Shareholder’s Equity d.

issuance or exercise of share warrants

e. issuance of convertible bonds payable
COMPOSITION AND ISSUANCE
f. distribution of small stock dividends
(any excess of FV over par)
Corporation – artificial being created by operation
g. quasi reorganization or re-
of law, having the right of succession and the
capitalization
powers, authorities and properties expressly
authorized by law or incident to its existence.
3. Subscribed share capital
unissued until fully paid, possibility of
Shareholder’s Equity
partial payment
1. equity of a corporation
4. Subscription receivable – remaining
2. residual balance (asset-liab)
balance of subscriber
3. components of SHE
Treatment
3.1 contributed capital (add, credit)
a. current (12 mos) – receivable
3.2 OCI (add, credit)
b. noncurrent – contra-equity (deduct)
3.3 retained earnings (add, credit(debit, if
IF THE PROBLEM IS SILENT, CONTRA-
there is a loss)
EQUITY.
3.4 treasury shares (contra-equity
account) (deduct, debit)
Other Comprehensive Income
1. Real Account not Nominal Account
Contributed Capital (always @ issued price)
(accumulated and presented in the
1. Share Capital (always at par) if not given,
balance sheet)
times sa stated value
- revaluation surplus, unrealized
a. Ordinary share capital (common) –
gains/losses, actuarial gains/losses
real and ordinary
owners/stockholders, therefore they
Contra SHE – share subscription receivable &
have voting rights
treasury shares (deduct)
b. Preference share capital (preferred) –
priority, no voting rights, fixed (return
Retained Earnings
and has dividend rate) dividend=kita
1. AKA accumulated profit
Preference Dividends
2. RE, beg + Net income – dividends = RE,
1. cumulative – accumulate profits
end
from undeclared dividends from a
3. appropriated RE or reserved - restricted
past transaction
unappropriated RE – unrestricted
2. participating –with share in
excess over preference dividends
Treasury Shares
3. noncumulative – no
shares issued but reacquired by the corporation
accumulation
Reissuance of shares
4. nonparticipating – no share over
excess all share left is for ordinary
shareholders
Other Information
Number of shares xx
1. Authorized share capital – represents
Multiply: Par value xx
Share Capital (in Peso) xx maximum number of shares fixed in the
AOI that can be subscribed and issued for
2. Share Premium (APIC) shareholders
a. excess over par/stated value (issue 2. Outstanding Shares – shares issued in the
price-par value) hands of shareholders deducted by
b. resale of treasury shares @more than treasury shares
cost 3. Unissued share capital – portion of
c. donated capital authorized, not issued
 4. issued share capital – portion of authorized share capital already issued to shareholders, can
only be decreased through the retirement of shares
5. subscription – a contract between issuer and purchaser in which the purchaser promise to buy
shares
6. subscription receivable – unpaid portion of the subscriber
7. subscribed capital stock – portion of the authorized share capital already subscribed but not yet
issued
8. share capital – part of ASC already issued
9. share certificate – proof of ownership of shares

1. Authorization of Shares
ME JE
No entry Unissued Share Capital xx
Authorized Share Capital xx

1. Upon issuance of shares

ME JE
Cash/Asset xx Cash/Asset xx
Share Capital xx Unissued Share Capital xx

2. Upon subscription
ME JE
Cash/Asset xx Cash/Asset xx
Subscription Receivable xx Subscription Receivable xx
Subscribed Capital Stock xx Subscribed Capital Stock xx

3. Upon Collection of Sub. Receivable

ME JE
Cash xx Cash/Asset xx
Subscription Receivable xx Subscription Receivable xx

4. Upon full payment of sub. receivable

ME JE

Different Forms of Share Issuance

1. Cash
2. Property – can also be shares from other corporation
3. Services
4. On subscription – utang muna or w/ downpayment
Sample Problem 1 Property/Services
ABC Company acquired land with an equivalent cash price of 12M by issuing 100k shares of 100 par
ordinary share.

Exchange of property or services (order of priority)

1. FV of property/services
2. FV of shares issued
3. par value or stated value

Dr. Land 12M if par 10M

Cr. Ord. share capital @par 10M
Cr. Share Premium 2M

Sample Problem 2 Subscription

Ace subscribed to 1000 shares of 100 par value ordinary shares at par. A 25% downpayment was given
by Ace and the balance in 2 equal installments. Ace paid the first installment but defaulted in second.
The unpaid subscription was offered for sale. Advertising costs amounted to 5,000 pesos.

Issue price = par value – NO SHARE PREMIUM

Cash 25k
Sub. receivable 75k
Sub. share capital 100k

First annual payment

Cash 75/2 37,500
Sub. receivable 37,500

Delinquent shares
Highest Bidder
a. willing to pay the defaulted price
b. willing to pay the selling costs
c. willing to receive the smallest or least number of shares

To take up the receivable

Receivable from highest bidder 42500
(37500 + 5k)
Sub. receivable 37500
Cash 5k

Upon payment
Cash 42500
Receivable from highest bidder 42500

Issuance of shares
Subscribed share capital 100k
Ord. share capital 100k

No highest bidder = issued to the corporation hence, treasury shares.

 same entry for taking up the receivable
Issuance of shares to the corporation
Treasury shares 42500
subscription receivable 42500

REACQUISITION OF SHARES (TREASURY SHARES)

A. Issued 10,000 shares of 10 par for 12 pesos per share.
Cash 120k
O/S 100k
SP-O/S 20k
B. Reacquired 3,000 shares for 15 pesos. original reacquisition cost basis for subsequent treasury
cost basis share transactions
Treasury Shares 45k (3k x 15pesos)
Cash 45k
C. Sold 2,000 treasury shares for 18 pesos
Cash 36000 (2k x 18)
Treasury Share 30k
SP-T/S 6k
D. Reacquired 5,000 treasury shares for 21 pesos
Treasury Shares 75k (5kx15pesos)
SP – T/S 6k balance
RE 24k
Cash 105k (5k x 21pesos

Upon Retirement
- at par
- compute for SP per share SP/issued share (20k/10k)
Retired 3k shares at P15
O/S 30k
SP-O/S 6k
RE 9k
cash 45k (3kx15)

A. Retired 3k shares at 10
O/S 30k
SP-O/S 6k
Cash 10k
Paid in capital from retirement 6k

B. Retired 2k shares at 21
O/S 20k
SP-O/S 2k
Paid in capital from retirement 6k --------- ubusin muna yung paid in from retirement
RE 12k
Cash 42k (2kx21pesos)

Share Splits – increase in number of shares and decrease in par

Reverse share splits – decrease in number of share and increase in par value
O/S, 100 par, 10k shares 1M
SP 120k
RE 300k

Assume company effected 5 for 1 share splits

1st number – number of shares – 10k*5/1 = 50k
2nd number – par value – 100*1/5 = 20 pesos

Effect of Share Splits to O/S or share capital – no effect

Effect of share splits to number of shares - increase
Effect of share splits to par value - decrease

Assume company effected 1 for 5 share splits

1st number – number of shares – 10k*1/5 = 2k shares
2nd number – par value – 100*5/1 = 500 par