SHE-exercises (2)

1
SHAREHOLDERS’ EQUITY
BASIC TRANSACTIONS
EXERCISES
-oOo-
PROBLEM 1
On January 1, 2025, the Square Company was authorized to issue share capital as
follows:
100,000 shares of 12% preference share capital, P20 par value
15,000 shares of ordinary share capital, P100 par value
2025
JANUARY
1 -Received subscriptions for 3,750 shares of ordinary share capital at P105 with a
40% down payment.
1- Incorporation fees paid to the SEC, P3,500.
2 - Grace was paid for her promotional services with 200 shares of ordinary share
capital.
6 - Issued for cash 25,000 preference shares at P22 and P2,500 ordinary shares at
P110.
12- Cruz Trading subscribed 1,000 shares of preference share capital at P25 per
share giving a down payment of P5,000. The balance is payable in two equal
monthly installments due on February 2 and March 2, 2000.
16- Received subscriptions of 1,000 preference shares at par from Gay.
18- Received the balance due on subscription of January 1.
20- Collected P5,000 from Gay.
29- Received subscriptions of 5,000 shares of preference share capital at 110% of

par from Alyssa. Terms: 30% down payment, balance subject to call.
30- Sold 500 shares of ordinary share capital for cash. 300 of these shares were
sold at a premium of P1.50 per share and the rest at par.
2
FEBRUARY
2 - Received payment from Cruz Trading for the first installment on its subscription.
6 - Collected P5,000 from Gay and notified that the balance of her subscription is
due and payable on or before March 5.
18-Received subscriptions of 100 shares of ordinary share capital at 103% of par

from Carrie. Collected 40% of the total subscription.
MARCH
2 - Cruz Trading sent a check in full payment of the second and last installment on
its subscription.
5 - Gay failed to pay the balance of her subscription. Her subscription was declared
delinquent and the same was advertised for sale.
10- Paid advertising expenses of P200 on the delinquent subscription of Gay.
16- The delinquent stock was sold at a public auction. Expenses of sale amounted to
P350. May was the highest bidder, having agreed to accept 150 shares only. She paid
the total amount due.
20- Carrie paid the balance of her subscription with merchandise of the same value
which the corporation accepted.
26- Alyssa received notice that her subscription had been declared due and
payable, gave a check in full payment of the amount due thereon.
29- Issued 500 ordinary shares and 1,800 preference shares for P120,000. The
market values of the share capital at the date of issuance: Preference- P25 per share;
Ordinary- P110 per share.
31-Issued 20,000 shares of preference shares in exchange for the following;

Land P300,000
Equipment 250,000
Required: Journalize the above transactions using the memorandum entry

method.
3
PROBLEM 2
The following transactions affecting shareholders' equity of Diana Corporation oc-

curred during 2025
2025
Jan. 1- Issued 10,000 ordinary shares, par P100, for P105 per share.
4- Issued 5,000 preference shares, par P50, for P56 per share.
Feb. 6- Reacquired for cash 3,000 shares of its ordinary share capital for P110
per
share.
20- Sold for cash 500 shares of its treasury stock at P105 per share.
March 5- Stockholders donated 1,000 shares of preference share capital to the
corporation.
31- Sold for cash the treasury shares donated at P48 per share.
Apr. 10- Sold for cash 1,000 shares of treasury ordinary share capital at P115 per
share.
Dec. 10- 1,000 shares in the treasury are cancelled and retired.
31- The board of directors authorized the appropriation necessitated by the
holding of treasury stock.
Required: Journal entries for the above transactions.

4
PROBLEM 3
The shareholders' equity section of Dela Pena, Inc. as at Dec. 31, 2025 is shown be-
low;
Preference share capital, P100 par, 200,000 shares authorized;
100,000 shares issued and outstanding P10,000,000
Ordinary Share Capital, P20 par, 500,000 shares authorized;
200,000 shares issued and outstanding 4,000,000
Share Premium-PS 5,000,000
Share Premium-OS 3,600,000
Retained Earnings 5,700,000
Give the entries to record the following independent cases;

a. The board of directors declared and issued a 2-for-1 preference share capital
split.
b. Each ordinary shareholder receives 2 shares of new stock, P10 par value, in ex-
change for each share of ordinary share capital owned.
c. Each ordinary shareholder receives 4 shares of new no par stock with a stated
value of P10 in exchange for each share of ordinary share capital owned.
d. A stock split is effected, each ordinary shareholder receiving 1 share for every
five shares held.
e. Each ordinary shareholder receives 1 share of new P100 par value ordinary
share capital in exchange for every 5 shares of ordinary share capital owned.
5
PROBLEM 4
An examination of the ledger of Pio Enterprises revealed the following balances on

January 2, 2024:
Ordinary Share Capital, 100,000 shares authorized, par P100.

50,000 shares issued of which 2,000 are in the treasury P5,000,000
Share Premium 1,200,000
Retained Earnings Appropriated for Treasury Shares 250,000
Retained Earnings-Free 4,450,000
Treasury Shares, at cost- 2,000 shares 250,000
The following transactions occurred during the year:
Jan. 15 Declared a P30 dividend per share to stockholders on record as of January

20. Dividend is to be distributed on May 20.
Mar.15 Declared and issued a 15% stock dividend. Current market value of stock is
P140.
Apr. 30 Declared a 10% cash dividend payable on November 1, 2024.
May 20 Paid the dividends declared on January 15.
Sept. 1 Declared and issued a property dividend in the form of Petron shares to
stockholders on record as of Sept. 21. For every 10 shares held by a PIO
stockholder, one Petron share will be issued. Fair market value of Pio stock
was P175 while Petron stock was P4.50. Petron shares were bought at P4 per
share.
Oct. 20 Declared a 20% scrip dividend to stockholders on record as of October 30.

Dividend is to be distributed on December 30 plus 16% interest. Current
market value of the stock is P120.
Dec. 20 Paid for the scrip dividend.
Dec. 31 Profit for the year amounted to P1,750,000.
Required: Prepare journal entries for the above transactions.

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1

1- Incorporation fees paid to the SEC, P3,500.

16- Received subscriptions of 1,000 preference shares at par from Gay.

18- Received the balance due on subscription of January 1.

20- Collected P5,000 from Gay.

29- Received subscriptions of 5,000 shares of preference share capital at 110% of

18-Received subscriptions of 100 shares of ordinary share capital at 103% of par

10- Paid advertising expenses of P200 on the delinquent subscription of Gay.

31-Issued 20,000 shares of preference shares in exchange for the following;

Required: Journalize the above transactions using the memorandum entry

The following transactions affecting shareholders' equity of Diana Corporation oc-

Required: Journal entries for the above transactions.

Give the entries to record the following independent cases;

An examination of the ledger of Pio Enterprises revealed the following balances on

Ordinary Share Capital, 100,000 shares authorized, par P100.

The following transactions occurred during the year:

Jan. 15 Declared a P30 dividend per share to stockholders on record as of January

Apr. 30 Declared a 10% cash dividend payable on November 1, 2024.

May 20 Paid the dividends declared on January 15.

Oct. 20 Declared a 20% scrip dividend to stockholders on record as of October 30.

Dec. 20 Paid for the scrip dividend.

Dec. 31 Profit for the year amounted to P1,750,000.

Required: Prepare journal entries for the above transactions.

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