[SHAREHOLDERS’ EQUITY] AUDITING/FAR

Problem 1
Spring Company’s adjusted balance at December 31, 2017 includes the following account balances:
 8% Preferred Stock(preference shares), P100 P900,000.00
 Common Stock(ordinary shares), P3 par P500,000.00
 Subscribed common stock(subscribed ordinary share) P400,000.00
 Subscription Receivable(on ordinary share) P150,000.00
 Additional paid-in capital (share premium) – CS P300,000.00
 Additional paid-in capital (share premium) – PS P250,000.00
 Retained Earnings: Appropriated for uninsured earthquake losses P100,000.00
 Retained Earnings: Unappropriated P200,000.00
 Treasury stock at cost P70,000.00
 Net unrealized loss on non-current marketable equity securities P40,000.00
 Net unrealized gain on foreign currency translation adjustments P25,000.00
 Revaluation Surplus P280,000.00
The amount that Spring Company should report as total SHE in its December 31, 2017 balance sheet is?

Problem 2
The accounts below appear in the December 31, 2017 trial balance of Summer Company:
 Authorized common stock (Ordinary Shares) P10,000,000.00
 Unissued common stock (Ordinary Shares) P4,000,000.00
 Subscribed common stock P3,000,000.00
 Subscription Receivable P1,000,000.00
 Additional paid-in capital (share premium) P4,000,000.00
 Retained Earnings: Appropriated P2,500,000.00
 Retained Earnings: Unappropriated P2,000,000.00
 Treasury stock at cost P500,000.00
 Revaluation Increment P1,500,000.00
The amount that Summer Company should report as total SHE in its December 31, 2017 balance sheet is?

Problem 3
Prepare the necessary journal entries for each independent situation:
a) Issued 10,000 shares of its P10 par value common stock at P20 per share.
b) Issued 20,000 shares of its no par but with stated value of P20 per share for P70 per share.
c) Issued 30,000 shares of its no par, no stated value common shares for P60 each
d) Issued 40,000 shares of its P50 par value common stock for P90 each, and incurred direct stock issue
costs (legal and accounting fees, printing costs, documentary stamps) of P60,000; management salaries
and indirect costs of P20,000.
e) Issued 20,000 shares of its P50 par value common stock for P55 each and incurred direct stock issue
costs of P110,000
f) Issued subscription contracts for 5,000 shares of its P5 par value common stock at P25 per share. The
terms of the subscription are 40% down and the balance at the end of six months.
g) Issues 5,000 shares of its P30 par common stock and 1,000 shares of P100 par preferred stock for a
lump sum price of P200,000. The stocks were quoted at P34.5 and P115 at the time issuance.
h) Acquired an under developed land having an appraised value of P1,500,000 by isuuing 25,000 shares of
its 10 par value common stock. The land’s carrying amount was P1,400,000. At the time of exchange,
the common stock was trading at P62 per share in an organized exchange.
i) Issued 4,000 shares of its P100 par value preferred stock in exchange for customer’s list of a
competitor that was going out of business. The customer list was valued by an independent consultant
at approximately P800,000. The preferred stock was not actively traded. However, the president of the
company estimated that the stock was worth about P500 per share.
j) Issued 5,000, P10 par value of its common stock to a Company in payment of a bill for P65,000 for
services rendered in helping the company to incorporate.

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 [SHAREHOLDERS’ EQUITY] AUDITING/FAR

k) Issued 40,000 shares having a par value of P5 in settlement of financial liability. The carrying amount of
the financial liability was P320,000. The shares were quoted at P9.

Problem 4
On January 1, 2017 Winter Company has 10,000 par value convertible preferred stocks outstanding which it
has originally issued for P120. The conversion feature allows the holder for each preferred shares 3 of Winter’s
Company’s P30 par value common stock. On June 30, 2017 when the market value of the common stock was
P42 the entire preferred shares were converted. No additional common shares were issued subsequent to the
conversion. The share premium- comoon recorded arising from the conversion of the preferred shares is?

Problem 5
The Original sale of the P50 par value common shares of Fall Company was recorded as follows:
Cash 290,000
Common Stock 250,000
Share Premium 40,000
During the year, the following transactions occurred
a. May 1 – bought 300 shares of common stock as treasury shares at P62
b. July 1 – sold80 shares of treasury stock at P64
c. September 1- sold 50 treasury shares at P59
d. December 1 – retired 30 shares of treasury stock
Prepare the necessary journal entries for the above transactions:

Problem 6
At the start of 2017, Weather Company’s equity accounts appeared as follows:
Common stock P15 par value; authorized 200,000 shares;
issued and outstanding, 150,000 shares P2,250,000.00
Paid- In Capital in excess of par P300,000.00
Retained Earnings P12,000,000.00
During the year, Weather Company entered into the following transactions
 Acquired 100,000 shares of its stock for P1,800,000
 Reissued 30,000 treasury shares at P19 per share
 Reissued 45,000 treasury shares at P16 per share
 Retired the remaining treasury shares
Prepare the necessary journal entries for the above transactions:

Problem 7
Sven Company’s stockholders’ equity at January 1, 2017 is as follows:
Common stock P10 par value; authorized 75,000 shares;
issued and outstanding, 150,000 shares P750,000.00
Paid- In Capital in excess of par P300,000.00
Retained Earnings P730,000.00
During 2017, Sven Company had the following stock transactions:
 Acquired 2,000 shares of its stock for P90,000
 Sold 1,200 treasury shares at P50 per share
 Retired the remaining treasury shares
 No other stock transactions occurred during 2017
The balances on December 31, 2017 of the following if Sven uses the cost method
a. Additional paid-in capital accounts
b. Retained earnings
c. Stockholders’ Equity

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 [SHAREHOLDERS’ EQUITY] AUDITING/FAR

Problem 8
On January 3, 2017, Axe Company has 200,000, P10 par value ordinary shares outstanding having a market
price of P15. The shares were originally issued at P14. Total undistributed accumulated net earnings was
P4,000,000. On January 4, 2017, Axe Company declared a 2 for 1 stock split
 The balances of the capital stock, premium on capital and retained after the stock split is?
 Assuming that the 2-1 stock split was a reverse split (split down) what are the balances?

Problem 9
The following has been taken from the records of Troll Company:
 Total Income since incorporation P3,170,000.00
 Total cash dividends P600,000.00
 Proceeds from the sale of donated stock P400,000.00
 Total value of stock dividends distributed P300,000.00
 Gain on treasury stock transactions P180,000.00
 Unamortized discount on bonds payable P320,000.00
 Appropriation for plant expansion P700,000.00
Determine the current balance of total retained earnings.

Problem 10
On December 1, 2017, Medusa Company declared a property dividend. The dividend is payable on January 31,
2018. On December 1. 2017 the carrying amount of the property declared was P5,000,000 which had a fair
value of P7,500,000. The fair values of the property declared as dividend on December 31, 2017 was
P9,500,000.
a) Reduction to retained earnings at the time the property dividends were declared on December 1, 2017
is?
b) The dividends payable account at December 31, 2017 is?

Problem 11
Warlock Company has the following capital stock outstanding:
Common, P5 par, 500,000 shares outstanding P2,500,000
10% Preferred, P50, 10,000 shares outstanding P500,000
In 2017 Warlock Company declared and paid cash dividend of P750,000. Determine the amount distributed
among the common and preferred stockholders assuming:
a) Preferred stock is non-cumulative and non-participating, no dividends have been declared since 2016.
b) Preferred stock is cumulative and non-participating, no dividends have been declared since 2016.
c) Preferred stock is non-cumulative and fully participating, no dividends have been declared since 2016.
d) Preferred stock is cumulative and fully participating, no dividends have been declared since 2016.

Problem 12
The following stock dividends declared and distributed by Sniper Company
% of Common Shares Outstanding
at declaration date Fair Value Par Value
10% P15,000 P10,000
29% P40,000 P30,000
The amount debited to retained earnings for these stock dividends is?

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 [SHAREHOLDERS’ EQUITY] AUDITING/FAR

Problem 13
The stockholders equity of Dota Chess Auto Company showed the following data on
December 31, 2004:
 12% preferred stock, P30 par, 135,000 shares issued and outstanding P4,050,000
 Common stock, P50 par, 180,000 shares issued and outstanding 9,000,000
 Premium on preferred stock 1,080,000
 Premium on common stock 3,240,000
 Retained earnings 1,395,000
The 2005 transactions of the company affecting its stockholders’ equity are summarized chronologically as
follows:
1. Issued 27,000 shares of preferred stock at P40.
2. Issued 94,500 shares of common stock at P70.
3. Retired 5,400 shares of preferred stock at P45.
4. Purchased 13,500 shares of its common stock at P80.
5. Split common stock two for one (par value reduce to P25).
6. Reissued 13,500 shares of treasury stock – common at P50.
7. Stockholders donated to the company 9,000 shares of common stock when shares had
a market price of P52. One half of these shares were subsequently issued for P54.
8. Dividends were paid at the end of the calendar year on the common stock at P2 per
share and on the preferred stock at the preferred rate.
9. Net income for the year was P2,520,000.

QUESTIONS:
Based on the above and the result of your audit, determine the following as of December 31, 2005:
1. Preferred stock
a. P4,617,000 b. P4,968,000 c. P4,698,000 d. P4,860,000
2. Common stock
a. P15,615,000 b. P13,968,000 c. P13,500,000 d. P13,725,000
3. Additional paid-in capital
a. P6,777,000 b. P6,679,800 c. P6,858,000 d. P6,814,800
4. Unappropriated retained earnings
a. P1,749,240 b. P1,711,440 c. P2,251,440 d. P1,684,440
5. Total stockholders’ equity
a. P26,949,240 b. P26,958,960 c. P26,922,240 d. P26,940,240

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