Ia2 Ia2 Millan Solution - Compress

Chapter 10
Chapter 10: Shareholders' Equity (Part 1)

pp. 499-508
Problem 1: TRUE or FALSE

1 False - PFRS apply equally to all reporting entities regardless of the formation of organization
2 False - Entity's "Article of Incorporation" must be authorized by the Securities and Exchange Com
3 False - Unissued Share Capital significes the application of Journal Entry Method
4 True - Share Premium is credited at the subscription date even for subscription that are not yet p
5 False - Preference Shares can only be issued as par valued shares.
6 False - In the Philippines "Stocks Subscription Receivable" is more commonly presented as contra
rather than as an asset as applied under traditional US GAAP
7 False - Non cash consideration must be measured at its fair value
8 False - As per Philippine Interpretations Committee or PIC, excess shall be debited to "share issua
9 ##
10 True
Problem 2: Multiple Choice -theory

1 B. Entity should credit share premium for ₱ 26,000 on March 31, 20x1.
Explanation:
Mar. 31 Subscription Receivable (2,000 x ₱18) 36,000
Subscribed Share Capital (2,000 x ₱5) 10,000
Share Premium 26,000
42125 Cash 36,000

Subscription Receivable 36,000
Subscribed Share Capital 10,000

Share Capital 10,000
2 A. Cost
Explanation:
Treasury Shares shall be recorded at cost, regardless of whether the shares are acquired belo
3 A. credited to share premium

Explanation:
Gain in reissuance of treasury is directly recognized in equity as SHARE PREMIUM
4 D. no oeffect on both SP and RE

Explanation:
• Treasury Shares (1000 x 15) 15,000
Cash 15,000
reacquisition
Cash (500 x 18) 9,000
0 0
Treasury Shares (500 x 15) 7,500
Share Premium - Treasury 1,500
reissuance
5 D. Reissuance of TS above cost

Explanation:
since above cost, magkakaroon ng credit na SP
6 A. Financial Liability
Explanation:
Redeemable PS are classified as FL because when holder exercises its right to redeem, issuer
7B
8C
9A
Explanation:
Retirement below the orginal issue price will decrease the SP account
10 D
Problem 3: Exercises
P-1 Req. #1:
(a) Journal Entry Method (Journal Entry)
20x1
Jan. 1 Unissued Share Capital 2,000,000
Authorized Share Capital 2,000,000
Cash (2,000,000 x 25% x 25%) 125,000

Subscription Receivable (2,000,000 x 25% x 75%) 375,000
Feb. 1 Cash (2,000 x ₱200 x 75%) 300,000


Unissued Share Capital 400,000
Feb. 28 Cash (1,000 x ₱200) 200,000

Unissued Share Capital 200,000
Req. #2
(a) Journal Entry Method (FS)
Shareholders' Equity:
Unissued Share Capital (1,400,000)
Issued Share Capital 600,000
0 0
Subscription Receivable (75,000)
Total Share Capital 625,000
P-2 Provide the Journal Entries

(a) Journal Entry Method (Journal Entry)
20x1
Jan. 1 Unissued Share Capital 2,000,000
Cash (5,000 x ₱120) 600,000

Unissued Share Capital (5,000 x ₱100) 500,000
Jan. 31 Subscription Receivable (2,000 x ₱160) 320,000

P-3 Provide Journal Entries (reacquisition & reissuance)

(a)
20x1
37073 Treasury Shares (1,000 x ₱90) 90,000
Cash 90,000
Retained Earnings - unrestricted 90,000

Retained Earnings - approproated 90,000
37135 Cash (1,000 x ₱140) 140,000

Treasury Shares (1,000 x ₱ 90) 90,000
Share Premium - TS 50,000
Retained Earnings - appropriated 90,000

P-4 Journal Entries (reacquisition and retirement)

(a)
20x1
37073 Treasury Shares (1000 x ₱80) 80,000
Cash 80,000

Sep-01 Share Capital (1000 x ₱100)

Share Premium
0 0
mmission (SEC)
paid
a equity account (a deduction in equity),
ance costs" to be reported as a contra equity account
Note: SP is
credited and
recognize at the
SUBSCRIPTION
ow or above the par or stated value
0 0
is mandatorily obligated to pay
(b) Memorandum Method (Journal Entry)

20x1
Jan. 1 Memo Entry - The company was authorized to issue share capital of ₱2,000,000,
divided into 10,000 shares with par value of ₱200.
Cash (2,000,000 x 25% x 25%) 125,000

Subscription Receivable (2,000,000 x 25% x 75%) 375,000
Subscribed Share Capital (2,000,000 x 25%) 500,000
Feb. 1 Cash (2,000 x ₱200 x 75%) 300,000


Feb. 28 Cash (1,000 x ₱200) 200,000

(b) Memorandum Method (FS)

Shareholders' Equity:
Subscription Receivable (75,000)
Total Share Capital 625,000
0 0
(b) Memorandum Method (Journal Entry)
20x1
Jan. 1 Memo Entry - The corporation was authorized to issue capital share of ₱2,000,000
divided into shares with par value of ₱100
Cash (5,000 x ₱120) 600,000

Share Capital (5,000 x ₱100) 500,000
Jan. 31 Subscription Receivable (2,000 x ₱160) 320,000

(b)
20x1
Jul-01 Treasury Shares (1,000 x ₱90) 90,000
Cash 90,000

Sep-01 Cash (1,000 x ₱60) 60,000

Retained Earnings 30,000
Treasury Shares (1,000 x ₱ 90) 90,000
Retained Earnings - appropriated 90,000

(b)
20x1
Jul-01 Treasury Shares (1000 x ₱80) 80,000
Cash 80,000

0 0

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Chapter 10

Chapter 10: Shareholders' Equity (Part 1)

Problem 1: TRUE or FALSE

Problem 2: Multiple Choice -theory

42125 Cash 36,000

Subscribed Share Capital 10,000

3 A. credited to share premium

4 D. no oeffect on both SP and RE

Cash (500 x 18) 9,000

5 D. Reissuance of TS above cost

Cash (2,000,000 x 25% x 25%) 125,000

Feb. 1 Cash (2,000 x ₱200 x 75%) 300,000

Subscribed Share Capital (2,000 x ₱200) 400,000

Feb. 28 Cash (1,000 x ₱200) 200,000

P-2 Provide the Journal Entries

Cash (5,000 x ₱120) 600,000

Jan. 31 Subscription Receivable (2,000 x ₱160) 320,000

P-3 Provide Journal Entries (reacquisition & reissuance)

Retained Earnings - unrestricted 90,000

37135 Cash (1,000 x ₱140) 140,000

Retained Earnings - appropriated 90,000

P-4 Journal Entries (reacquisition and retirement)

Retained Earnings - unrestricted 80,000

Sep-01 Share Capital (1000 x ₱100)

a equity account (a deduction in equity),

ance costs" to be reported as a contra equity account

ow or above the par or stated value

(b) Memorandum Method (Journal Entry)

Cash (2,000,000 x 25% x 25%) 125,000

Feb. 1 Cash (2,000 x ₱200 x 75%) 300,000

Subscribed Share Capital (2,000 x ₱200) 400,000

Feb. 28 Cash (1,000 x ₱200) 200,000

(b) Memorandum Method (FS)

Cash (5,000 x ₱120) 600,000

Jan. 31 Subscription Receivable (2,000 x ₱160) 320,000

Retained Earnings - unrestricted 90,000

Sep-01 Cash (1,000 x ₱60) 60,000

Retained Earnings - appropriated 90,000

Retained Earnings - unrestricted 80,000

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