Accounting 1B – Accounting for corporation

Exercises:
Problem 1:
A, B, C, D and E organized Bump Corporation on January 5, 2022 with an authorized share capital of P 5,000,000 consisting of 50,000
shares of p 100 par value. Other transactions during the month are as follows:
2022
Jan. 5- Subscriptions were taken from A for 12,000 shares, from B for 13,000 shares, from C for P 8,000 shares, from D
for 4,000 shares and from E for 3,000 shares, all at par.
6 - A transferred to the corporation in partial payment of his subscription the following assets and liabilities:
Accounts receivable P 350,000
Notes Receivable 70,000
Inventory 680,000
Accounts Payable 100,000

- B transferred the following assets to the corporation in partial payment of his subscription:
Land P 150,000
Building 850,000

- The remaining incorporators paid 25% of their subscriptions.

11 - 600 shares were issued in payment of legal fees of P P60,000 in connection with organizing the corporation.
15 - A subscription for 1,000 shares at P 120 per share was received from F . F paid P 40 per share on his subscription.
20 - A, B and C paid the remainder of their subscriptions.
25 - 1,000 shares were issued at P 125 cash
28 - F paid his subscription in full.
30 - 5,000 shares were subscribed at par,

REQUIRED: 1. Prepare the journal entries.

a. Memorandum Entry Method
b. Journal Entry Method
2. Balance sheet as of January 31, 2022

Solution
a) Memorandum Entry Method
2022
Jan. 5 The corporation was authorized to issue 50,000 Ordinary shares ,
P 100 par.

5 Subscription Receivable P 4,000,000

Subscribed Share capital P 4,000,000
Subscriptions by incorporator: A, 12,000; B, 13,000
C, 8,000; D 4,000 and E, 3,000 shares , all at par

6 Accounts Receivable 350,000

Notes Receivable 70,000
Merchandise Inventory 680,000
Accounts Payable 100,000
Subscription Receivable 1,000,000
Noncash assets received from A.

6 Land 150,000
Building 850,000
Subscription Receivable 1,000,0000
Assets transferred from B.

6 Cash 375,000
Subscription Receivable 375,000
Partial payment by C, D and E, 25% of their
Subscription.
 11 Legal Expenses 60,000
Share Capital 60,000
600 shares issued in payment for legal fees.

15 Cash 40,000
Subscription Receivable 80,000
Subscribed share capital 100,000
Share Premium 20,000
1,000 shares subscribed by F.

20 Cash 1,100,000
Subscription Receivable 1,100,000
Full collection of subscription from A, B and C.

Subscribed share capital 3,300,000

Share capital 3,300,000
Issuance of 33,000 shares to A, B and C.

25 Cash 125,000
Share capital 100,000
Share Premium 25,000
1,000 shares issued for cash.

28 Cash 80,000
Subscription Receivable 80,000
Full collection of subscription from F.

Subscribed share capital 100,000

Share capital 100,000
1,000 shares issued to F.

30 Subscription Receivable 500,000

Subscribed share capital 500,000
5,000 shares subscribed for cash.

Bump Corporation
Statement of Financial Position
January 1, 2022

Assets Liabilities & Stockholders’ Equity

Cash 1,720,000 Accounts Payable 100,000
Accounts Receivable 350,000
Notes Receivable 70,000 Share capital, P 100 par , 50,000 share
Merchandise Inventory 680,000 authorized; 35,600 shares issued 3,560,000
Land 150,000 Share Premium 45,000
Building 850,000 Subscribed share capital 1,200,000
Subscription Receivable (1,025,000)
_________ Retained Earnings (expense) (60,000)
3,820,000 3,820,000
b) Journal Entry Method
2022
Jan. 5 Unissued share capital P 5,000,000
Authorized share capital P 5,000,000
Authorized 50,000 shares at P 100 par.

5 Subscription Receivable 4,000,000

Subscribed Share capital 4,000,000
Subscriptions by incorporator: A, 12,000; B, 13,000
C, 8,000; D 4,000 and E, 3,000 sharess , all at par

6 Accounts Receivable 350,000

Notes Receivable 70,000
Merchandise Inventory 680,000
Accounts Payable 100,000
Subscription Receivable 1,000,000
Noncash assets received from A.

6 Land 150,000
Building 850,000
Subscription Receivable 1,000,0000
Assets transferred from B.

6 Cash 375,000
Subscription Receivable 375,000
Partial payment by C, D and E, 25% of their
Subscription.

11 Legal Expenses 60,000

Unissued Share Capital 60,000
600 shares issued in payment for legal fees.

15 Cash 40,000
Subscription Receivable 80,000
Subscribed share capital 100,000
Share Premium 20,000
1,000 shares subscribed by F.

20 Cash 1,100,000
Subscription Receivable 1,100,000
Full collection of subscription from A, B and C.

Subscribed share capital 3,300,000

Unissued Share capital 3,300,000
Issuance of 33,000 shares to A, B and C.

25 Cash 125,000
Unissued Share capital 100,000
Share Premium 25,000
1,000 shares issued for cash.

28 Cash 80,000
Subscription Receivable 80,000
Full collection of subscription from F.

Subscribed share capital 100,000

Unissued Share capital 100,000
1,000 shares issued to F.

30 Subscription Receivable 500,000

Subscribed share capital 500,000
5,000 shares subscribed for cash.
 Bump Corporation
Statement of Financial Position
January 1, 2022

Assets Liabilities & Stockholders’ Equity

Cash 1,720,000 Accounts Payable 100,000
Accounts Receivable 350,000
Notes Receivable 70,000 Authorized share capital, P100 par,50,000 shares 5,000,00
0
Merchandise Inventory 680,000 Less: Unissued share capital, 14,400 shares 1,440,00
0
Land 150,000 Issued share capital , 35,600 shares 3,560,000
Building 850,000 Share Premium 45,000
Subscribed share capital 1,200,000
Subscription Receivable (1,025,000)
________ Retained Earnings (expense) (60,000)
Total assets 3,820,000 Total liabilities & Stockholders’ equity 3,820,000

Problem 2:

HERALD Corporation. was organized On January 5, 2022, with authorized share capital divided into 300,000 shares Preference share
with a par value of P 100 per share and 1,000,000 shares Ordinary share, par, P 10 . On this date, the incorporators, Henry, Ranny, Andy,
Lance, and Don subscribed for a total of 25% of Preference share and 25% of Ordinary shares, each having subscribed for the same
number of shares. Also on this date, the incorporators paid for the required 25% of their subscriptions.

Other transactions during the month are as follows:

Jan. 5 - Received cash for 4,000 ordinary shares issued at P 40 per share and 2,000 preference shares issued at P 120 per share.
5- Received subscription from Tamy, 1,000 ordinary shares at P 35 and 1,000 preference shares at P 125.
7- 1,000 preference shares were issued in payment for fees amounting to P 105,000 in connection with organizing the
corporation.
8- Land which had a fair market value of P 1,300,000 for which 100,000 ordinary shares were issued.
9- Tamy paid ½ of his subscription.
10 - Hanry, Ranny and Andy paid their subscriptions in full today and the preference sharee and ordinary shares certificates
were issued.
11 - The corporation received a bill on June 10 in the amount of P 50,000 from the legal counsel for organization services
rendered. The counsel accepted 5,000 ordinary shares in full payment.
19 - Lance transferred the following assets to the corporation in payment for his unpaid subscription and paid the balance in
cash:
Delivery Equipment (FMV) P 800,000
Furniture and Fixtures (FMV) 350,000

20 - A subscription for 1,000 ordinary shares at P 35 per share was received from Gerry for which cash of P25 per share
was received in partial payment.
21 - Tamy paid his subscription in full.
22 - Cash subscription, 2,000 preference shares at par and 1,000 ordinary shares at par value.
23 - Paid P 1,000 for other expenses incurred during incorporation.

REQUIRED: 1. Prepare the journal entries.

a) memorandum entry method
b) journal entry method
2. Balance sheet as of January 31, 2022
Solution:
a) Memorandum Entry Method
2022
Jan. 5 The corporation was authorized to issue 1,000,000 Ordinary
shares at P 10 par, and 300,000 preference shares at P 100 par,

5 Subscription Receivable - Preference P 7,500,000

Subscription Receivable – Ordinary 2,500,000
Subscribed Preference shares P 7,500,000
Subscribed Ordinary Shares 2,500,000
Subscriptions by 5 incorporators, 25% of Preference
and ordinary shares at par.

5 Cash 2,500,000
Subscription Receivable – Preference 1,875,000
Subscription Receivable – Ordinary 625,000
25% payment on the subscription made by 5 incorporators

5 Cash 400,000
Preference shares 200.000
Ordinary shares 40,000
Share Premium – Preference 40,000
Share Premium – ordinary 120,000
Issuance of 4,000 ordinary shares & 2,000 Pref. shares

5 Subscription Receivable - Preference 125,000

Subscription Receivable – Ordinary 35,000
Subscribed Preference shares 100,000
Subscribed Ordinary Shares 10,000
Share Premium – Preference 25,000
Share Premium – ordinary 25,000
Subscription by Tamy: 1,000 ordinary and 1,000 Pref.

7 Organization Expenses 105,000

Preference shares 100,000
Share Premium – Preference 5,000
1,000 Pref. share issued.

8 Land 1,300,000
Ordinary Shares 1,000,000
Share Premium – ordinary 300,000
100,000 ordinary shares issued.

9 Cash 80,000
Subscription Receivable - Preference 62,500
Subscription Receivable – Ordinary 17,500
Partial payment from Tamy

10 Cash 4,500,000
Subscription Receivable – Preference 3,375,000
Subscription Receivable - Ordinary 1,125,000
Full collection of subscription from Hanry, Ranny & Andy

Subscribed Preference shares 4,500,000

Subscribed Ordinary shares 1,500,000
Preference shares 4,500,000
 Ordinary shares 1,500,000
Issuance of 45,000 pref.shares and 150,000 ordinary
Shares.

11 Organization Expenses 50,000

Ordinary shares 50,000
Issuance of 5,000 shares to the legal counsel.

19 Cash 350,000
Delivery Equipment 800,000
Furniture and Fixtures 350,000
Subscription Receivable – Preference 1,125,000
Subscription Receivable – Ordinary 375,000
Full payment of subscription by Lance.

Subscribed Preference share 1,500,000

Subscribed Ordinary shares 500,000
Preference shares 1,500,000
Ordinary shares 500,000
Issuance of stock certificates to Lance

20 Cash 25,000
Subscription Receivable – ordinary 10,000
Subscribed ordinary shares 10,000
Share Premium – ordinary 25,000
1,000 shares subscribed by Gerry.

21 Cash 80,000
Subscription Receivable - Preference 62,500
Subscription Receivable – Ordinary 17,500
Full payment from Tammy

Subscribed Preference shares 100,000

Subscribed Ordinary shares 10,000
Preference shares 100,000
Ordinary shares 10,000
Issuance of 1,000 pref. shares & 1,000 ordinary shares

22 Cash 210,000
Preference shares 200,000
Ordinary shares 10,000
Issuance of 2,000 pref. shares and 1,000 ordinary shares

23 Organization expenses 1,000

Cash 1,000
Payment of other organization expense

b)Journal Entry Method

2015
Jan. 5 Unissied Preference shares 30,000,000
Unissed Ordinary shares 10,000,000
Authorized Preference shares 30,000,000
Authorized Ordinary shares 10,000,000
Authorized 300,000 preference shares at P 100 par and
1,000,000 ordinary shares at P 10 par.

5 Subscription Receivable - Preference P 7,500,000

Subscription Receivable – Ordinary 2,500,000
 Subscribed Preference shares P 7,500,000
Subscribed Ordinary Shares 2,500,000
Subscriptions by 5 incorporators, 25% of Preference
and ordinary shares at par.

5 Cash 2,500,000
Subscription Receivable – Preference 1,875,000
Subscription Receivable – Ordinary 625,000
25% payment on the subscription made by 5 incorporators

5 Cash 400,000
Unissued Preference shares 200.000
Unissued Ordinary shares 40,000
Share Premium – Preference 40,000
Share Premium – ordinary 120,000
Issuance of 4,000 ordinary shares & 2,000 Pref. shares

5 Subscription Receivable - Preference 125,000

Subscription Receivable – Ordinary 35,000
Subscribed Preference shares 100,000
Subscribed Ordinary Shares 10,000
Share Premium – Preference 25,000
Share Premium – ordinary 25,000
Subscription by Tammy: 1,000 ordinary and 1,000 Pref.

7 Organization Expenses 105,000

Unissued Preference shares 100,000
Share Premium – Preference 5,000
1,000 Pref. share issued.

8 Land 1,300,000
Unissued Ordinary Shares 1,000,000
Share Premium – ordinary 300,000
100,000 ordinary shares issued.

9 Cash 80,000
Subscription Receivable - Preference 62,500
Subscription Receivable – Ordinary 17,500
Partial payment from Tammy

10 Cash 4,500,000
Subscription Receivable – Preference 3,375,000
Subscription Receivable - Ordinary 1,125,000
Full collection of subscription from Hanry, Ranny & Andy

Subscribed Preference shares 4,500,000

Subscribed Ordinary shares 1,500,000
Unissued Preference shares 4,500,000
Unissued Ordinary shares 1,500,000
Issuance of 45,000 pref. shares and 150,000 ordinary

11 Organization Expenses 50,000

Unissed Ordinary shares 50,000
Issuance of 5,000 shares to the legal counsel.

19 Cash 350,000
Delivery Equipment 800,000
Furniture and Fixtures 350,000
Subscription Receivable – Preference 1,125,000
Subscription Receivable – Ordinary 375,000
 Full payment of subscription by Lance.

Subscribed Preference share 1,500,000

Subscribed Ordinary shares 500,000
Unissued Preference shares 1,500,000
Unissed Ordinary shares 500,000
Issuance of stock certificates to Lance

20 Cash 25,000
Subscription Receivable – ordinary 10,000
Subscribed ordinary shares 10,000
Share Premium – ordinary 25,000
1,000 shares subscribed by Gerry.

21 Cash 80,000
Subscription Receivable - Preference 62,500
Subscription Receivable – Ordinary 17,500
Full payment from Tamy

Subscribed Preference shares 100,000

Subscribed Ordinary shares 10,000
Unissed Preference shares 100,000
Unissed Ordinary shares 10,000
Issuance of 1,000 pref. shares & 1,000 ordinary shares

22 Cash 210,000
Unissed Preference shares 200,000
Unissed Ordinary shares 10,000
Issuance of 2,000 pref. shares and 1,000 ordinary shares

23 Organization expenses 1,000

Cash 1,000
Payment of other organization expense