Corporation

- As per Corporation code of the Philippines Section 2

- it is defined as an artificial being created by operation of law having the right of succession and the powers, att
expressly authorized by law or incident to its existence.

a. incorporation
b. issuance of shares
c. limitations of dividends
d. defenition of legal capital
e. procedures for retirement of stocks

Artificial being - separate and distinct personality from the shareholders.

Legal personality - created y operation of law and as such is a juridical person with rights, powers and duties
Right of succession - shall exist for a period until its term, and can be extended, has a capacity of continuous exis
Corporate ownership - the interest is divided into shares of stock.
Limited Liability - shareholders cannot be liable for acts nor are they liable for corporate debts
Transfer of interest - shares of stock may be sold or transferred without consent of other stockholders. Such sale

Advantages and disadvantages

1. Capital
2. Libaility to corporate creditors
3. Transferability of interest
4. Continued existence
5. Skilled management
6. Tax Liability
7. Legal requirements
8. Lac of control
- Owners (Shareholders) - Corporators for stock and members for non stock
- Policy Makers (BOD) - oversee the opertion
- Managers (President/ CEO) - day to day operation

Kinds of Corporation
1. Private corporation
- stock
- non stock
2. Public corporation - government corporation
3. Close corporation - privately held
4. Open corporation - publicly held

Kinds of stock
1. As to value
- Par value Fixed value stated in stock certificate and articles of incororation, canno
 - No par value - cannot be sold less than P5.00

2. As to right
- Ordinary voting
- Preferred non voting

Legal Capital
- minimum permanent investment from the shareholders
- Trust fund doctrine

Rights of a shareholder
1. Share in the corporate profits at the discretion of the BOD, exempted for Treasury shares.
2. Vote and attend annual stockholder's meeting
3. Share in the distribution of assets upon liquidation of thr business
4. Sell or dispose of their shares
5. Receive the same dividends given to all ordinary shareholders
6. Receive timely financial reports
7. Purchase of additional shares of stock whenever there is an increase in the authorized capitla stock of the corp

Things to remember
1. Asset contribution may be the form of
a. cash
b. property
c. service
2. Following the Cost Principle, properties must be recorded at:
a. FMV of the property
b. FMV of the shares to be issued
c. Par value
3. Services must be recorded at its billed price
4. For par value stock, Share Capital and Subcribed Share Capital must be recorded at the par value. Subscribed s
5. Subscription receivable is recognized at the subscription price which may be above par.
6. Excess contribution can be recorded to APIC, Share Premium and Paid in excess of PAR
ccession and the powers, attributes, and properties

ghts, powers and duties

a capacity of continuous existence and cannot be dissolved

other stockholders. Such sale does not affect the operations

rticles of incororation, cannot be below par

ized capitla stock of the corporation. (Pre emptive right)

t the par value. Subscribed share captal is credited when stock certificate is issued. It is being issued when it is fully paid.
sued when it is fully paid.
Par Value Stock

1. Authorization

2. Shares sold at PAR.

Issued for cash 1,500 shares at the par value of P 200.

3. Shares issued at Par in exchange of service

100 shares were given to Atty. Pacifico for legal services rendered

4. Shares sold at a premium in exchance for land

Issued 3000 shares for land received from a shareholder valued a 750000

5. Shares sold for cash at a premium

Received 50,000 cash from a shareholder and issued 240 shares.

6. Shares subscribed at par with a down payment

Received subscription for 100 shares at par from a shareholder who paid 50%

7. Subscription balance paid in full and certificate issued

Balance of the subscription is collected in full

8. Subscription at a premium with a down payment

Received subscription for 250 shares at 220 per hare. Received a 50% down payment, balance callable after 30 days

9. Balance of subscription paid in full. And a stock certificate is issued

 Memorandum Entry Journal Entry Method

e callable after 30 days

Par Value Stock

Mercedez Corporation is authorized to issue 100,000 shares at P 50 par value. On August 1, 2014 five incorporators

INCORPORATORS Shares subscribed at par

Aida Asis 7,500

Barbara Bello 10,000
Carlota Cruz 15,000
Daria Domingo 8,000
Estela Enriquez 12,500
53,000

The subscription contract calls for collection of 50% of the balance on August 31, and the remainder 30 days after. A

August 5 Penny Frances paid 55,000.00 for 1,000 shares

August 15 The lawyer Atty. Pasco was given 500 sahres for legal services billed at 25,000.

August 19 Received a piece of land costing 50,000 and issued 1,400 shares to Glo Gomez. Fair market value of th

August 23 Grace Quilatan and Helen Quilatan subscribed to 500 shares each at a subscription price of 54 per sha

August 30 Aida and Barbara paid in full and certificates were issued to them

August 31 The incorporators paid their balance due.

Sept 7 Received 10,000 from another shareholder Issued a certificate for 175 shares.

Sept 14 Helen paid another 25%. Grace paid in ufll and was issued a certificate.

Sept 23 Another subscription was received for 150 shares at 52 per share and collected 25% as down payment

Sept 30 The incorporators paid their balance in full

Memorandum Entry
ust 1, 2014 five incorporators made the following subscriptions with the corresponding down payments

Down Payment

93,750.00
125,000.00
175,000.00
100,000.00
150,000.00
643,750.00

he remainder 30 days after. Additional stock transaction follow:

omez. Fair market value of the land is 75,000.00

bscription price of 54 per share gave a 25% down payment.

ected 25% as down payment

Jorunal Entry Method

Non Par Value Stock

1 Authorization

2. Rolly Perez subscribed to 500 shares at 80. A down payment of 10,000 was received

3, Received a bill from Atty. Gaspar for legal services, 25,000. Issued 200 shares.

4. Received a piece of land worth 500,000. Issued a certificate for 8,000 shares.
Authorized to issue 2,000 shares no par value, stated value of P 50.
Assume that on January 2, Makati Corporation was authorized to issue 18% cumulative 5,000 preference shares of a
The incorporators subscribed to 25% of the preferred shares and 30% of the ordinary shares at the stated value. A 2
in two equal installments on February 28 and March 30: Additional transactions follow:

15-Jan 100 ordinary shares were sold for cash at 220 per share

20-Jan 200 ordinary shares were subscribed at 120 and a 50% down payment was received

25-Jan 200 preference shares were issued in exchange for land worth 50,000.

19-Feb Subscription made on January 20 were collected in full. Certificate of stocks were issued.

25-Feb 500 preference shares were sold for cash at 220 per share.

28-Feb The incorporators paid the first installment due on the preference and oridnary shares

7-Mar 700 ordinary shares were subscribed at stated value. Received 20,000 as down payment

17-Mar 500 preference shares were subscribed at 210 per share. Received 25% down payment

27-Mar The subscribers of March 7 paid 30,000.

30-Mar The incorporators paid the installment due. Stocks certificate were issued
ative 5,000 preference shares of a par value of 200 and 10,000 ordinary shares of no par but with stated value of 100.
ary shares at the stated value. A 25% down payment was required on each class of stock with the balance due

nt was received

stocks were issued.

d oridnary shares

0 as down payment

5% down payment
with stated value of 100.
the balance due
A subscribed to 100 common shares on June 1 at the par value of 100. A 25% down payment was given by A, the ba
He paid the first installment but defaulted in the second installment. The inpaid subscription was offered for sale in
D made a bid for 90 shares, E for 75 shares and F for 80 shares. E being the highest bidder paid the amount due plu
n payment was given by A, the balance payable in two equal installments, on June 30 and July 30.
bscription was offered for sale in public auction. Advertising cost amounted to 500.
bidder paid the amount due plus interest of 425. Stock certificate were issued to A and E
 1-Nov 200 shares par 50 were reacquired at 55 per share.

15-Nov 100 of the treasury shares were sold at 60 each.

25-Nov 50 of the treasury shares were sold at 40 each

30-Nov Remaining treasury shares were canceled or retired.

18% Preference shares, par value 100, 10,000 shares issued and outstanding
Ordinary shares, par value of 50, 5,000 shares issued and oustanding
Retained earnings

No dividends were declared for the past two eyars

The board declared of dividends of 600,000.00

Case A - Preference share is non-cumulative and non participating Preference Ordinary

Total - -

Case B.- Preference share is cumulative but non-participating Preference Ordinary

Total - -

Case C - Preference share is cumulative and fully participating Preference Ordinary

Total - -

Case D - Preference share is non cumulative and fully participating Preference Ordinary

Total - -

Case E - Preference share is non-cumulative but participating up to 20% Preference Ordinary

Total - -
 1,000,000.00
250,000.00
1,850,000.00

Total
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