Problem 1 - Pre-Incorporation Subscription Requirement Minimum Subscription Minimum Paid-In

Yvonne Antonette Duyao ACT1122 – SEC 9
Problem 1 – Pre- incorporation subscription requirement
Minimum Subscription Minimum Paid-In

A. 5,000,000 x 25% 1,250,000 none
B. 30,000 x 50 x 25% 375, 000 none
- There is no minimum paid in capital
Problem 2 – Accounting for share capital
1. Journalize transactions
A. Memorandum entry method
a) Corporation was authorized to issue 500,000 shares with a par value of 10 per
share
b) Subscription Receivable 1,500,000

Subscribed Share Capital 1,500,000
Solution: 150,000 shares x 10 par value = 1,500,00
c) Cash 450,000
Subscription Receivable 450,000
Solution: 1,500,000 x 30% = 450,000
d) Cash 630,000
Solution: 90,000 x 10 = 900,000 original subscribed shares

900,000 x 0.30 = 270,000
900, 000 – 270,00 = 630,000
e) Subscribed Share Capital 900,000

Share Capital 900,000
Solution: 90,000 x 10 = 900,000
f) Cash 60,000
Share Capital 60,000
Solution: 6,000 x 10 = 60,000
B. Journal entry method
a) Unissued Share Capital 5,000,000

Authorized Share Capital 5,00,000
Solution: 500,000 x 10 = 5,000,000
b) Subscription Receivable 1,500,000

Subscribed Share Capital 1,500,000
c) Cash 450,000
d) Cash 630,000
e) Subscribed Share Capital 900,000

Unissued Share Capital 900,000
f) Cash 60,000
Unissued Share Capital 60,000
Problem 3 – Issuance of share capital for cash
1. With Par Value
Cash 20,000 x 130 2, 600,000

Ordinary shares 2,000,000
Share Premium 600,000
2. Without Par Value
Cash 40,000 x 120 4, 800,000

Share Premium 1, 600,000
Problem 4 – Issuance of shares for noncash consideration

a.
Land 500,000
Building 1,500,000
Ordinary Shares 1,500,000
Solution:
2,000,000 x 25 % = 500,000 – Land
2,000,000 – 500,000 = 1,500,000 – building
15,000 x 100 = 1,500,000 – ordinary share
b.
Land 3,500,000
Ordinary Shares 2,500,000
Share Premium 1,000,000
Solution:
Land = 25,000 x 140
Ordinary share = 25,000 x 100
c.
Professional Fee 125,000
Ordinary Shares 100,000
Solution:
Ordinary Shares = 1,000 x 100= 100,000
Share premium = 125,000 – 100,000 = 25,000
d.
Professional Fee 700,000
Ordinary Shares 500,000
Solution:
Fee - 500,000 x 140 = 700,000
Ordinary sale - 5,000 x 100 = 500,000
Problem 5 – Incorporation for a partnership
Journal entry:
Cash 55,000
Ordinary share capital 55,000
Problem 5 – Issuance of two classes of shares
Journal entry:
Cash 1,800,000
Ordinary share 200,000
Share Premium – Ordinary 250,000
Preference shares 400,000
Share premium – preference 950,000
Solution:
Total amount of ordinary and preference share = 1,800,000
20,000 x 10 = 200,000 – ordinary share
1,800,000 x 25% - share premium
40,000 x 10 = 400,000 – preference share
1,800,000 x 75% - share premium
Problem 6 – Organization Cost
a. Issuance of shares
Cash 7,500,000
Share Premium 2,500,000
Solution:
500,000 shares x 150 = 7,500,000
50,000 x 100 par value = 5,000,000
7,500,000 – 5,000,000 = 2,500,000 value of share premium
b. Incurrence of organization cost
Organization cost 45,000

Cash 45,000
Share premium – ordinary 35,000

Cash 35,000
Problem 7 – Computation of legal capital
Case A – with par value
Preference Share 2,500,000

Ordinary share 5,000,000
Subscribed ordinary share 65,000,00
Legal capital 7,565,000
Case B – No par with stated value
Preference Share 1,200,000

Share Premium – PS 900,000
Ordinary Share 3,000,000
Share Premium – OS 2,800,000
Subscribed Share 80,000
Legal capital 7,980,000
Problem 8 - Delinquent subscription and highest bidder
a. Journal entry
Jan 2 Subscribed receivable 1,250,000

Subscribed share capital 1,250,000
Solution: 25,000 share x 50 par value = 1,250,000
Feb 28 Cash 750,000

March 5 no entry
d) Receivable from highest bidder 38,000

Cash 38,000
e) Cash 560,000
Subscription receivable 500,000
Receivable from highest bidder 38,000
Interest Income 22,000
Solution: 1,250,000 – 750,000 = 500,000
b. Who was the highest bidder?
The highest bidder is Rey
c. How many shares were actually issued to (a) Olive and to the (b) highest bidder?
Olive share 21,000
Rey 4,000
25,000 – olive original subscribed share

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Yvonne Antonette Duyao ACT1122 – SEC 9

Problem 1 – Pre- incorporation subscription requirement

Minimum Subscription Minimum Paid-In

- There is no minimum paid in capital

Problem 2 – Accounting for share capital

A. Memorandum entry method

b) Subscription Receivable 1,500,000

Solution: 150,000 shares x 10 par value = 1,500,00

Solution: 1,500,000 x 30% = 450,000

Solution: 90,000 x 10 = 900,000 original subscribed shares

e) Subscribed Share Capital 900,000

Solution: 90,000 x 10 = 900,000

Solution: 6,000 x 10 = 60,000

B. Journal entry method

a) Unissued Share Capital 5,000,000

Solution: 500,000 x 10 = 5,000,000

b) Subscription Receivable 1,500,000

e) Subscribed Share Capital 900,000

Problem 3 – Issuance of share capital for cash

1. With Par Value

Cash 20,000 x 130 2, 600,000

2. Without Par Value

Cash 40,000 x 120 4, 800,000

Problem 4 – Issuance of shares for noncash consideration

Problem 5 – Incorporation for a partnership

Problem 6 – Organization Cost

Organization cost 45,000

Share premium – ordinary 35,000

Problem 7 – Computation of legal capital

Case A – with par value

Preference Share 2,500,000

Case B – No par with stated value

Preference Share 1,200,000

Problem 8 - Delinquent subscription and highest bidder

Jan 2 Subscribed receivable 1,250,000

Feb 28 Cash 750,000

d) Receivable from highest bidder 38,000

b. Who was the highest bidder?

The highest bidder is Rey

Olive share 21,000

25,000 – olive original subscribed share

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