EXERCISES

A. The Bank of Gold was organized on April 1, 2022 and is authorized to issue 250,000 shares of Ordinary Share
Capital. Thereafter, 62,500 shares were issued at P 25 per share. Prepare the journal entries to record the
authorization of the share capital and the issuance of the 62,500 shares using the memorandum entry
method and the journal entry method under of the following independent cases:

a) Each ordinary share has a par value of P 20

b) Each ordinary share has a stated value of P 15
c) Each ordinary share have a no par value and no stated value

Memorandum Entry Method

Journal Entry Method
a) Par Value P 20
Authorized to issue 250,000 shares
of Ordinary
Share Capital with a stated value P
20 per share
Cash 1,562,500
OS Capital
1,250,000
OS Premium
312,500
62,500 sh x P25= 1562500 IP
62500 sh x P20 = 1250000 PV
62500 sh x P5= 312500 Premium
Apr 1 Unissued OSC
5,000,000
Authorized OSC
5,000,000
250,000 sh x P20 pv= 5,000,000
Cash 1562500
UnIssued OSC
1250000
OS Premium
312,500
b) Each ordinary share has a
stated value of P 15
B. SV P15
Authorized to issue 250,000
shares of
Ordinary Share Capital with a
stated
value P 15 per share
Cash
1,562,500
OSC
937,500
P in C in excess of SV
625,000
62,500 sh x P25= 1562500
62500 sh x P15 =937,500
62500 sh x P10= 625,000
Unissued OSC
3,750,000
 Authorized OSC
3,750,000
250,000 sh X P15/sh = P3,750,000
Cash
1,562,500
Unissued OSC
1,250,000
P in C in excess of SV
625,000
62,500 sh x P25= 1562500
62500 sh x P15 =937,500
62500 sh x P10= 625,000
c) Each ordinary share have a no
par value and no stated value
A. Authorized to issue
250,000 shares of of no
par and no stated value
Cannot be used for no par and no
stated value
Memorandum Entry Method
Journal Entry Method
a) Par Value P 20
Authorized to issue 250,000 shares
of Ordinary
Share Capital with a stated value P
20 per share
Cash 1,562,500
OS Capital
1,250,000
OS Premium
312,500
62,500 sh x P25= 1562500 IP
62500 sh x P20 = 1250000 PV
62500 sh x P5= 312500 Premium
Apr 1 Unissued OSC
5,000,000
Authorized OSC
5,000,000
250,000 sh x P20 pv= 5,000,000
Cash 1562500
UnIssued OSC
1250000
OS Premium
312,500
b) Each ordinary share has a
stated value of P 15
B. SV P15
Authorized to issue 250,000
shares of
Ordinary Share Capital with a
stated
value P 15 per share
Cash
1,562,500
OSC
937,500
P in C in excess of SV
625,000
62,500 sh x P25= 1562500
62500 sh x P15 =937,500
62500 sh x P10= 625,000
Unissued OSC
3,750,000
 Authorized OSC
3,750,000
250,000 sh X P15/sh = P3,750,000
Cash
1,562,500
Unissued OSC
1,250,000
P in C in excess of SV
625,000
62,500 sh x P25= 1562500
62500 sh x P15 =937,500
62500 sh x P10= 625,000
c) Each ordinary share have a no
par value and no stated value
A. Authorized to issue
250,000 shares of of no
par and no stated value
Cannot be used for no par and no
stated value
a) Each ordinary share has a par value of P 20

Memorandum Entry
Apr 1 Authorized to issue 250,000 shares of ordinary share capital with par value of P20 per share

Cash 1,562,500
Ordinary Share Capital 1,250,000
Ordinary Share Capital Premium 312,500
62,500 sh x 25 = 1,562,500
62,500 sh x 20 = 1,250,000
62,500 x 5 = 312,500

Journal Entry
Unissued Ordinary Share Capital 5,000,000
Authorized Ordinary Share Capital 5,000,000
250,000 sh x20= 5,000,000

Cash 1,562,500
Unissued Ordinary Share Capital 1,250,000
Ordinary Share Capital Premium 312,500
62,500 sh x 25 = 1,562,500
62,500 sh x 20 = 1,250,000
62,500 x 5 = 312,500

b) Each ordinary share has a stated value of P 15

Memorandum Entry
Apr 1 Authorized to issue 250,000 shares of ordinary share capital with a stated value of P15 per share

Cash 1,562,500
Ordinary Share Capital 937,500
Ordinary Share Capital in Excess of Stated Value 625,000
62,500 sh x 25 = 1,562,500
62,500 sh x 15 = 937,500
62,500 x 10 = 625,000

Journal Entry
Unissued Ordinary Share Capital 3,750,000
Authorized Ordinary Share Capital 3,750,000
250,000 sh x 15= 3,750,000

Cash 1,562,500
Unissued Ordinary Share Capital 937,500
Ordinary Share Capital in Excess of Stated Value 625,000
62,500 sh x 25 = 1,562,500
62,500 sh x 15 = 937,500
62,500 x 10 = 625,000

c) Each ordinary share has no par value and no stated value

Memorandum Entry
Apr 1 Authorized to issue 250,000 shares of no par value and no stated value Ordinary Share

Cash 1,562,500
Ordinary Share Capital 1,562,500
62,500 x 25 = 1,562,500

B. The Ace Corporation is authorized to issue 100,000 shares of Ordinary Share Capital with a par value of P20.
The following transactions took place in relation to the share capital:

May 2 Issued 25,000 shares for cash at par value.

5 Issued 5,000 shares to Atty. Reeves for services in organizing the corporation. The value of the
services was P 120,000.
18 Issued 4,000 shares to corporate promoters. Each ordinary share is selling at P 30 on this date.
25 Issued 20,000 shares in exchange for Land valued at P 600,000.
30 Issued for cash 10,000 shares at P 23 per share

Prepare journal entries to record the above transactions including authorized capital dated May 2, using the
memorandum method.

May 2 Cash 500,000

Ordinary Share Capital 500,000
25,000 sh x 20 = 500,000

May 5 Pre-operating Expenses 120,000

Ordinary Share Capital 100,000
Ordinary Share Premium 20,000
5,000 sh x 20 = 100,000
120,000 – 100,000 = 20,000

May 18 Pre-operating Expenses 120,000

Ordinary Share Capital 80,000
Ordinary Share Premium 40,000
4,000 sh x P30 = 120,000
120,000 - 80,000= 40,000
May 25 Land 600,000
Ordinary Capital Share 400,000
Ordinary Share Premium 200,000
20,000 sh x 20 = 400,000
600,000 – 400,000 = 200,000

May 30 Cash 230,000

Ordinary Share Capital 200,000
Ordinary Share Premium 30,000
10,000 sh x P23 = 230,000
230,000-200,000= 30,000

C. On March 1, 2022, Hill, Inc. sold 40,000 shares of its P 30 par value Ordinary Share Capital on a subscription
basis at P 50 per share. The corporation received a 30% down payment on the date of subscription. On
March 10, 2018, the corporation collected the balance of the subscription and issued the certificates.

Required: Prepare the journal entries to record above transactions.

2022
Mar 1 Ordinary Share Capital Subscription Receivable 2,000,000
Ordinary Share Capital Subscribed 1,200,000
Ordinary Share Premium 800,000
40,000 sh x 50= 2,000,000
40,000 sh x 30= 1,200,000
2,000,000-1,200,000= 800,000

Cash 600,000
Ordinary Share Capital Subscription Receivable 600,000
2,000,000 x 30%= 600,000

Mar 10 Cash 1,400,000

Ordinary Share Capital Subscription Receivable 1,400,000
2,000,000 x 70%= 1,400,000

Ordinary Share Capital Subscribed 1,200,000

Ordinary Share Capital 1,200,000

D. Loyal Corporation was organized on January 2, 2022 and is authorized to issue 25,000 shares of 10%
Preference Share Capital, P 50 par and 250,000 shares of Ordinary Share Capital, P 20 stated value.

The following transactions took place during January:

Jan 2 Issued to incorporators 62,500 ordinary shares at P 25 per share and 6,250 preference shares at par value.
6 Issued 1,250 shares to corporate promoters. The value of preference share capital on this date is P 70 per share.
10 Received subscriptions for 85,000 ordinary shares at P 30 per share with a down payment of 60% of the
subscription price.
19 Issued 25,000 ordinary shares in exchange for the following:
Fair value
 Merchandise Inventory P 10,000
Land 350,000
Building 200,000
Equipment 20,000
28 Received balance due on the Jan. 10 subscription and issued the certificates.

Required: Prepare the journal entries to record above transactions.

2022
Jan 2 Cash 1, 875,000
Ordinary Share Capital 1,250,000
Preference Share Capital 312,500
Ordinary Share Capital in Excess of Stated Value 312,500
(62,500 sh x 25) + (6,250 sh x 50) = 1,875,000
62,500 sh x 20= 1,250,000
6,250 sh x 50= 312,500
62,500 x 5= 312,500

Jan 6 Pre-Operating Expenses 87,500

Preference Share Capital 62,500
Preference Share Premium 25,000
1,250 sh x 70= 87,500
1,250 sh x 50= 62,500
87,500 – 62,500= 25,000

Jan 10 Ordinary Share Capital Subscription Receivable 2,550,000

Ordinary Share Capital Subscribed 1,700,000
Ordinary Share Premium 850,000
85,000 sh x 30= 2,550,000
85,000 sh x 20= 1,700,000
2,550,000-1,700,000= 850,000

Cash 1,530,000
Ordinary Share Capital Subscription Receivable 1,530,000
2,550,000 x 60%= 1,530,000

Jan 19 Merchandise Inventory 10,000

Land 350,000
Building 200,000
Equipment 20,000
Ordinary Share Capital 500,000
Ordinary Share Capital in Excess of Stated Value 80,000
10,000 + 350,000 + 200,000 + 20,000= 580,000
25,000 sh x 20= 500,000
580,000 – 500,000= 80,000

Jan 28 Cash 1,020,000

Ordinary Share Capital Subscription Receivable 1,020,000
2,550,000 x 40%= 1,020,000
 Ordinary Share Capital Subscribed 1,700,000
Ordinary Share Capital 1,700,000

E. Marvel Corporation was authorized to issue 100,000 ordinary shares with a stated value of P 20. The
following transactions have taken place in relation to the share capital:

Aug 1 Received subscriptions for 25,000 shares at 30 receiving a 40% down payment.
5 Received balance due from subscribers of 10,000 shares and issued the certificates to
the subscribers.
12 Received balance due from subscribers of 12,000 shares and issued the certificates to
the subscribers.
20 The subscriber of the remaining shares failed to pay his delinquency and was declared delinquent.
21 Paid delinquency sale of P 15,000
25 Received payment from the highest bidder and issued the certificates.

Aug 1 Ordinary Share Capital Subscription Receivable 750,000

Ordinary Share Capital Subscribed 500,000
Ordinary Share Capital in Excess of Stated Value 250,000
25,000 sh x 30= 750,000
850,000 sh x 20= 500,000
2,550,000-1,700,000= 250,000

Cash 300,000
Ordinary Share Capital Subscription Receivable 300,000
750,000 x 40%= 300,000

Aug 5 Cash 180,000

Ordinary Share Capital Subscription Receivable 180,000
10,000 sh x 30 =300,000
300,000 x 60%= 180,000

Ordinary Share Capital Subscribed 200,000

Ordinary Share Capital 200,000
10,000 sh x 20= 200,000

Aug 12 Cash 216,000

Ordinary Share Capital Subscription Receivable 216,000
12,000 sh x 30 =360,000
360,000 x 60%= 216,000

Ordinary Share Capital Subscribed 240,000

Ordinary Share Capital 240,000
12,000 sh x 20= 240,000

Aug 20 Receivable from Highest Bidder 54,000

Ordinary Share Capital Subscription 54,000
3,000 sh x 30= 90,000
90,000 x 60%= 54,000

Aug 21 Receivable from Highest Bidder 15,000

Cash 15,000
Aug 25 Cash 69,000
Receivable from Highest Bidder 69,000

Ordinary Share Capital Subscribed 60,000

Ordinary Share Capital 60,000
3,000 sh x 20= 60,000

F. The Silver Ray Corporation was organized on January 1, 2022 with authorized share capital consisting of
50,000 preference shares with a par value of P 50 and 1,000,000 of no-par ordinary shares with a stated
value of P 10 per share. At December 31, 2018, the ledger included the following balances pertaining to
shareholders’ equity.

Preference Share Capital P 1,000,000

Preference Share Premium 120,000
Ordinary Share Capital 3,000,000
Ordinary Share Capital in Excess of Stated Value 4,500,000

10,000 preference shares were issued in exchange for equipment having a fair value of P 550,000. The remaining
preference shares were issued for cash. All ordinary shares were issued for cash.

Required: Compute for the following:

a) Number of preference shares issued for cash
b) Price per share of preference share capital issued for cash
c) Number of ordinary shares issued
d) Average price per share of the ordinary share capital issued for cash
e) Total preference share premium arising from issuance in exchange for equipment.

a. Number of preference shares issued for cash

10,000 x 50= 500,000
550,000 – 500,000= 50,000 (Preference Share Capital Premium Issued for Non-cash)
1,000,000 – 500,000= 500,000 (Preference Share Capital Issued for Cash)
500,000 / 50= 10,000 preference shares issued for cash

b. Price per share of preference share capital issued for cash

120,000 – 50,000= 70,000 (Preference Share Capital Premium Issued for Cash)
500,000 + 70,000= 570,000 (Total of Preference Share Proceeds)
570,000 / 10,000= P57

c. Number of ordinary shares issued

3,000,000 / 10= 300,000 ordinary shares

d. Average price per share of the ordinary share capital issued for cash
3,000,000 + 4,500,000= 7,500,000
7,500,000 / 300,000= P25

e. Total preference share premium arising from issuance in exchange for equipment.
550,000 – 500,000= 50,000

G. Shown below are account balances found in the ledger of Honesty Corporation at the end of year 2022:
Subscription Receivable-Preference Share P 360,000
Subscription Receivable-Ordinary Share 182,000
8% Preference Share Capital, P 50 par value,
80,000 shares authorized
Issued P 1,440,000
Subscribed 720,000 2,160,000
Ordinary Share Capital, no par, P 10 stated value
320,000 shares authorized
Issued P 1,360,000
Subscribed 280,000 1,640,000
Additional Paid In Capital
Preference Share Premium P 216,000
Paid-In Capital In Excess of Stated Value 328,000 544,000

Required: Compute for the following:

1) Number of Preference shares issued
2) Number of Ordinary shares issued
3) Number of subscribed preference shares
4) Number of subscribed ordinary shares
5) Average price per share received by the corporation on its preference share capital including
subscribed shares
6) Average price per share received by the corporation on its ordinary share capital including
subscribed shares
7) Average amount per share that the preference shares subscribers have not yet paid to the corp.
8) Average amount per share that the ordinary share subscribers have already on their subscriptions.
Assume ordinary share subscription price is P 12 per share.
1. Number of Preference shares issued
1,440,000 / 50 =28,800

2. Number of Ordinary shares issued

1,360,000 / 10= 136,000

3. Number of subscribed preference shares

720,000 / 50= 14,400

4. Number of subscribed ordinary shares

280,000 / 10= 28,000

5. Average price per share received by the corporation on its preference share capital including subscribed shares
2,160,000 ((Preference Share Capital (Issued & Subscribed))
+ 216,000 (Preference Share Premium)
2,376,000 (Total Preference Share Proceeds)
/ 43,200 (Total Number of Preference Share Issued: 14,400 +28,800)
55 (Average price per share of Preference Share Capital)
6. Average price per share received by the corporation on its ordinary share capital including subscribed shares

1,640,000 ((Ordinary Share Capital (Issued & Subscribed))

+ 328,000 (Ordinary Share Premium)
1,968,000 (Total Ordinary Share Proceeds)
/ 164,000 (Total Number of Ordinary Share Issued: 136,000 +28,00)
12 (Average price per share of Preference Share Capital)

7. Average amount per share that the preference shares subscribers have not yet paid to the corp.
360,000 (Preference Share Capital Subscription Receivable)
/ 14,400 (Number of Preference Share Subscribed)
25 (Average amount per share that Preference Share Subscribers have not yet paid)

8. Average amount per share that the ordinary share subscribers have already on their subscriptions. Assume
ordinary share subscription price is P 12 per share
28,000 (Number of Ordinary Shares Subscribed)
x 12 (Subscription Price)
336,000 (Ordinary Share Subscription Receivable)
- 182,000 (Amount that has not yet paid)
154,000 (Amount that have been paid already)
/ 28,000 (Number of Ordinary Shares Subscribed)
5.5 (Average amount per share that the Ordinary Share Subscribers have already on their
subscriptions)

H. Below is a partial list of account titles and balances for the TNT Corporation as of December 31, 2022.

Cash P 320,000
Notes Receivable 24,000
Preference Share Capital, P 100 par, 10,000 shares authorized 400,000
Ordinary Share Capital, P 20 par, 100,000 shares authorized 1,000,000
Preference shares premium 150,000
Ordinary share premium 200,000
Retained Earnings 250,000
Accounts Payable 150,000
Sales 950,000

Compute for the following:

1) How many shares were issued for the Preference Share Capital?
2) How many shares were issued for the Ordinary Share Capital?
3) How much is the premium per share for the Preference Share Capital?
4) How much is the premium per share for the Ordinary Share Capital?
5) How much is the issuance price for the Preference Share Capital?
6) How much is the issuance price for the Ordinary Share Capital?
7) How much is the total Share Capital?
8) How much is the total Additional Paid in Capital?
9) How much is the total Contributed Capital?
10) How much is the Total Shareholders ’Equity?
1. How many shares were issued for the Preference Share Capital?
400,000 (Preference Share Capital)
/ 100 (Par Value)
4,000 (Number of Preference Shares Issued)

2. How many shares were issued for the Ordinary Share Capital?
1,000,000 (Ordinary Share Capital)
/ 20 (Par Value)
50,000 (Number of Ordinary Shares Issued)

3. How much is the premium per share for the Preference Share Capital?
150,000 (Preference Share Premium)
/ 4,000 (Number of Preference Shares Issued)
37.5 (Preference Premium per Share)

4. How much is the premium per share for the Ordinary Share Capital?
200,000 (Ordinary Share Premium)
/ 50,000 (Number of Ordinary Shares Issued)
4 (Ordinary Premium per Share)

5. How much is the issuance price for the Preference Share Capital?
100 (Par Value)
+ 37.5 (Preference Share Premium per Share)
137.5 (Issuance Price for the Preference Share Capital)

6. How much is the issuance price for the Ordinary Share Capital?
20 (Par Value)
+ 4 (Ordinary Share Premium per Share)
24 (Issuance Price for the Ordinary Share Capital)

7. How much is the total Share Capital?

400,000 (Preference Share Capital)
+ 1,000,000 (Ordinary Share Capital)
1,400,000 (Total Share Capital)

8. How much is the total Additional Paid in Capital?

150,000 (Preference Share Premium)
+ 200,000 (Ordinary Share Premium)
350,000 (Total Additional Paid in Capital)

9. How much is the total Contributed Capital?

1,400,000 (Total Share Capital)
+ 350,000 (Total Additional Paid in Capital)
1,750,000 (Total Contributed Capital)

10. How much is the Total Shareholders ’Equity?

 1,750,000 (Total Contributed Capital)
+ 250,000 (Retained Earnings)
2,000,000 (Total Shareholders’ Equity)

I. On July 1, 2022, Alphine Corp. issued 6,000 shares of its P 100 par ordinary share to Atty. Black as
compensation for 1,000 hours of legal services performed during incorporation. Atty. Black usually bills P
500 per hour for legal services. On this date of issuance, the share was selling at a public trading at P 150
per share. By what amount should the Share Premium account of Alaska Corp. increase as a result of the
issuance of those shares? 300,000

Cash 900,000
Ordinary Share Capital 600,000
Ordinary Share Premium 300,000
6,000 sh x 150= 900,000
6,000 sh x 100= 600,000
900,000-600,000= 300,000

J. Carnation Inc. issued 15,000 shares of its P 100 par ordinary share in acquiring a land that was recently
appraised at P 1,700,000. The ordinary share is actively selling at P 120 per share. What is the amount of
Share Premium to be credited on the issuance of shares? 100,000

Par Value= P100

Issuance Price= P120 (above par)

15,000 x 120= 1,800,000

1,800,000 – 1,700,000= 100,000

K. The shareholder’s equity section of Angel Inc. showed the following data on December 31, 2022:

Preference Share (P100 par) P 2,300,000; Preference Share Premium P 805,000;

Ordinary Share (P15 par) P 5,250,000; Ordinary Share Premium P 2,750,000
Subscribed Ordinary Share P 50,000; Retained Earnings P 1,900,000
Subscription Receivable (due on January 31, 2019) P 400,000

How much is the legal capital? 7,600,000

Preference Share (P100 par) 2,300,000

Ordinary Share (P15 par) 5,250,000
Subscribed Ordinary Share 50,000
Total 7,600,000

L. On October 1, 2022, Branded Corporation exchanged 20,000 shares of its P 200 par value of Ordinary Shares
for land. A few months ago, the land was appraised by Mr. Roy, an independent appraiser, at P 5,000,000.
Branded shares are currently traded at the stock exchange at P 300. How much should be debited to land
account? 6,000,000

20,000 sh x 300= 6,000,000

M. On August 1, 2022, Queen Corporation, a newly formed company had the following shares issued and
outstanding:
Preference Shares, P 50 par, 12,000 shares originally issued at P 65
Ordinary Shares, P 20 par, 25,000 shares originally issued at P 35

How should Queen shareholders’ equity report the following?

1) Preference Share Capital 600,000
2) Ordinary Share Capital 500,000
3) Total Additional Paid in Capital 555,000
4) Total Contributed Capital 1,100,000

1. 12,000 sh x 50= 600,000

2. 25,000 sh x 20= 500,000
3. (12,000 sh x 15) + (25,000 sh x 15)
= 180,000 + 375,000
= 555,000
4. 600,000 + 500,000= 1,100,000