Answers - V2Chapter 3 2012 PDF

CHAPTER 3
SHAREHOLDERS EQUITY
PROBLEMS
3-1.
(Budomo Company)
Cash (20,000 x 300)

Ordinary share
6,000,000
6,000,000
Legal expense/Professional fees

Ordinary share (250 x 300)
Share premium - Ordinary
Land
Building
Ordinary share (12,500 x 300)
1,000,000
2,950,000
Cash (6,500 x 380)

2,470,000
Cash (10,000 x 200)

2,000,000
90,000
75,000
15,000
3,750,000
200,000
1,950,000
520,000
3-2.
a.
Share premium-Ordinary
Cash
b.
c.
d.
e.
Land (3,500 x 560)

Share premium Ordinary
Cash
Preference share
Ordinary share
Share premium Preference
MV: Pref 5,000 x 800=4M
Ord 100,000 x 120 = 12M
Allocation:
Pref: 18M x 4/16 = 4.5M
Ord: 18M x 12/16 = 13.5M
Subscription receivable
Cash
Subscribed ordinary share
Land
Cash
Donated capital
1,500,000
500,000
60,000
60,000
1,960,000
700,000
1,260,000
18,000,000
2,500,000
10,000,000
2,000,000
3,500,000
450,000
150,000
500,000
100,000
5,000,000
40,000
4,960,000
Chapter 3 Shareholders Equity
3-3.
(Blazing Red Corporation)

Correction to the problem: RE balance on December 31, 2012, instead of 2010.
Shareholders Equity
Contributed capital
10% Preference share, cumulative and non-participating, P100 par
30,000 shares authorized; 12,000 shares issued and outstanding
Ordinary share, P10 par, 100,000 shares authorized, 30,000 shares
issued, 29,000 shares outstanding
Subscribed ordinary share, 4,500 shares
Subscription receivable Ordinary
Total contributed capital
Retained earnings
Appropriated for treasury share
P 15,000
Unappropriated
335,000
Treasury shares, 1,000 ordinary shares, at cost
Total shareholders equity
P1,200,000
300,000
45,000
(43,200)
275,000
77,000
P1,853,800
350,000
( 15,000)
P2,188,800
The total amount of P2,048,800 may also be obtained without necessarily preparing
the shareholders equity in good format (if not required) as follows:
Issue of 30,000 ordinary shares
Issue of preference shares in exchange of equipment
Subscriptions for 4,500 ordinary shares at 16
Subscriptions receivable (60%)
Purchase of 1,000 treasury shares at 15
Retained earnings
Total shareholders equity, December 31, 2012
3-4.
(Millennium Company)
(a)
(1)
Treasury share
Cash
(2)
(3)
(4)
(b)
350,000
1,475,000
72,000
(43,200)
(15,000)
350,000
P 2,188,800
140,000
140,000
Cash
Treasury share
Paid in capital from treasury chare
60,000
Cash
Paid in capital from treasury share
Retained earnings
Treasury share
65,000
4,000
1,000
Ordinary share
Share premium
Retained earnings
Treasury share
10,000
3,000
1,000
56,000
4,000
70,000
14,000

(1) Purchase of treasury share (10,000 x 14)
(2) Sale of treasury share (4,000 x 15)
(3) Sale of treasury share (5,000 x 13)
Net income for the year
26
P2,200,000
(140,000)
60,000
65,000
280,000
Dividends declared
(200,000)
P2,265,000
The total shareholders equity may also be obtained by determining the balance of
the shareholders equity accounts, as follows:
Ordinary Share, P10 par (99,000 shares issued and outstanding) P 990,000
Share Premium
297,000
Retained Earnings
978,000
P2,265,000
3-5.
(Consuelo Enterprises, Inc.)

(a)
Preference share (4,000 x 20)
Share premium Preference (4,000 x 1.60)
Retained earnings
Cash (4,000 x 22)
(b)
(c)
80,000
6,400
1,600
88,000

Retained earnings
Cash (4,000 x 26)
80,000
6,400
17,600

Cash (4,000 x 20.50)
PIC from retirement of preference
80,000
6,400
104,000
82,000
4,400
Average preference share premium per share

160,000 / 100,000 shares =
1.60
3-6.
(Concepcion Enterprises, Inc.)

(a)
Retained earnings
(b)
3-7.

Share premium Ordinary share
(Red Stone Company)

(a)
Retained Earnings ( 10,000 shares x P20)
Share Dividends Distributable
Share Premium
(b)
60,000
4,800
25,200
90,000
60,000
4,800
45,000
19,800
200,000
100,000
100,000

Ordinary Share Capital
100,000
Retained Earnings (30,000 x 10)

300,000

Ordinary Share Capital
300,000
27
100,000
300,000
300,000
(c)
3-8.
Memo: Effected a 2 for 1 stock split on 100,000 shares P100 par

previously issued and outstanding.
(Dark Red Company)

Capital structure:
Preference
20,000
P2,000,000
Number of shares outstanding

Total par value
(a)
Preference share is non-cumulative and non-participating
2011
Current preference dividends (9% x 2,000,000 =
180,000; dividends declared were P150,000 only.
Dividend per share
Preference
2012
Current preference dividends (9% x 2,000,000)
Excess (240,000 180,000)
Dividend per share
Preference
P 180,000
2013
Current preference dividends (9% x 2,000,000)
Excess (540,000 180,000)
Dividend per share
Preference
P 180,000
(b)
Ordinary
P0
P 150,000
P7,50
P9.00
P9.00
P0
Ordinary
P60,000
P0.24
Ordinary
P360,000
P1.44
Preference share is cumulative and non-participating.
2011
Current on preference is P180,000
Arrears, end (P180,000 150,000 = 30,000)
Dividend per share
Preference
P150,000
2012
Arrears, beginning
P 30,000
Current year
180,000
Total
P210,000
Excess to ordinary = 240,000 210,000
Preference
P0
P0
Ordinary
P210,000
P30,000
P10.50
2013
Current year
Excess to ordinary = 540,000 180,000
Dividend per share
Ordinary
P7.50
Dividend per share
(c)
Ordinary
250,000
P2,500,000
Preference
P180,000
P9.00
P0.12
Ordinary
P360,000
P1.44
Preference share is cumulative and fully participating
2011
Current dividends:
9% x 2,000,000 = P180,000
Arrears, end = 180,000 150,000 = 30,000
Dividend per share
28
Preference
Ordinary
P 150,000
P0
P 7.50
P0
3-9.
2012
Arrears, beginning
P30,000
Current on preference 180,000
To ordinary: initial limit 9% x P2,500,000
= P225,000, but remaining is only
Total dividends
Dividend per share
Preference
2013
Current dividends:
9% x 2,000,000
9% x 2,500,000
Excess: P135,000 x 2.0/4.5
135,000 x 2.5/4.5
Total
Dividend per share
Preference
Ordinary
P 210,000
P210,000
P10.50
P30,000
P30,000
P 0.12
Ordinary
P 180,000
P 225,000
60,000
P240,000
P12.00
75,000
P300,000
P1.20
Additional information: Preference has P100 par value per share.

Capital structure:
Number of shares outstanding
Total par value
(a) Preference is participating up to 14%.
2013
Current dividends:
9% x P2,000,000
9% x P2,500,000
Excess divided by total par
155,000/4,500,000 = 3.44%, which is
less than the limit of additional 5%;
therefore full excess is prorated.
P155,000 x 2M/4.5M
P155,000 x 2.5M/4.5M
Total
Dividend per share
(b) Preference is participating up to 12%.
2013
Current dividends:
9% x P2,000,000
9% x P2,500,000
Excess divided by total par
155,000/4,500,000 = 3.44%, which
exceeds the additional limit of 3%;
therefore, additional to preference is
limited to 3%; remainder goes to ordinary
3% x P2,000,000
P155,000 60,000
Total
Dividend per share
29
Preference
20,000
P2,000,000
Ordinary
250,000
P2,500,000
Preference
Ordinary
P180,000
P225,000
68,889
P248,889
P12.44
Preference
86,111
P311,111
P1.24
Ordinary
P180,000
P225,000
60,000
P240,000
P12.44
95,000
P320,000
P1.24
3-10. (Red Mama Company)

Retained Earnings
50% x 100,000 x 10 = 500,000
3-11
500,000
500,000

Ordinary Shares
Fractional Share Warrants Outstanding
500,000
Fractional Share Warrants Outstanding

Ordinary Share
PIC from Unexercised Fractional Share Warrants
100,000
(Red Ball Corporation)

October 31, 2012
Trading Securities
Unrealized Gain on Trading Securities
10,000 shares x (15 14)
Retained Earnings
Property Dividends Payable
10,000 shares x 15
400,000
100,000
80,000
20,000
10,000
10,000
150,000
150,000
December 31, 2012

Trading Securities
Unrealized Gain on Trading Securities
10,000 shares x (17 15)
Retained Earnings
20,000
20,000
20,000
20,000
February 28, 2013

Retained Earnings
30,000
30,000

Trading Securities
Gain on Disposal of Trading Securities
200,000
170,000
30,000
3-12. (Red Chili Company)

10/1/12 Depreciation Expense
Accumulated Depreciation Equipment
450,000/10 x 9/12
33,750
33,750
Retained Earnings
190,000
Assets Held for Distribution

Accumulated Depreciation Equipment
Property, Plant and Equipment
Cost
P450,000
Acc. Deprn 450,000/10 x 6
270,000
Carrying value
P180,000
180,000
270,000
30
190,000
450,000
FV(because it is higher)
P190,000
12/31/12 Impairment Loss

180,000 160,000 = 20,000
20,000
20,000
30,000
Retained Earnings
190,000 160,000 = 30,000 decrease
1/31/13
30,000
Retained Earnings
175,000 160,000 = 15,000 increase
15,000
15,000

Gain on Disposal of Assets
175,000
160,000
15,000
3-13. (Red Ribbon Corporation)

Total SHE
12/31/11 Balances
P16,500,000
2010 transactions:
a) 4,000 x 280
(1,120,000)
b) 8,000 x 75
(600,000)
c) 2:1 share split
d) 6,000 x 45
270,000
e) 4,000 x 46
f) 2,000 x 48
96,000
g) Profit
2,000,000
12/31/12 balances
P7,146,000
*P600,000 x 6,000/16,000 = 225,000
(a)
(b)
(c)
(d)
Preference
Shares
Issued
30,000
Ordinary
Shares
Issued
100,000
Treasury Share
Shares
Cost
(4,000)
100,000
26,000
200,000
8,000
8,000
(6,000)
4,000
(2,000)
P600,000
(225,000)*
12,000
P375,000

P17,146,000
Number of preference shares issued and outstanding
26,000
Number of ordinary shares issued
200,000
Number of ordinary shares outstanding(200,000 12,000)
188,000
Cost of remaining treasury shares
P
375,000
3-14. (Red Heart Corporation)

06/15/11 Cash
Ordinary share
09/30/11
Retained earnings (80,000 x 5% x 110)
6,000,000
5,000,000
1,000,000
440,000
Share dividends distributable (4,000 x 100)
400,000
40,000

11/10/11
12/31/11
Share dividends distributable

Ordinary share
Income summary
Retained earnings
400,000
400,000
1,175,000
1,175,000
31
03/01/12
05/01/12
Treasury share (3,000 x 95)

Cash
Cash (1,500 x 120)
Treasury share (1,500 x 95)
PIC from treasury share
285,000
285,000
180,000
142,500
37,500
08/10/12
Issued 82,500 rights to shareholders

entitling holders to purchase 2 additional
shares for P125 per share.
09/15/12
Cash (30,000 x 125)

3,750,000
Cash (80,000 x 125)

10,000,000
10/31/12
12/10/12
12/20/12
12/31/12
3,000,000
750,000
8,000,000
2,000,000
Retained earnings
Dividends payable (192,500 x 5)
962,500

Share premium Ordinary (1,000 x 10)*
Paid in Capital from Treasury Shares
Treasury share
*Share premium per share
300,000/30,000 = 10
100,000
10,000
Income summary
Retained earnings
962,500
15,000
95,000
1,200,000
1,200,000
3-15. (Red Carpet Company)

(a)
Total lump sum price is P147,000 (1,500 x 98), allocated as follows:
Securities
Preference
Warrant
Entry
(b)
Market value
90
10
Allocation
147,000 x 90/100
147,000 x 10/100
Cash
Share warrants outstanding
Cash (600 x 40)
Share warrants outstanding
Ordinary share
32
Allocated Price
132,300
14,700
147,000
45,000
87,300
14,700
24,000
11,760
6,000
29,760
3-16. (Red Hot Company)

(a)
Value of each option
Number of shares granted
Total value assigned to share options
Required service period
Annual compensation expense
(b)
1/1/12
12/31/12
12/31/13
12/31/14
12/31/15
P8
x 30,000
P240,000
3years
P 80,000
Memo: Granted share options to selected

senior employees for the purchase of
30,000 ordinary shares at P50 per share,
from January 1 to December 31, 2015.
Compensation Expense
Share Options Outstanding
80,000
80,000
80,000
80,000
Share options outstanding

Cash (30,000 x 50)
80,000
80,000
240,000
1,500,000
600,000
1,140,000
3-17. (Fire Red Company)

01/02/12 Memo: granted 40,000 share options to certain officers for the
purchase of the companys P100 par ordinary shares at P430 per share.
12/31/12
12/31/13
Compensation expense
(40,000 x 80) 4 years
800,000
(40,000 x 80) 4 years
800,000
800,000
800,000
2014
Memo: 8,000 share options were cancelled.
12/31/14
Total accrued compensation expense
(34,000 x 80) x 3/4
2,040,000
Less: previously accrued
1,600,000
Compensation expense-2008
440,000
12/31/15
01/01/14
(34,000 x 80) / 4
Cash (34,000 x 430)
Share options outstanding (34,000 x 80)
Ordinary shares (34,000 x 100)
33
440,000
440,000
680,000
680,000
14,620,000
2,720,000
3,400,000
13,940,000
3-18. (Red Fox Corporation)

(a) Compensation Expense
2012
200 10 15 = 175 employees x 100 options=17,500
17,500 x 32 = 560,000; 560,000 x 1/3
2013
2014
(b)
01/01/12
12/31/12
12/31/13
12/31/14
2015
2016
186,667
20010125=173 employees x 100 options=17,300

17,300 x 32 x 2/3 = 369,067; 369,067 186,667
182,400
200-10-12-8=170 employees x 100 options=17,000

17,000 x 32 = 544,000; 544,000 369,067
174,933
Granted 100 share options to each of its 200 employees to buy

P100 par ordinary share at P220 per share. The options are
exercisable starting January 1, 2011 provided that the employees
are still in the service. Options expire on December 31, 2012.
186,667
182,400
174,933
Cash (140 x 100 x 220)

Share Premium - Ordinary
186,667
182,400
174,933
3,080,000
448,000
2,800,000
728,000
Cash (10 x 100 x 220)

220,000
32,000

PIC from forfeited share options
64,000
200,000
52,000
64,000
3-19. (Cherry Red Company)

(a)
01/01/12 Memo: Granted 10,000 share options for the purchase of P100 par
ordinary shares at P120 per share. The options vest once the market
price of ordinary shares reached P200, up to Dec. 31, 2014 Options
expire at the end of 2015.
12/31/12
12/31/13
(10,000 x 20) / 3 years
66,667
(10,000 x 20) - 66,667
133,333
34
66,667
133,333
2014
Cash (10,000 x 120)

Ordinary Share Capital (10,000 x 100)
Share Premium-Ordinary
(b)
01/01/12
12/31/12
12/31/13
12/31/14
2015
(c)
1,200,000
200,000
1,000,000
400,000
Memo: Granted 10,000 share options for the purchase of P100 par
ordinary shares at P120 per share. The options vest once the market
price of ordinary shares reached P200. Options expire at the end of
2013.
(10,000 x 20) / 3 years
66,667
66,667
66,666
66,667
66,667
66,666
Cash (8,000 x 120)

Share Options Outstanding (80% x 200,000)
Ordinary Shares (8,000 x 100)
Share Premium-Ordinary
960,000
160,000
Share Options Outstanding (20% x 200,000)

PIC from Forfeited Share Options
40,000
800,000
320,000
40,000
If the stock price reached P200 by June 2015, the same entries will be made
for year 2012 through 2014, as given in (b) The recorded share options,
however, will be cancelled at the end of 2015, as the options already expire.
12/31/15

PIC from Forfeited Share Options
200,000
200,000
3-20. (Red Day Company)

(a)
01/01/12 Granted 80 share options to each of 400 employees for the
purchase of P100 par ordinary shares at P140 per share. Options
shall vest in 2012 if earnings increase by 15% or at the end of
2013 if average annual earnings for 2012 and 2013 increased by an
average of 12%.
12/31/12
12/31/13
2014
400 x 80 x 22 = 704,000
704,000/2 = 352,000
352,000
352,000
Cash (32,000 x 140)
352,000
352,000
4,480,000
35

Ordinary Share (32,000 x 100)
Share Premium Ordinary
(b)
704,000
3,200,000
1,984,000
The full amount of P704,000 is recognized as compensation

expense since the options vest already in 2012.
3-21. (Bloody Red Company)

01/01/12
Memo: Issued to its CEO share options for the purchase of ordinary shares at
a strike price of P50. The options are exercisable beginning January 1, 2015
and expire on December 31, 2016. The number of share options will be based
on the level of sales for 2014.
12/31/12
15,000 sh x 30 x 1/3
150,000
150,000
12/31/13
15,000 sh x 30 x 2/3
12/31/14
18,000 sh x 30 x 3/3
150,000
150,000
300,000
150,000
150,000
240,000
240,000
540,000
300,000
240,000
3-22. (Striking Red Corporation)

(a)
12/31/12 Compensation Expense
Share Appreciation Rights Payable
66,667
66,667
10,000 x (140 -120) x 1/3
12/31/13
133,333
133,333
10,000 x (150 - 120) x 2/3 = 200,000

200,000 66,667 = 133,333
12/31/14
10,000 x (165 - 120) = 450,000
450,000 200,000 = 250,000
250,000
250,000
(b) (1) Assuming that the rights were exercised on January 1, 2015, when the market
price is P165.
01/01/15

Cash
450,000
450,000
(b) (2) Assuming that the rights were exercised on December 31, 2015, when the
market price is P172.
36
12/31/15

Compensation Expense 10,000 (172 165)
Cash 10,000 x (172-120)
450,000
70,000
520,000
3-23. (Red Bull Corporation)

(a) Liability at December 31, 2012 = P89,333
December 31, 2013 = P208,000
December 31, 2014 = P394,000
12/31/12
12/31/13
10,000 x 26.80 x 1/3
89,333
118,667
89,333
118,667
10,000 x 31.20 x 2/3 = 208,000

208,000 89,333 = 118,667
12/31/14
186,000
186,000
10,000 x 39.40 = 394,000

394,000 208,000 = 194,000
2015

Cash 10,000 x (165-120)
3-24. (Ruby Red Company)

(a)
Fair value of the equity alternative
4,000 shares x 150
Fair value of debt component
3,600 shares x 158
Fair value of equity component 1/1/12
(b)
394,000
56,000
450,000
600,000
568,800
31,200
2012: 3,600 x 160=576,000; 576,000/3

31,200/3
Total compensation expense
192,000
10,400
202,400
2013: 3,600 x 165 x 2/3 = 396,000

396,000 192,000
31,200/3
204,000
10,400
214,400
2014: 3,600 x 168 = 604,800

604,800 396,000
31,200/3
208,800
10,400
219,200
2013: 2,700 x (172-168)
37
10,800
(b) Correction to the problem: One executive exercised his right to receive
the cash alternative on December 31, 2014, instead of 2012.
01/01/12
Granted each of the four executives the right to choose either

1,000 ordinary shares or to receive cash payment equal to 900
shares, conditional upon the completion of three years of service.
12/31/12
202,400
214,400
219,200
Share Options Outstanding x 31,200

Cash
PIC from Unexercised Share Options
31,200 / 4 = 7,800
604,800 / 4 =151,200
7,800
151,200
12/31/13
12/31/14
12/31/14
12/31/15
12/31/13
3-25
900 x 3 x (172 168)
Ordinary Share (3,000 x 100)
Share Premium Ordinary
31,200 x
10,400
192,000
10,400
204,000
10,400
208,800
151,200
7,800
10,800
10,800
23,400
464,400
300,000
187,800
(Red Santa Company)

RE, January 1, 2012
2012 Transactions
(1) 200,000 x 70%
(2) Dividends
On preference: 200,000 x P100 x 8%
On ordinary: 300,000 x P5
(3) 10,000 (150 130)
(4) Release of appropriation
(5) 45,000/300,000 = 15% bonus issue
45,000 x P150
(6) Appropriation for bond redemption
(7) Profit for the year
Balance, December 31, 2012
Total retained earnings, (P2,000,000 unavailable
for dividends)
38
Appropriated
P 4,000,000
Unappropriated
P9,000,000
(140,000)
(4,000,000)
2,000,000
P2,000,000
(1,600,000)
(1,500,000)
(200,000)
4,000,000
(6,750,000)
(2,000,000)
3,000,000
P3,810,000
P5,810,000
3-26. (Red Hat Company)

Retained earnings balance as of December 31, 2012
3,900,000 600,000 240,000
Total shareholders equity as of December 31, 2012
6,000,000 + 8,000,000 + 3,060,000
P 3,060,000
P17,060,000
(a)
Par value of preference share
Dividends in arrears (6,000,000 x 9% x 3 yrs.)
Excess to ordinary (17,060,000 7,620,000)
Total equity
Divide by the number of shares outstanding
Book value per share
Preference
P6,000,000
1,620,000
(b)
Liquidation value (60,000 shares x P105)
Dividends in arrears (P6,000,000 x 9% x 3 yrs.)
Excess to ordinary (17,060,000 7,920,000)
Total equity
Divide by the number of shares outstanding
Book value per share
Preference
P6,300,000
1,620,000
3-27. (Red, Inc.)

Retained Earnings
Inventory
P7,620,000
60,000
P 127
P7,920,000
60,000
P132
Ordinary
P9,440,000
P9,440,000
800,000
P 11.80
Ordinary
P9,140,000
P9,140,000
800,000
P11.425
300,000
300,000
Land
Buildings
Machinery and Equipment
Accum. Depreciation Buildings
Accum. Depreciation Machinery & Equipment
Revaluation Surplus
1,500,000
1,875,000
350,000
Revaluation Surplus
Retained Earnings
2,300,000
875,000
150,000
3,700,000
2,300,000
3-28. (Skinny Red Company)

(a) Retained Earnings
Accumulated Depreciation
Current Assets
Building
400,000
75,000
100,000
375,000
Ordinary Share
Ordinary Share
Share Premium
6,000,000
Share Premium
Retained Earnings
1,400,000
4,000,000
2,000,000
1,400,000
39
Skinny Red Company

Statement of Financial Position
Current Assets
P 400,000
Land
1,500,000
Building
4,625,000
Accumulated Depreciation ( 925,000)
Total
P5,600,000
Liabilities
Ordinary Share
Share Premium
P1,000,000
4,000,000
600,000
Total
P5,600,000
3-29. Same as 3-27.
MULTIPLE CHOICE QUESTIONS

Theory
MC1
MC2
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC10
MC11
C
D
B
B
B
C
C
C
A
C
C
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20
MC21
MC22
A
C
C
A
D
B
D
C
D
C
C
Problems
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
MC38
MC39
MC40
MC41
MC42
MC43
C
B
D
D
B
A
A
C
B
A
B
C
B
B
D
C
B
D
D
B
A
MC44
MC45
A
A
230,000 + 525,000 + 5,000 = 760,000

480,000 x 110/120 = 440,000; 440,000-400,000 = 40,000
(60,000 x 2) (5,000 x 2) = 110,000
125,000 x 3 = 375,000
375,000 [(12,000 x 3) + 5,000] = 334,000
20,000 x 9 = 180,000; 180,000/2 = 90,000 x 1/2 = 45,000
600,000 x 5 = 3,000,000
1,000,000 + (10,000 x 20) (2,000 x 20) = 1,160,000
7,000,000 + (35,000 x 70) = 9,450,000
2,000 x 8 = 16,000
70 (70/2) = 35
(5,000 x 80) (5,000 x 40) = 200,000
600 x 10 x 60% = 3,600; 6,000 3600 = 2,400
Interest expense for 2009 = 100,000 x 10% x 9/12 = 7,500
2,120,000 (2,000 bonds x 1,040) = 40,000
945,000/ 70 = 13,500; 13,500/90,000 = 15%
80,000 + (2,000,000 x 8%) = 240,000; 300,000 240,000 = 60,000
(3,000,000 x 5% x 2 years) 100,000 = 200,000 arrears, end
(110,000 + 10,000) x 2 = 220,000 issued; 220,000 (4,000 x 2) = 212,000
24,000+48,000=72,000; 108,000-72,000-24,000 = 12,000
72,000 + (12,000 x 4/6) = 80,000; 24,000 + (12,000 x 2/6) =28,000
80,000/4,000 = 20; 28,000/20,000 = 1.40
8,000,000 (10,000 x 70) 1,200,000 = 6,100,000
(15 x 2)/5 = 6.00
40
MC46
MC47
MC48
MC49
MC50
MC51
MC52
MC53
MC54
MC55
MC56
MC57
MC58
C
A
D
C
B
B
D
B
B
B
B
MC59
MC60
25,000 x 40 = 1,000,000; 10% x 2,500,000 = 150,000

1,000,000 + 250,000 = 1,250,000
(40,000x 105) (600 x 110) + (400 x 95) + 830,000 200,000 =
4,802,000
5,520,000 25,000 170,000 + 40,000 + 900,000 = 6,265,000
(2,000 x 85) (800 x 42.50) = 136,000
[3,000 x (50-20)] / 3 years = 30,000
4,500,000 x 95% = 4,275,000; 4,275,000/3 = 1,425,000
4,500,000 x 94% x 2/3 = 2,820,000; 2,820,000 1,425,000=1,395,000
(4 x 200 x 300) x = 120,000
(90% x 7 x 200 x 300) 120,000 = 258,000
360,000 70,000 = 290,000; 290,000/5,000 = 58
3,150,000/ 50,000 = 63
3,150,000 (5,000 x 120) = 2,550,000; 2,550,000/50,000 = 51
RE = 1,000,000; cumulative dividends in arrears = 5,000,000 x 8% x 3
years = 1,200,000, but dividends are limited to the extent of RE balance of
P1,000,000; Thus, equity of ordinary share is 13,500,000 5,000,000
1,000,000 = 7,500,000; 7,500,000/ 750,000 shares = P10
13,500,000 (50,000 x 106) 1,000,000 = 7,200,000 ; 7,200,000/750,000
shares = 9.60
(200,000 x 2) + (200,000 x 5) 950,000 = 450,000
41

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CHAPTER 3

Cash (20,000 x 300)

Legal expense/Professional fees

Cash (6,500 x 380)

Cash (10,000 x 200)

Land (3,500 x 560)

Chapter 3 Shareholders Equity

(Blazing Red Corporation)

Total shareholders equity, December 31, 2011

Chapter 3 Shareholders Equity

(Consuelo Enterprises, Inc.)

Preference share (4,000 x 20)

Preference share (4,000 x 20)

Average preference share premium per share

(Concepcion Enterprises, Inc.)

Preference share (3,000 x 20)

(Red Stone Company)

Share Dividends Distributable

Retained Earnings (30,000 x 10)

Share Dividends Distributable

Chapter 3 Shareholders Equity

Memo: Effected a 2 for 1 stock split on 100,000 shares P100 par

(Dark Red Company)

Number of shares outstanding

Preference share is non-cumulative and non-participating

Preference share is cumulative and non-participating.

Dividend per share

Preference share is cumulative and fully participating

Chapter 3 Shareholders Equity

Additional information: Preference has P100 par value per share.

Chapter 3 Shareholders Equity

3-10. (Red Mama Company)

Share Dividends Distributable

Fractional Share Warrants Outstanding

(Red Ball Corporation)

December 31, 2012

February 28, 2013

Property Dividends Payable

3-12. (Red Chili Company)

Assets Held for Distribution

Chapter 3 Shareholders Equity

12/31/12 Impairment Loss

Property Dividends Payable

Property Dividends Payable

3-13. (Red Ribbon Corporation)

Total shareholders equity

3-14. (Red Heart Corporation)

Retained earnings (80,000 x 5% x 110)

Share dividends distributable (4,000 x 100)

Share premium Ordinary

Share dividends distributable

Chapter 3 Shareholders Equity

Treasury share (3,000 x 95)

Issued 82,500 rights to shareholders

Cash (30,000 x 125)

Cash (80,000 x 125)

Ordinary share (1,000 x 100)

3-15. (Red Carpet Company)

Chapter 3 Shareholders Equity

3-16. (Red Hot Company)

Memo: Granted share options to selected

Share options outstanding