Answers - V2Chapter 3 2012 PDF
Answers - V2Chapter 3 2012 PDF
Answers - V2Chapter 3 2012 PDF
SHAREHOLDERS EQUITY
PROBLEMS
3-1.
(Budomo Company)
6,000,000
6,000,000
Land
Building
Ordinary share (12,500 x 300)
Share premium - Ordinary
1,000,000
2,950,000
2,470,000
2,000,000
90,000
75,000
15,000
3,750,000
200,000
1,950,000
520,000
3-2.
a.
Share premium-Ordinary
Cash
b.
c.
d.
e.
1,500,000
500,000
60,000
60,000
1,960,000
700,000
1,260,000
18,000,000
2,500,000
10,000,000
2,000,000
3,500,000
450,000
150,000
500,000
100,000
5,000,000
40,000
4,960,000
3-3.
P1,200,000
300,000
45,000
(43,200)
275,000
77,000
P1,853,800
350,000
( 15,000)
P2,188,800
The total amount of P2,048,800 may also be obtained without necessarily preparing
the shareholders equity in good format (if not required) as follows:
Issue of 30,000 ordinary shares
Issue of preference shares in exchange of equipment
Subscriptions for 4,500 ordinary shares at 16
Subscriptions receivable (60%)
Purchase of 1,000 treasury shares at 15
Retained earnings
Total shareholders equity, December 31, 2012
3-4.
(Millennium Company)
(a)
(1)
Treasury share
Cash
(2)
(3)
(4)
(b)
350,000
1,475,000
72,000
(43,200)
(15,000)
350,000
P 2,188,800
140,000
140,000
Cash
Treasury share
Paid in capital from treasury chare
60,000
Cash
Paid in capital from treasury share
Retained earnings
Treasury share
65,000
4,000
1,000
Ordinary share
Share premium
Retained earnings
Treasury share
10,000
3,000
1,000
56,000
4,000
70,000
14,000
26
P2,200,000
(140,000)
60,000
65,000
280,000
Dividends declared
Total shareholders equity, December 31, 2012
(200,000)
P2,265,000
The total shareholders equity may also be obtained by determining the balance of
the shareholders equity accounts, as follows:
Ordinary Share, P10 par (99,000 shares issued and outstanding) P 990,000
Share Premium
297,000
Retained Earnings
978,000
Total shareholders equity
P2,265,000
3-5.
(c)
80,000
6,400
1,600
88,000
80,000
6,400
17,600
80,000
6,400
104,000
82,000
4,400
3-7.
(b)
60,000
4,800
25,200
90,000
60,000
4,800
45,000
19,800
200,000
100,000
100,000
100,000
300,000
300,000
27
100,000
300,000
300,000
(c)
3-8.
2011
Current preference dividends (9% x 2,000,000 =
180,000; dividends declared were P150,000 only.
Dividend per share
Preference
2012
Current preference dividends (9% x 2,000,000)
Excess (240,000 180,000)
Dividend per share
Preference
P 180,000
2013
Current preference dividends (9% x 2,000,000)
Excess (540,000 180,000)
Dividend per share
Preference
P 180,000
(b)
Ordinary
P0
P 150,000
P7,50
P9.00
P9.00
P0
Ordinary
P60,000
P0.24
Ordinary
P360,000
P1.44
2011
Current on preference is P180,000
Arrears, end (P180,000 150,000 = 30,000)
Dividend per share
Preference
P150,000
2012
Arrears, beginning
P 30,000
Current year
180,000
Total
P210,000
Excess to ordinary = 240,000 210,000
Preference
P0
P0
Ordinary
P210,000
P30,000
P10.50
2013
Current year
Excess to ordinary = 540,000 180,000
Dividend per share
Ordinary
P7.50
(c)
Ordinary
250,000
P2,500,000
Preference
P180,000
P9.00
P0.12
Ordinary
P360,000
P1.44
2011
Current dividends:
9% x 2,000,000 = P180,000
Arrears, end = 180,000 150,000 = 30,000
Dividend per share
28
Preference
Ordinary
P 150,000
P0
P 7.50
P0
3-9.
2012
Arrears, beginning
P30,000
Current on preference 180,000
To ordinary: initial limit 9% x P2,500,000
= P225,000, but remaining is only
Total dividends
Dividend per share
Preference
2013
Current dividends:
9% x 2,000,000
9% x 2,500,000
Excess: P135,000 x 2.0/4.5
135,000 x 2.5/4.5
Total
Dividend per share
Preference
Ordinary
P 210,000
P210,000
P10.50
P30,000
P30,000
P 0.12
Ordinary
P 180,000
P 225,000
60,000
P240,000
P12.00
75,000
P300,000
P1.20
29
Preference
20,000
P2,000,000
Ordinary
250,000
P2,500,000
Preference
Ordinary
P180,000
P225,000
68,889
P248,889
P12.44
Preference
86,111
P311,111
P1.24
Ordinary
P180,000
P225,000
60,000
P240,000
P12.44
95,000
P320,000
P1.24
3-11
500,000
500,000
500,000
100,000
400,000
100,000
80,000
20,000
10,000
10,000
150,000
150,000
20,000
20,000
20,000
20,000
30,000
30,000
200,000
170,000
30,000
33,750
33,750
Retained Earnings
Property Dividends Payable
190,000
180,000
270,000
30
190,000
450,000
FV(because it is higher)
P190,000
20,000
20,000
30,000
Retained Earnings
190,000 160,000 = 30,000 decrease
1/31/13
30,000
Retained Earnings
Property Dividends Payable
175,000 160,000 = 15,000 increase
15,000
15,000
175,000
160,000
15,000
(a)
(b)
(c)
(d)
Preference
Shares
Issued
30,000
Ordinary
Shares
Issued
100,000
Treasury Share
Shares
Cost
(4,000)
100,000
26,000
200,000
8,000
8,000
(6,000)
4,000
(2,000)
P600,000
(225,000)*
12,000
P375,000
6,000,000
5,000,000
1,000,000
440,000
400,000
40,000
400,000
400,000
1,175,000
1,175,000
31
03/01/12
05/01/12
285,000
285,000
180,000
142,500
37,500
08/10/12
09/15/12
3,750,000
10,000,000
10/31/12
12/10/12
12/20/12
12/31/12
3,000,000
750,000
8,000,000
2,000,000
Retained earnings
Dividends payable (192,500 x 5)
962,500
100,000
10,000
Income summary
Retained earnings
962,500
15,000
95,000
1,200,000
1,200,000
(b)
Market value
90
10
Allocation
147,000 x 90/100
147,000 x 10/100
Cash
Preference share (1,500 x 30)
Share premium Preference
Share warrants outstanding
Cash (600 x 40)
Share warrants outstanding
Ordinary share
Share premium Ordinary
32
Allocated Price
132,300
14,700
147,000
45,000
87,300
14,700
24,000
11,760
6,000
29,760
12/31/12
12/31/13
12/31/14
12/31/15
P8
x 30,000
P240,000
3years
P 80,000
80,000
80,000
Compensation Expense
Share Options Outstanding
80,000
Compensation Expense
Share Options Outstanding
80,000
80,000
80,000
240,000
1,500,000
600,000
1,140,000
12/31/13
Compensation expense
Share options outstanding
(40,000 x 80) 4 years
800,000
Compensation expense
Share options outstanding
(40,000 x 80) 4 years
800,000
800,000
800,000
2014
12/31/14
Compensation expense
Share options outstanding
Total accrued compensation expense
(34,000 x 80) x 3/4
2,040,000
Less: previously accrued
1,600,000
Compensation expense-2008
440,000
12/31/15
01/01/14
Compensation expense
Share options outstanding
(34,000 x 80) / 4
Cash (34,000 x 430)
Share options outstanding (34,000 x 80)
Ordinary shares (34,000 x 100)
Share premium Ordinary
33
440,000
440,000
680,000
680,000
14,620,000
2,720,000
3,400,000
13,940,000
12/31/12
12/31/13
12/31/14
2015
2016
186,667
182,400
174,933
186,667
Compensation expense
Share options outstanding
182,400
Compensation expense
Share options outstanding
174,933
186,667
182,400
174,933
3,080,000
448,000
2,800,000
728,000
220,000
32,000
64,000
200,000
52,000
64,000
12/31/13
Compensation Expense
Share Options Outstanding
(10,000 x 20) / 3 years
66,667
Compensation Expense
Share Options Outstanding
(10,000 x 20) - 66,667
133,333
34
66,667
133,333
2014
(b)
01/01/12
12/31/12
12/31/13
12/31/14
2015
(c)
1,200,000
200,000
1,000,000
400,000
Memo: Granted 10,000 share options for the purchase of P100 par
ordinary shares at P120 per share. The options vest once the market
price of ordinary shares reached P200. Options expire at the end of
2013.
Compensation Expense
Share Options Outstanding
(10,000 x 20) / 3 years
66,667
Compensation Expense
Share Options Outstanding
66,667
Compensation Expense
Share Options Outstanding
66,666
66,667
66,667
66,666
960,000
160,000
40,000
800,000
320,000
40,000
If the stock price reached P200 by June 2015, the same entries will be made
for year 2012 through 2014, as given in (b) The recorded share options,
however, will be cancelled at the end of 2015, as the options already expire.
12/31/15
200,000
200,000
12/31/13
2014
Compensation Expense
Share Options Outstanding
400 x 80 x 22 = 704,000
704,000/2 = 352,000
352,000
Compensation Expense
Share Options Outstanding
352,000
352,000
352,000
4,480,000
35
704,000
3,200,000
1,984,000
Memo: Issued to its CEO share options for the purchase of ordinary shares at
a strike price of P50. The options are exercisable beginning January 1, 2015
and expire on December 31, 2016. The number of share options will be based
on the level of sales for 2014.
12/31/12
Compensation Expense
Share Options Outstanding
15,000 sh x 30 x 1/3
150,000
Compensation Expense
Share Options Outstanding
150,000
12/31/13
15,000 sh x 30 x 2/3
Less: previously accrued
Compensation expense
12/31/14
Compensation Expense
Share Options Outstanding
18,000 sh x 30 x 3/3
Less: previously accrued
Compensation expense
150,000
150,000
300,000
150,000
150,000
240,000
240,000
540,000
300,000
240,000
66,667
66,667
12/31/13
Compensation Expense
Share Appreciation Rights Payable
133,333
133,333
12/31/14
Compensation Expense
Share Appreciation Rights Payable
10,000 x (165 - 120) = 450,000
450,000 200,000 = 250,000
250,000
250,000
(b) (1) Assuming that the rights were exercised on January 1, 2015, when the market
price is P165.
01/01/15
450,000
450,000
(b) (2) Assuming that the rights were exercised on December 31, 2015, when the
market price is P172.
36
12/31/15
450,000
70,000
520,000
12/31/13
Compensation Expense
Share Appreciation Rights Payable
10,000 x 26.80 x 1/3
89,333
Compensation Expense
Share Appreciation Rights Payable
118,667
89,333
118,667
12/31/14
Compensation Expense
Share Appreciation Rights Payable
186,000
186,000
2015
394,000
56,000
450,000
600,000
568,800
31,200
192,000
10,400
202,400
204,000
10,400
214,400
208,800
10,400
219,200
37
10,800
(b) Correction to the problem: One executive exercised his right to receive
the cash alternative on December 31, 2014, instead of 2012.
01/01/12
12/31/12
Compensation Expense
Share Options Outstanding
Share Appreciation Rights Payable
202,400
Compensation Expense
Share Options Outstanding
Share Appreciation Rights Payable
214,400
Compensation Expense
Share Options Outstanding
Share Appreciation Rights Payable
219,200
7,800
151,200
12/31/13
12/31/14
12/31/14
12/31/15
12/31/13
3-25
Compensation Expense
Share Appreciation Rights Payable
900 x 3 x (172 168)
Share Options Outstanding
Share Appreciation Rights Payable
Ordinary Share (3,000 x 100)
Share Premium Ordinary
31,200 x
10,400
192,000
10,400
204,000
10,400
208,800
151,200
7,800
10,800
10,800
23,400
464,400
300,000
187,800
38
Appropriated
P 4,000,000
Unappropriated
P9,000,000
(140,000)
(4,000,000)
2,000,000
P2,000,000
(1,600,000)
(1,500,000)
(200,000)
4,000,000
(6,750,000)
(2,000,000)
3,000,000
P3,810,000
P5,810,000
P 3,060,000
P17,060,000
(a)
Par value of preference share
Dividends in arrears (6,000,000 x 9% x 3 yrs.)
Excess to ordinary (17,060,000 7,620,000)
Total equity
Divide by the number of shares outstanding
Book value per share
Preference
P6,000,000
1,620,000
(b)
Liquidation value (60,000 shares x P105)
Dividends in arrears (P6,000,000 x 9% x 3 yrs.)
Excess to ordinary (17,060,000 7,920,000)
Total equity
Divide by the number of shares outstanding
Book value per share
Preference
P6,300,000
1,620,000
P7,620,000
60,000
P 127
P7,920,000
60,000
P132
Ordinary
P9,440,000
P9,440,000
800,000
P 11.80
Ordinary
P9,140,000
P9,140,000
800,000
P11.425
300,000
300,000
Land
Buildings
Machinery and Equipment
Accum. Depreciation Buildings
Accum. Depreciation Machinery & Equipment
Revaluation Surplus
1,500,000
1,875,000
350,000
Revaluation Surplus
Retained Earnings
2,300,000
875,000
150,000
3,700,000
2,300,000
400,000
75,000
100,000
375,000
Ordinary Share
Ordinary Share
Share Premium
6,000,000
Share Premium
Retained Earnings
1,400,000
4,000,000
2,000,000
1,400,000
39
Liabilities
Ordinary Share
Share Premium
P1,000,000
4,000,000
600,000
Total
P5,600,000
C
D
B
B
B
C
C
C
A
C
C
MC12
MC13
MC14
MC15
MC16
MC17
MC18
MC19
MC20
MC21
MC22
A
C
C
A
D
B
D
C
D
C
C
Problems
MC23
MC24
MC25
MC26
MC27
MC28
MC29
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
MC38
MC39
MC40
MC41
MC42
MC43
C
B
D
D
B
A
A
C
B
A
B
C
B
B
D
C
B
D
D
B
A
MC44
MC45
A
A
40
MC46
MC47
MC48
MC49
MC50
MC51
MC52
MC53
MC54
MC55
MC56
MC57
MC58
C
A
D
C
B
B
D
B
B
B
B
MC59
MC60
41