BM2403

PART I (PROBLEM-SOLVING)
Determine the requirement for each of the following independent cases. Use a 10-column worksheet for the
solution. (5 items x 5 points: 2 points for correct letter; 3 points for correct solution)
Case 1: Fabi Corporation
During the year, Fabi Corporation issued 10,000 ordinary shares with a P100 par value and 20,000 convertible
preference shares with a P200 par value of P8,000,000. On the date of issuance, the selling price of ordinary
shares and preference shares are P360 and P270, respectively.

In addition, the company issued 6% bonds with a maturity value of P6,000,000 and 20,000 ordinary shares
with P100 par value for a total amount of P11,000,000. The market value of the ordinary shares cannot be
determined. If bonds were issued separately, the bonds would have sold for P5,000,000 on an 8% yield-to-
maturity basis.

1. What amount should be reported as share premium from preference shares?

a. P900,000 c. P400,000
b. P800,000 d. P700,000

2. What amount should be reported as a share premium from ordinary shares?

a. P4,000,000 c. P6,200,000
b. P2,200,000 d. P3,000,000

Case 2: Recayo Corporation

Recayo Corporation was organized at the beginning of the current year with 100,000 authorized shares of
P100 par value. During the current year, the following transactions occurred.

January 1 Sold 30,000 shares at P150 per share.

February 1 Issued 2,000 shares for legal services with a fair value of P250,000. The shares on this
date are quoted at P140 per share.
March 1 Purchased 5,000 treasury shares at P120 per share.
October 31 Issued P5,000,000 convertible bonds at 120. The bonds are quoted at 98 without the
conversion feature.
November 15 Declared a 2-for-1 share split when the market value of the share was P160.
December 15 Sold 20,000 shares at P75 per share.
December 31 The net income for the year was P2,000,000.

3. What amount should be reported as share capital at year-end?

a. P4,200,000 c. P6,200,000
b. P2,200,000 d. P3,000,000

4. What amount should be recognized as a share premium at year-end?

a. P2,000,000 c. P3,150,000
b. P3,000,000 d. P8,750,000

5. What is the total shareholders’ equity at year-end?

a. P2,000,000 c. P3,150,000
b. P3,000,000 d. P8,750,000

05 Quiz 3 *Property of STI

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