Gordon College

nd
2 Sem A.Y. 2024: 2025

Intermediate Accounting 2
Chapter 10: Shareholders’ Equity

Problem 1:
Mara Company provided the following data at year – end:
Authorized Share capital 5,000,000.00
Unissued share capital 2,000,000.00
Subscribed share capital 1,000,000.00
Subscription receivable 400,000.00
Share premium 500,000.00
Retained earnings unappropriated 600,000.00
Retained earnings appropriated 300,000.00
Revaluation surplus 200,000.00
Treasury shares, at cost 100,000.00

What amount should be reported as shareholders’ equity?

Problem 2:
Glenn Company provided the following information at year – end:
Share premium - preference share 805,000.00
Ordinary share capital, P10 par 5,250,000.00
Share premium - ordinary share 2,750,000.00
Subscribed ordinary share capital 50,000.00
Retained earnings 1,900,000.00
Note payable 4,000,000.00
Subscription receivable - ordinary share 400,000.00

What is the amount of legal capital?

Problem 3:
At the beginning of the current year, Ria Company issued 10,000 ordinary shares of P20 par value and 20,000
convertible preference shares of P20 par value for a total of P800,000. At this date, the ordinary share was
selling for P36 and the convertible preference share was selling for P27.

1. What amount of the proceeds should be allocated to the preference shares?

2. What amount of the proceeds should be allocated to the ordinary shares?
3. What is the share premium from the issuance of preference shares?
4. What is the share premium from the issuance of ordinary shares?

Problem 4:
At the beginning of current year, Ashe Company was organized with authorized capital of P100,000 share of
P20 par value.

January 10 Issued 25,000 shares at P220 a share.

March 25 Issued 1,000 shares for legal services when the fair value was P20 a share.
September 30 Issued 5,000 shares for a tract of land when the fair value was P260,000.

1. What amount should the share capital be reported?

2. What amount should the share premium be reported?

Problem 5:
Negros Company was incorporated on January 1, 2017 with the following authorized capitalization:
 Ordinary share capital, 200,000 shares, no par, P100 stated value: 20,000,000
 Preference share capital, 200,000 shares, 10% fixed rate, P50 par value: 10,000,000

During 2017, the entity issued 150,000 ordinary shares for a total of P18,000,000 and 50,000 preference shares
at P60 per share. In addition, on December 15, 2017, subscriptions for 20,000 preference shares were made at a
purchase price of P100. These subscribed shares were paid for on January 15, 2018. What amount should be
reported as total contributed capital on December 31, 2017?

Problem 6:
At the beginning of current year, Dayron Company had 80,000 ordinary shares outstanding. The entity
distributed a 15% share dividend in March and a 10% share dividend in June. After acquiring 10,000 shares of
treasury in July, the entity split the share in 4 for 1 in December.
1. How many shares were issued before the share split?
2. How many ordinary shares are outstanding on December 31?

Problem 7:
At the beginning of current year, Rudd Company had 700,000 ordinary shares authorized and 300,000 shares
outstanding.
January 31 Declared 10% stock dividends
June 30 Purchased 100,000 shares
August 1 Reissued 50,000 shares
November 30 Declared 2-for-1 stock split
How many ordinary shares are outstanding at year-end?

Problem 8:
Negros Company was organized on January 1, 2017. On that date, it issued 200,000 ordinary shares of P10 par
value at P15 per share. The entity was authorized to issue 400,000 ordinary shares. During the period January 1,
2017, through December 31, 2017, the entity reported net income of P750,000 and paid cash dividend of
P380,000.

On January 5, 2018, the entity purchased 12,000 ordinary shares at P12 per share. On December 31, 2018,
8,000 treasury shares were sold at P8 per share and the remaining treasury shares were retired. The entity uses
the cost method of accounting for treasury shares. What is the total shareholders' equity on December 31, 2018?

Problem 9:
Juan Company was organized at the beginning of current year with 1,000,000 authorized shares of P100 par
value. The following transactions occurred during the year:
January 15 Sold 30,000 shares at P150 per share
February 1 Issued 2,000 shares for legal services with a fair value of P300,000. The shares on
this date are quoted at P160 per share
March 27 Purchased 5,000 treasury shares at a cost of P1 per share
October 31 Issued P4,000,000 convertible bonds at 1.10. The bonds are quoted at 97 without
the conversion feature
November 5 Declared a 2-for-1 stock split when the market value of the shares was P160
December 17 Sold 10,000 shares at P75 per share

What total amount should be recognized as share premium at year-end?

Problem 10:
Kalinga Company reported the following shareholders’ equity at the beginning of current year:

Preference share capital, 100,000 shares, P10 par 1,000,000

Ordinary share capital, 500,000 shares, P10 par 5,000,000
 Share premium – Preference 50,000
Share premium – Ordinary 200,000
Retained earnings 100000

During the current year, the following transactions were completed:

 Retirement of 5,000 preference shares at P11 per share.
 Purchase of 5,000 ordinary shares of treasury at P12 per share.
 Split of ordinary share 2 for 1.
 Reissue of 2,000 shares of treasury at P10 per share.
 Net income for the year, P300,000.

What is the total shareholders’ equity at year – end?