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Toyota Company

Toyota Company has two classes of shares - preference shares and ordinary shares. During the current year, the company issued additional ordinary shares, purchased treasury shares, conducted a share split of ordinary shares, reissued treasury shares, received donated shares which were later reissued, recorded net income, and appropriated retained earnings for treasury shares. At year-end, shareholders' equity consisted of preference share capital, ordinary share capital, various share premium accounts, unappropriated and appropriated retained earnings, and treasury shares at cost, totaling $7,420,000.

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110 views

Toyota Company

Toyota Company has two classes of shares - preference shares and ordinary shares. During the current year, the company issued additional ordinary shares, purchased treasury shares, conducted a share split of ordinary shares, reissued treasury shares, received donated shares which were later reissued, recorded net income, and appropriated retained earnings for treasury shares. At year-end, shareholders' equity consisted of preference share capital, ordinary share capital, various share premium accounts, unappropriated and appropriated retained earnings, and treasury shares at cost, totaling $7,420,000.

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Toyota Company has two classes of share capital outstanding consisting of 12%, P100 par value

preference share and P50 par value ordinary share. The entity reported the following balances
at the beginning of the current year:

Preference share capital – 5,000 shares 500,000


Ordinary share capital – 50,000 shares 2,500,000
Share premium – PS 200,000
Share premium – ordinary 500,000
Retained earnings 2,000,000

The following data summarize the transactions for the current year:

Shares Per share


1 Issue of ordinary share capital 20,000 50
2 Purchase of treasury share – ordinary 5,000 60
3 Share split-ordinary 2 for 1
4 Reissue of treasury share 3,000 40
5 Shareholders donated 15,000 ordinary shares to the corporation. Subsequently, 10,000
donated shares were reissued at P40 per share.
6 Net income for the year was P500,000.
7 Appropriated retained earnings equal to the cost of treasury shares.

Required:
a. Prepare journal entries to record the transactions.

1 Cash 1,000,000
Ordinary share capital 1,000,000
2 Treasury shares 300,000
Cash 300,000
3 Memo – issued 140,000 new ordinary shares with par of P25 as a result of a 2 for 1 split
of 70,000 original shares with a par of P150.
4 Cash 120,000
Treasury shares (3,000 / 10,000 x 300,000) 90,000
Share premium – treasury shares 30,000
5 Memo – received 15,000 ordinary shares by way of donation.
Cash (10,000 x 40) 400,000
Donated capital 400,000
6 Profit and loss 500,000
Retained earnings 500,000
7 Retained earnings 210,000
Retained earnings appropriated for treasury shares 210,000
b. Present the shareholder’s equity at year-end.

Preference share capital 500,000


Ordinary share capital 3,500,000
Share premium:
Preference share 200,000
Ordinary share 500,000
Treasury share 30,000
Donated capital 400,000 1,130,000
Retained earnings:
Unappropriated 2,290,000
Appropriated for treasury shares 210,000 2,500,000
Treasury shares, at cost (210,000)
Shareholder’s equity 7,420,000

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