Scribd
Upload
23 views4 pages

Assignment 3

The document outlines various problems related to shareholders' equity for different corporations, detailing transactions such as share issuances, reacquisitions, sales, and dividends. Each problem requires calculations to determine treasury shares, ordinary shares, share premiums, retained earnings, and other equity-related figures. The document also includes scenarios involving debt restructuring and the implications of equity interests in lieu of debt repayment.

Uploaded by

kassandracanlas13
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
23 views4 pages

Assignment 3

The document outlines various problems related to shareholders' equity for different corporations, detailing transactions such as share issuances, reacquisitions, sales, and dividends. Each problem requires calculations to determine treasury shares, ordinary shares, share premiums, retained earnings, and other equity-related figures. The document also includes scenarios involving debt restructuring and the implications of equity interests in lieu of debt repayment.

Uploaded by

kassandracanlas13
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Problem 1

The Shareholders’ equity of LGM Corporation as of 2020 calendar year end is as follows:

Ordinary Shares, 10 par, 300,000 shares authorized 2,500,000


Share Premium – issuance 3,500,000
Retained Earnings 1,740,000

On June 1, 2021, LGM reacquired 40,000 ordinary shares at 40 each. The following transactions occurred
in 2021 with regard to these shares.

July 1 Sold 15,000 shares at 48


August 1 Sold 19,000 shares at 27
September 1 Retired 1,000 shares

The following entries were made by the company’s accountant to record the preceding transactions.

June 1 Treasury Shares 1,600,000


Cash 1,600,000

July 1 Cash 720,000


Treasury Shares 720,000

August 1 Cash 513,000


Treasury Shares 513,000

September 1 Ordinary Shares 10,000


Treasury Shares 10,000

The net income of LGM in 2021 amounted to 135,000.

Determine:

1. Treasury Shares
2. Ordinary Shares
3. Share Premium – Issuance
4. Share Premium – Treasury Shares
5. Retained Earnings
6. Adjusting entries (if applicable)

Problem 2

At the beginning of the current year, CP Corporation issued 10,000 ordinary shares of 20 par value and
20,000 convertible preference shares of 20 par value for a total of 800,000

Provided below are the fair market values of the ordinary shares and the preference shares, respectively.

Ordinary Shares 36 per share


Preference Shares 27 per share
Determine:
7. Amount of proceeds allocated to ordinary shares.
8. Amount of proceed allocated to preference shares.
9. Journal entry on the provided transaction.

Problem 3

At the beginning of the year, BOA Corporation was organized and authorized to issue 100,000 shares with
50 par value

During the current year, BOA had the following transactions in relation to shareholders’ equity.

a. Issued 10,000 shares at 70 per share


b. Issued 20,000 shares at 80 per share
c. Reported net income of 1,000,000
d. Paid dividends of 200,000
e. Purchased 3,000 treasury shares of 100 per share

Determine:

10. Share capital


11. Share premium
12. Shareholders’ equity

Problem 4

At the beginning of the current year, Khara was authorized to issue share capital of 100,000 shares with
50 par value. The entity had the following share capital transactions:

January 1 Issued 80,000 shares at 60 per share


May 1 Reacquired 40,000 shares at 65 per share
July 1 Approved a share split of 5 for 1
October 1 Issued a 10% share dividend when the market value per share is 25
December 31 Reissued all treasury shares at 30
December 31 Net income for the year amounted to 3,000,000

Determine:

13. Number of shares outstanding at year end


14. Share capital
15. Share premium
16. Total shareholders’ equity

Problem 5

The Shareholders’ Equity of PL Corporation showed the following data on December 31, 2024:

12% Preference Share Capital, 30 par 4,050,000


Ordinary Share Capital, 50 par 9,000,000
Share Premium – Preference Share Capital 1,080,000
Share Premium – Ordinary Share Capital 3,240,000
Retained Earnings 1,395,000

The 2025 transactions of the company relating to its equity are summarized as follows:

a. Issued 27,000 preference shares at 40.


b. Issued 94,500 ordinary shares at 70.
c. Retired 5,400 preference shares at 45.
d. Purchased 13,500 ordinary shares at 80.
e. Split ordinary share two for one.
f. Reissued 13,500 treasury shares at 50.
g. Shareholders donated to the company 9,000 ordinary shares, half of which was
reissued for 54. The market value of the shares at the time of donation was 52.
h. Dividends were paid at the end of the calendar year on the ordinary shares at 2 per
share and the preference at its preference rate.
i. Profit for the year was 2,520,000.
j. On December 31, 2025, the Board of Directors decided on appropriating 600,000 of
its retained earnings in anticipation of its planned branch opening in Sta. Rosa in 2026.

Determine:

17. Share Capital – Preference


18. Share Capital – Ordinary
19. Share Premium
20. Appropriated Retained Earnings
21. Unappropriated Retained Earnings
22. Total Equity

Problem 6

The Shareholders’ Equity of AP2 Corporation showed the following data on December 31, 2019:

Ordinary Share Capital, 100 par, 540,000 shares authorized 5,400,000


Share Premium 540,000
Retained Earnings 810,000

On May 10, 2020, AP2 issued 90,000 ordinary shares for 10,800,000. A 5% share dividend was declared
on September 30, 2020 and issued on November 10, 2020 to shareholders of record on October 31 2020.
Market value of ordinary share was 110 per share on declaration date. The profit of AP2 for the year
ended December 31, 2020 was 855,000

During 2021, AP2 had the following equity transactions:

Feb 15 AP2 reacquired 5,400 ordinary shares for 95 per share


May 15 AP2 sold 2,700 treasury shares for 120 per share
Jun 30 issued to shareholders one right for each share held to purchase two additional
ordinary shares for 125 per share. The rights expire on year end.
Aug 15 45,000 rights were exercised.
Sep 30 72,000 rights were exercised.
Dec 01 AP2 declared a cash dividend of 2 per share payable on January 15, 2022 to
shareholders of record on December 31, 2021
Dec 15 AP2 retired 1,800 treasury shares.

The fair value of the shares on selected days for the year 2021 were as follows:

Aug 15 130 per share


Sep 30 140 per share
Dec 15 150 per share
Dec 31 148 per share

Determine:

23. Share Capital, 2021 end


24. Share Premium, 2021 end
25. Retained earnings, 2021 end
26. Treasury shares, 2021 end

Problem 7

Due to extreme financial difficulties, ABC Co. had negotiated a restructuring of a one-year 10%, P5,000,000
note payable due on December 31, 2021. The unpaid interest on the note on such date is P500,000.

The creditor had agreed to reduce the face value to P4,000,000, forgive the unpaid interest, reduce the
interest rate to 8% and extend the due date three years from December 31, 2021.

Use 2 decimal places in computing for the present values.

Determine:

27. Gain or Loss on extinguishment of debt


28. Interest expense for 2022

Problem 8

DEF Company is experiencing financial difficulty and is negotiating debt restructuring with its creditor for
its 2,500,000 note payable to Bank-OK.

Bank-OK accepted an equity interest in Seal Company in the form of 200,000 ordinary shares which
currently has a fair market value of 12 and a par value is 10 per share.

The fair value of the note payable on the date of restructuring is 2,200,000.

Determine:

29. Gain from debt extinguishment


30. Gain from debt extinguishment, assuming the fair market value of the shares were not provided
31. Gain from debt extinguishment, assuming both the fair market value of the shares and the bonds
were not provided.

You might also like