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    Activity 10

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    Randelle James Fiesta
    1. Arp Corp declared dividends of ₱100,000. The amount payable to ordinary stockholders was ₱40,000. This was calculated by first allocating ₱15,000 to preference shares and ₱10,000 to ordinary shares based on par value and dividend rate. The remaining ₱75,000 was allocated with preference shares participating at 3/5 and ordinary shares at 2/5. 2. When Newt Corp issued 3,000 treasury shares that were acquired for ₱18 per share and sold for ₱25 per share, they should credit ₱54,000 to Treasury shares and ₱21,000

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    Activity 10

    Uploaded by

    Randelle James Fiesta
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    1. Arp Corp declared dividends of ₱100,000. The amount payable to ordinary stockholders was ₱40,000. This was calculated by first allocating ₱15,000 to preference shares and ₱10,000 to ordinary shares based on par value and dividend rate. The remaining ₱75,000 was allocated with preference shares participating at 3/5 and ordinary shares at 2/5. 2. When Newt Corp issued 3,000 treasury shares that were acquired for ₱18 per share and sold for ₱25 per share, they should credit ₱54,000 to Treasury shares and ₱21,000

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    ACTIVITY 10

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    1. Arp Corp declared dividends of ₱100,000. The amount payable to ordinary stockholders was ₱40,000. This was calculated by first allocating ₱15,000 to preference shares and ₱10,000 to ordinary shares based on par value and dividend rate. The remaining ₱75,000 was allocated with preference shares participating at 3/5 and ordinary shares at 2/5. 2. When Newt Corp issued 3,000 treasury shares that were acquired for ₱18 per share and sold for ₱25 per share, they should credit ₱54,000 to Treasury shares and ₱21,000

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views2 pages

    Activity 10

    Uploaded by

    Randelle James Fiesta
    1. Arp Corp declared dividends of ₱100,000. The amount payable to ordinary stockholders was ₱40,000. This was calculated by first allocating ₱15,000 to preference shares and ₱10,000 to ordinary shares based on par value and dividend rate. The remaining ₱75,000 was allocated with preference shares participating at 3/5 and ordinary shares at 2/5. 2. When Newt Corp issued 3,000 treasury shares that were acquired for ₱18 per share and sold for ₱25 per share, they should credit ₱54,000 to Treasury shares and ₱21,000

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    © All Rights Reserved
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    of 2

    ACTIVITY 10-ELE02

    1. Arp Corp.’s outstanding capital stock at December 15, 20x1, consisted of the
    following: 30,000, 5% cumulative preference shares, par value ₱10 per share, fully
    participating as to dividends. No dividends were in arrears. 200,000 ordinary
    shares, par value ₱1 per share. On December 15, 20x1, Arp declared dividends of
    ₱100,000. What was the amount of dividends payable to Arp’s ordinary
    stockholders?
    Solution: 40,000
    Total dividends declared 100,000

    Allocation:
    Basic allocation to preference shares: (30,000 x 10 x 5%) 15,000
    Basic allocation to ordinary shares: (200,000 x 1 x 5%) 10,000
    Excess subject to participation (100,000 – 15,000 – 10,000) 75,000
    Participation of preference sh. (75,000 x 3/5) 45,000
    Participation of ordinary sh. (75,000 x 2/5) 30,000

    Total dividends to ordinary shareholders = 10,000 + 30,000 = 40,000

    2. In 20x0, Newt Corp. acquired 6,000 shares of its own ₱1 par value ordinary
    share at ₱18 per share. In 20x1, Newt issued 3,000 of these shares at ₱25 per
    share. Newt uses the cost method to account for its treasury stock transactions.
    What accounts and amounts should Newt credit in 20x1 to record the issuance of
    the 3,000 shares?
    Solution: $54,000 Treasury shares and $21,000 Share premium
    Acquisition:
    6,000 shares x $18per share = $108,000
    $108,000 cash

    Reissue:
    3,000 shares x $25per share = $75,000

    Treasury stock (at cost)


    3,000 shares x $18per share = $54,000 Treasury shares

    Additional paid-in capital


    3,000 shares x $25per share - $18per share = $21,000 Share premium

    3. Nest Co. issued 100,000 shares of common stock (i.e., ordinary shares). Of
    these, 5,000 were held as treasury stock at December 31, 20x1. During 20x2,
    transactions involving Nest's common stock were as follows: May 3 - 1,000
    shares of treasury stock were sold. August 6 - 10,000 shares of previously
    unissued stock were sold. November 18 - a 2-for-1 stock split took effect. Laws in
    Nest's state of incorporation protect treasury stock from dilution. At December
    31, 20x2, how many shares of Nest's common stock were issued and
    outstanding?
    Solution: Issued 220,000 and Outstanding 212,000
    Issued Outstanding
    Issued as of Dec. 31, 20x1 100,000 100,000
    Treasury shares as of Dec. 31, 20x1 (5,000)
    20x2 transactions:
    May 3 - reissuance of treasury shares 1,000
    Aug. 6 - issuance of new shares 10,000 10,000
    Totals 110,000 106,000
    Nov. 18 - 2-for-1 share split 2 2
    Ending balances 220,000 212,000

    4. The stockholders' equity section of Peter Corporation's balance sheet at


    December 31, 20X2, was as follows: Ordinary shares (₱10 par value, authorized
    1,000,000 shares, issued and outstanding 900,000 share P9,000,000 Share
    premium 2,700,000 Retained earnings 1,300,000 On January 2, 20X3, Peter
    purchased and retired 100,000 shares of its stock for ₱1,800,000. Immediately
    after retirement of these 100,000 shares, the balances in the share premium and
    retained earnings accounts should be
    Solution: Share premium 2,400,000 and Retained earnings 800,000

    5. At December 31, 20x0 and 20x1, Carr Corp. had outstanding 4,000 shares of
    ₱100 par value 6% cumulative preferred stock and 20,000 shares of ₱10 par value
    common stock (i.e., ordinary shares). At December 31, 20x0, dividends in arrears
    on the preferred stock were ₱12,000. Cash dividends declared in 20x1 totaled
    ₱44,000. Of the ₱44,000, what amounts were payable to each class of stock?
    Solution: $36,000 Preference Shares and $8,000 Ordinary Shares
    4,000 shares × $100 par value × 6% = $24,000
    $12,000 Year 3 dividends in arrears + $24,000 Year 4 dividends = $36,000 Preference
    Shares
    ₱44,000 - $36,000 = $8,000 Ordinary Shares

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