he issuance of shares?

a. P 200,000 c. P 500,000
 

FINANCIAL ACCOUNTING

b. P 300,000 d. P 600,000

8. Ribbon Company issued 10,000 of is 6% preference share; par P 100, a P 125 per share. Each
share carried a deachable share warran for one share of Ribbon’s ordinary shares, P 40 par, a
a specied opton price of P 50 per share. Immediaely aer issuance, he marke value of 
Ribbon’s preference share was P 1,140,000 and he warran was P 60,000. Wha porton of he
proceeds should be credied o ordinary share warrans ousanding?

a. None c. P 62,500
b. P 60,000 d. P 250,000

9. The Magic Lamp Corporaton was incorporaed on January 1, 2014, wih following auhorized
capializaton:

 40,000 ordinary shares, no par value, saed value P40 per share
 10,000 shares of 5% cumulatve preference share, par value P 10 per share

During 2014, Magic Lamp issued 24,000 ordinary shares for a oal of P 1,200,000 and 6,000
preference share a P 16 per share. In additon, on December 19, 2014, subscriptons for 2,000
preference shares were paid for on January 2, 2015. Wha should Magic Lamp repor as oal
conribued capial in is December 31, 2014 balance shee?

a. P 1,040,000 c. P 1,294,000
b. P 1,262,000 d. P 1,330,000

10. The shareholders equiy secton of Fan Company revealed he following informaton on
December 31, 2014:

Preference share (100 par), P 2,300,000; share premium in excess of par preference,
P 805,000; ordinary share (p15 par), P 5,250,000; share premium in excess of par –ordinary,
P 2,750,000; subscribed ordinary share, P 50,000. Accumulaed pros and losses,
P 1,900,000; and subscriptons receivable ordinary; P 400,000. How much is he legal
capial?

a. P 7,550,000 c. P 11,150,000
b. P 7,600,000 d. P 13,055,000

11. The Goa Corporaton is auhorized o issue 100,000 shares a P 20 par ordinary share. A he
beginning of 2014, 18,000 ordinary shares were issued and ousanding. These shares had been
issued a P 27 per share. During 2014, he company enered ino he following ransactons:

January 2 Issued 1,300 ordinary shares a P28 per share.

March 19 Exchanged 12,000 ordinary shares for a machine

The ordinary share was selling a P 30 per share.

May 8 Reacquired 500 ordinary shares a P29 per share.

July 19 Acceped subscriptons for 1,000 ordinary shares a P 31 per share. The
conac called for 10% down paymen wih he balance due on December
1.
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