Chapter – Shareholders’ Equity CHAPTER SHAREHOLDERS’ EQUITY PROBLEMS 3-1 (Budomo Company) Cash (20,000 x 300)  6,000,000 Ordinary Share  6,000,000 Legal Expense/Professional Fees 90,000 Ordinary Share (250 x 300) Share Premium - Ordinary   75,000 15,000 Land 1,000,000 Building Ordinary Share (12,500 x 300) Share Premium - Ordinary 2,950,000 Cash (6,500 x 380) 2,470,000 3,750,000 200,000 Ordinary Share (6,500 x 300) Share Premium - Ordinary 3-2 a Cash (10,000 x 200) Ordinary Share (10,000 x 150) Share Premium - Ordinary Share Premium-Ordinary Cash b Land (3,500 x 560) Ordinary Share (3,500 x 200) Share Premium – Ordinary c Cash Preference Share Ordinary Share Share Premium – Preference Share Premium – Ordinary MV: Pref – 5,000 x 800=4M Ord – 100,000 x 120 = 12M Allocation: Pref: 18M x 4/16 = 4.5M Ord: 18M x 12/16 = 13.5M 22 1,950,000 520,000 2,000,000 1,500,000 500,000 60,000 60,000 1,960,000 18,000,000 700,000 1,260,000 2,500,000 10,000,000 2,000,000 3,500,000 Chapter – Shareholders’ Equity d Subscription Receivable Cash Subscribed Ordinary Share Share Premium – Ordinary 450,000 150,000 Land Cash Donated Capital (Blazing Red Corporation) Shareholders’ 5,000,000 e 3-3 500,000 100,000 40,000 4,960,000 Equity Contributed Capital 10% Preference Share, cumulative and non-participating, P100 par 30,000 shares authorized; 12,000 shares issued and outstanding Ordinary Share, P10 par, 100,000 shares authorized, 30,000 shares issued, 29,000 shares outstanding Subscribed Ordinary Share, 4,500 shares Subscription Receivable – Ordinary Share Premium – Preference Share Premium –Ordinary Total contributed capital Retained Earnings Appropriated for Treasury Share P 15,000 Unappropriated 195,000 Treasury Shares, 1,000 ordinary shares, at cost Total Shareholders’ Equity P1,200,000 300,000 45,000 (43,200) 275,000 77,000 P1,853,800 210,000 ( 15,000) P2,048,800 The total amount of P2,048,800 may also be obtained without necessary 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 1,475,000 Subscriptions for 4,500 ordinary shares at 16 72,000 Subscriptions receivable (60%) (43,200) Purchase of 1,000 treasury shares at 15 (15,000) Retained earnings Total shareholders’ equity, December 31, 2009 2,048,800 3-4 P 350,000 210,000 P (Millennium Company) (a) (1) (2) Treasury Share Cash 140,000 140,000 Cash Treasury Share Paid in Capital from Treasury Share 23 60,000 56,000 4,000 Chapter – Shareholders’ Equity (3) (4) 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 70,000 14,000 (b) Total shareholders’ equity, December 31, 2008 P2,200,000 (1) Purchase of treasury share (10,000 x 14) (140,000) (2) Sale of treasury share (4,000 x 15) 60,000 (3) Sale of treasury share (5,000 x 13) 65,000 Net income for the year 180,000 Dividends declared (200,000) Total shareholders’ equity, December 31, 2009 P2,165,000 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 878,000 Total shareholders’ equity P2,165,000 3-5 (Consuelo Enterprises, Inc.) (a) (b) (c) Preference Share (4,000 x 20) Share Premium – Preference (4,000 x 1.60) Retained Earnings Cash (4,000 x 22) 80,000 6,400 Preference Share (4,000 x 20) Share Premium – Preference (4,000 x 1.60) Retained Earnings Cash (4,000 x 26) 80,000 6,400 Preference Share (4,000 x 20) Share Premium – Preference (4,000 x 1.60) Cash (4,000 x 20.50) PIC from Retirement of Preference 80,000 6,400 1,600 88,000 17,600 104,000 82,000 4,400 Average preference share premium per share 160,000 / 100,000 shares = 1.60 3-6 (Concepcion Enterprises, Inc.) (a) Preference Share (3,000 x 20) Share Premium – Preference (3,000 x 1.60) Retained Earnings 24 60,000 4,800 25,200 Chapter – Shareholders’ Equity Ordinary Share (3,000 x 30) (b) 3-7 Preference Share (3,000 x 20) Share Premium – Preference (3,000 x 1.60) Ordinary Share (1,500 x 30) PIC from Conversion of Preference (Red Heart Corporation) 06/15/09 Cash Ordinary Share Share Premium – Ordinary 09/30/09 Retained Earnings (80,000 x 5% x 110) 90,000 60,000 4,800 45,000 19,800 6,000,000 440,000 400,000 Share Dividends Distributable (4,000 x 100) Share Premium – Ordinary 11/10/09 Share Dividends Distributable Ordinary Share 12/31/09 Income Summary Retained Earnings 03/31/10 Treasury Share (3,000 x 95) Cash Cash (1,500 x 120) Treasury Share (1,500 x 95) PIC from Treasury Share 05/01/10 40,000 400,000 1,175,000 285,000 180,000 08/10/10 Issued 82,500 rights to shareholders entitling holders to purchase additional shares for P125 per share 09/15/10 Cash (30,000 x 125) Ordinary Share (30,000 x 100) Share Premium – Ordinary 3,750,000 Cash (80,000 x 125) 10,000,00 10/31/10 Ordinary Share (80,000 x 100) Share Premium – Ordinary 400,000 1,175,000 285,000 142,500 37,500 3,000,000 750,000 12/10/10 Retained Earnings Dividends Payable (192,500 x 5) 962,500 **12/20/10 Ordinary Share (1,000 x 100) Share Premium – Ordinary (1,000 x 10)* Retained Earnings Treasury Share *Share premium per share 300,000/30,000 = 10 100,000 10,000 25 5,000,000 1,000,000 10,000 8,000,000 2,000,000 962,500 120,000 Chapter – Shareholders’ Equity 12/31/10 3-8 Income Summary Retained Earnings 1,200,000 (Red Carpet Company) (a) Total lump sum price is P147,000 (1,500 x 98), allocated as follows: Securities Preference Warrant Entry (b) 3-9 1,200,000 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 Allocated Price 132,300 14,700 147,000 45,000 87,300 14,700 Cash (600 x 40) Share Warrants Outstanding Ordinary Share Share Premium – Ordinary 24,000 11,760 6,000 29,760 (Red Hot Company) (a) Value of each option Number of shares granted Total value assigned to share options Required service period Annual compensation expense (b) Share Options Outstanding Cash (30,000 x 50) Ordinary Share (30,000 x 20) Share Premium - Ordinary P8 x 30,000 P240,000  3years P 80,000 240,000 1,500,000 600,000 1,140,000 3-10 (Fire Red Company) 01/02/09 Memo: granted 40,000 share options were granted to certain officers for the purchase of the company’s P100 par ordinary shares at P430 per share 12/31/09 12/31/10 Compensation Expense Share Options Outstanding (40,000 x 80)  years Compensation Expense Share Options Outstanding 01/01/11 Memo: 8,000 cancelled share 12/31/11 Compensation Expense options 800,000 800,000 800,000 were Share Options Outstanding Total accrued compensation expense (32,000 x 80)=2,560,000 x 3/4 1,920,00 26 800,000 320,00 320,000 Chapter – Shareholders’ Equity Less: previously accrued Compensation expense-2011 12/31/12 06/30/13 1,600,00 320,00 Compensation Expense Share Options Outstanding (32,000 x 80) / Cash (32,000 x 430) Share Options Outstanding (32,000 x 80) Ordinary Shares (32,000 x 100) Share Premium – Ordinary 640,000 640,000 13,760,000 2,560,000 3,200,000 13,120,000 3-11 (Red Fox Corporation) (a) 2009 2010 2011 (b) 01/01/09 12/31/09 200 – 10 – 15 = 175 employees options=17,500 17,500 x 32 = 560,000; 560,000 x 1/3 x 100 186,667 200–10–12–5=173 employees x 100 options=17,300 17,300 x 32 x 2/3 = 369,067; 369,067 – 186,667 182,400 200-10-12-8=170 employees x options=17,000 17,000 x 32 = 544,000; 544,000 – 369,067 174,933 100 Granted 100 share options to each of its 200 employees to buy P100 par ordinary share at P220 per share The options are exercisable starting January 1, 2010 provided that the employees are still in the service Options expire on December 31, 2011 Compensation Expense Share Options Outstanding Compensation Expense Share Options Outstanding 186,667 12/31/11 Compensation Expense Share Options Outstanding 174,933 2012 Cash (140 x 100 x 220) Share Options Outstanding (14,000 x 32) Ordinary Share (14,000 x 200) Share Premium - Ordinary 3,080,000 448,000 Cash (10 x 100 x 220) Share Options Outstanding (1,000 x 32) Ordinary share (1,000 x 200 Share Premium - ordinary 220,000 32,000 12/31/10 2013 27 182,400 186,667 182,400 174,933 2,8000,000 728,000 200,000 52,000 Chapter – Shareholders’ Equity Share option outstanding (20 x 100 x 32) Paid in capital from Forfeited share options 64,000 64,000 3-12 (Cherry Company) (a) 01/01/09 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 2012 12/31/09 Compensation Expense Share Options Outstanding (10,000 x 20) / years 66,667 12/31/10 Compensation Expense Share Options Outstanding (10,000 x 20) - 66,667 133,333 2011 Cash (10,000 x 120) Share Options Outstanding Ordinary Shares (10,000 x 100) (b) 01/01/09 12/31/09 1,000,00 400,000 Share Premium-Ordinary 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 2010 66,667 Compensation Expense Share Options Outstanding 66,667 12/31/11 Compensation Expense Share Options Outstanding 66,666 2012 Cash (8,000 x 120) Share Options Outstanding (80% 200,000) Ordinary Shares (8,000 x 100) Share Premium-Ordinary Share Options Outstanding (20% 200,000) PIC from Forfeited Share Options (c) 133,333 1,200,000 200,000 Compensation Expense Share Options Outstanding (10,000 x 20) / years 12/31/10 66,667 66,667 66,667 x 66,666 960,000 160,000 800,000 320,000 x 40,000 40,000 If the stock price reached P200 by June 2012, the same entries will be made for year 2009 through 2011, as given in (b) The recorded 28 Chapter – Shareholders’ Equity share options, however, will be cancelled at the end of 2012, as the options already expire 12/31/12 Share Options Outstanding PIC from Forfeited Share Options 200,000 200,000 3-13 (Panda Company) (a) 01/01/09 Granted 80 share options to each of 400 employees for the purchase of P100 par ordinary shares at P140 per share 12/31/09 Compensation Expense Share Options Outstanding 400 x 80 x 22 = 704,000 704,000/2 = 352,000 352,000 12/31/10 Compensation Expense Share Options Outstanding 352,000 2011 Cash (32,000 x 140) Share Options Outstanding Ordinary Share (32,000 x 100) 4,480,00 352,000 Share Premium – Ordinary (b) 352,000 352,000 3,200,00 1,632,00 The full amount of P704,000 is recognized as compensation expense since the options vests already in 2007 3-14 (Paul Company) (a) 01/01/09 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, 2012 and expire on December 31, 2013 The number of share options will be based on the level of sales for 2011 12/31/09 Compensation Expense Share Options Outstanding 10,000 sh x 30 x 1/3 100,000 Compensation Expense Share Options Outstanding 15,000 sh x 30 x 2/3 300,000 Less: previously accrued 100,000 Compensation expense 200,000 200,000 Compensation Expense Share Options Outstanding 240,000 12/31/10 12/31/11 29 100,000 200,000 240,000 Chapter – Shareholders’ Equity 18,000 sh x 30 x 3/3 540,000 300,000 Less: previously accrued Compensation expense 240,000 (b) Assuming that the chief executive officer resigned in 2010 12/31/10 Share Options Outstanding Compensation Expense 100,000 100,000 Note: When the grant of share options is based on non-market performance condition, the amount of recognized services received during the vesting period shall be based on the number of share options expected to vest The entity shall reverse that estimate, if necessary, if the share options are later forfeited, or lapse at the end of the share option’s life Thus, in effect, on a cumulative basis, no compensation expense is recorded as a result of the stock options 3-15 (Joey Corporation) (a) 12/31/09 Compensation Expense Share Appreciation Rights Payable 66,667 10,000 x (140 -120) x 1/3 12/31/10 Compensation Expense Share Appreciation Rights Payable 133,333 Compensation Expense Share Appreciation Rights Payable 10,000 x (165 - 120) = 450,000 450,000 –200,000 = 250,000 250,000 133,333 10,000 x (150 - 120) x 2/3 = 200,000 200,000 – 66,667 = 133,333 12/31/11 66,667 250,000 (b) (1)Assuming that the rights were exercised on January 1, 2012, when the market price is P165 01/01/12 Share Appreciation Rights Payable Cash 450,000 450,000 (b) (2)Assuming that the rights were exercised on December 31, 2012, when the market price is P172 12/31/12 3-16 (Red Bull 12/31/09 12/31/10 Share Appreciation Rights Payable Compensation Expense Cash 10,000 x (172-120) 450,000 70,000 520,000 Corporation) Compensation Expense Share Appreciation Rights Payable 10,000 x 26.80 x 1/3 89,333 Compensation Expense Share Appreciation Rights Payable 118,667 10,000 x 31.20 x 2/3 = 208,000 208,000 – 83,333 = 118,667 30 89,333 116,667 Chapter – Shareholders’ Equity 12/31/11 Compensation Expense Share Appreciation Rights Payable 194,000 Share Appreciation Rights Payable Compensation Expense Cash 10,000 x (165-120) 394,000 56,000 10,000 x 39.40 = 394,000 394,000 –200,000 = 194,000 2012 194,000 450,000 3-17 (Emerald Company) (a) (b) Fair value of the equity alternative 4,000 shares x 150 Fair value of debt component 3,600 shares x 158 Fair value of equity component 600,000 568,800 31,200 2009: 3,600 x 160=576,000/3 31,200/3 Total compensation expense 192,000 10,400 202,400 2010: 3,600 x 165 x 2/3 = 396,000 396,000 – 192,000 31,200/3 Total compensation expense 204,000 10,400 214,400 2011: 3,600 x 168 = 604,800 604,800 – 396,000 31,200/3 Total compensation expense 208,800 10,400 219,200 2012: 2,700 x (172-165) (c) 01/01/09 12/31/09 18,900 Granted each of the four executives the right to choose either 1,000 ordinary shares or to receive cash payment equal to 900 shares, conditional upon the completion of three years of service Compensation Expense Share Options Outstanding Share Appreciation Rights Payable 202,400 12/31/10 Compensation Expense Share Options Outstanding Share Appreciation Rights Payable 214,400 12/31/11 Compensation Expense Share Options Outstanding Share Appreciation Rights Payable 219,200 Share Options Outstanding Share Appreciation Rights Payable Cash PIC from Unexercised Share Options 31,200 / = 7,800 7,800 151,200 12/31/11 31 10,400 192,000 10,400 204,000 10,400 208,800 151,200 7,800 Chapter – Shareholders’ Equity 12/31/12 12/31/12 604,800 / =151,200 Compensation Expense Share Appreciation Rights Payable 18,900 Share Options Outstanding Share Appreciation Rights Payable Ordinary Share (3,000 x 100) Share Premium – Ordinary 7,800 x = 23,400 151,200 x = 453,600 + 18,900 23,400 472,500 3-18 (Red Stone Company) (a) Retained Earnings ( 10,000 shares x P20) Share Dividends Distributable Share Premium (b) (c) 18,900 300,000 195,900 200,000 Share Dividends Distributable Ordinary Shares 100,000 Retained Earnings (30,000 x 10) Share Dividends Distributable 300,000 Share Dividends Distributable Ordinary Shares 300,000 100,000 100,000 100,000 300,000 300,000 Memo: Effected a for stock split on 100,000 shares P100 par previously issued and outstanding 3-19 (Buenviaje Corporation) Capital structure: Preference 20,000 P2,000,000 Number of shares outstanding Total par value (a) Preference share is non-cumulative and non-participating 2009 Current preference dividends (9% x 2,000,000) Excess (1,500,000 – 180,000) Dividend per share Preference P 180,000 2010 Current preference dividends (9% x 2,000,000) Excess (2,400,000 – 180,000) Dividend per share Preference P 180,000 2011 Current preference dividends (9% x 2,000,000) Excess (5,600,000 – 180,000) Dividend per share Preference P 180,000 (b) Preference share P9.00 P9.00 P9.00 Ordinary 250,000 P2,500,000 Ordinary P1,320,000 P5.28 Ordinary P2,220,000 P8.88 Ordinary P5,420,000 P21.68 is cumulative and non-participating 2009 Dividends in arrears (9% x 2,000,000 x 3) Excess (1,500,000 – 540,000) 32 Preference P 540,000 Ordinary P 960,000 Chapter – Shareholders’ Equity Dividend per share 2010 Current preference dividends (9% x 2,000,000) Excess (2,400,000 – 180,000) Dividend per share P2.70 Preference P 180,000 2011 Current preference dividends (9% x 2,000,000) Excess (5,600,000 – 180,000) Dividend per share Preference P 180,000 (c) Preference share 2009 Current dividends: 9% x 2,000,000 9% x 2,500,000 Excess: 1,095,000 x 2.0/4.5 1,095,000 x 2.5/4.5 Total dividends Dividend per share P3.84 Ordinary P2,220,000 P8.88 P9.00 P9.00 Ordinary P5,420,000 P21.68 is cumulative and fully participating Preference P 180,000 Ordinary P 225,000 486,667 P 2010 Current dividends: 9% x 2,000,000 9% x 2,500,000 Excess: 1,995,000 x 2.0/4.5 1,995,000 x 2.5/4.5 Total dividends Dividend per share Preference 2011 Current dividends: 9% x 2,000,000 9% x 2,500,000 Excess: 5,195,000 x 2.0/4.5 5,195,000 x 2.5/4.5 Total Dividend per share Preference P 608,333 P 833,333 P3.33 666,667 P33.33 180,000 Ordinary P 225,000 886,667 P1,066,667 P53.33 P 180,000 1,108,333 P1,333,333 P 5.33 Ordinary P 225,000 2,308,889 P2,488,889 P124.44 3-20 (Mama Mia Company) Retained Earnings Share Dividends Distributable 50% x 100,000 x 10 = 500,000 Share Dividends Distributable Ordinary Shares Fractional Share Warrants Outstanding Fractional Share Warrants Outstanding Ordinary Share PIC from Unexercised Fractional Share Warrants 33 2,886,111 3,111,111 P 12.44 500,000 500,000 500,000 100,000 400,000 100,000 80,000 20,000 Chapter – Shareholders’ Equity 3.21 (Kenneth Corporation) October 31, 2009 Trading Securities Unrealized Gain on Trading Securities 10,000 shares x (15 – 14) 10,000 10,000 Retained Earnings Property Dividends Payable 10,000 shares x 15 150,000 150,000 December 31, 2009 Trading Securities Unrealized Gain on Trading Securities 10,000 shares x (17 – 15) 20,000 Retained Earnings Property Dividends Payable 20,000 February 28, 2010 Retained Earnings Property Dividends Payable 30,000 Property Dividends Payable Trading Securities Gain on Disposal of Trading Securities 20,000 20,000 30,000 200,000 170,000 30,000 3-22 (Buenas Aires Corporation) Total SHE Preferenc e Shares Issued 12/31/08Balances P16,500,000 2009 transactions: a) 4,000 x 280 (1,120,000) b) 8,000 x 75 (600,000) c) 2:1 share split d) 6,000 x 45 270,000 e) 4,000 x 46 f) 2,000 x 48 96,000 g) Net income 2,000,000 12/31/09 balances P7,146,000 *P600,000 x 6,000/16,000 = 225,000 (a) (b) (c) (d) 30,000 Ordinary Shar es Issu ed 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 Total shareholders’ equity P17,146,000 Number of preference shares issued and outstanding 26,000 Number of ordinary shares issued 200,000 Number of ordinary shares outstanding(200,000 – 12,000) 188,000 Cost of remaining treasury shares P 375,000 3-23 (La Vida Company) Retained earnings balance as of December 31, 2009 3,900,000 – 600,000 – 240,000 Total shareholders’ equity as of December 31, 2009 6,000,000 + 8,000,000 + 3,060,000 34 P 3,060,000 P17,060,000 Chapter – Shareholders’ Equity (a) Par value of preference share Dividends in arrears (6,000,000 x 9% x yrs.) Excess to ordinary (17,060,000 – 7,620,000) Total equity Divide by the number of shares outstanding Book value per share (b) Liquidation value (60,000 shares x P105) Dividends in arrears (P6,000,000 x 9% x yrs.) Excess to ordinary (17,060,000 – 7,920,000) Total equity Divide by the number of shares outstanding Book value per share 3-24 (Los Angeles Company) (a) Retained Earnings Accumulated Depreciation Current Assets Building Ordinary Share Ordinary Share Preferenc e P6,000,00 1,620,000 P7,620,00 60,000 P 127 Preferenc e P6,300,00 1,620,000 P7,920,00 60,000 P132 P9,440,00 P9,440,00 800,000 P 11.80 Ordinary P9,140,00 P9,140,00 800,000 P11.425 400,000 75,000 100,000 375,000 6,000,000 Share Premium Share Premium Retained Earnings Ordinary 4,000,00 2,000,00 1,400,000 1,400,00 (b) Current Assets P 400,000 Liabilities P1,000,000 Land 1,500,000 Ordinary Share Building 4,625,000 Share Premium Accumulated Depreciation ( 925,000) Total Assets P5,600,000 Total Equities 3-25 (Las Vegas, Inc.) Retained Earnings Inventory 4,000,000 600,000 P5,600,000 300,000 300,000 Land Buildings 1,500,000 1,875,000 35 Chapter – Shareholders’ Equity Machinery and Equipment Accum Depreciation – Buildings Accum Depreciation – Machinery & Equipment Revaluation Surplus Revaluation Surplus Retained Earnings 350,000 875,000 150,000 3,700,00 2,300,000 2,300,00 MULTIPLE CHOICE PROBLEMS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10 MC11 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 C B D D D A A C B A B C B B D C B D D B MC43 A MC44 A 230,000 + 525,000 + 5,000 = 760,000 480,000 x 110/120 = 440,000; 440,000-400,000 = 40,000 (60,000 x 2) – (5,000 x 2) = 110,000 125,000 x = 375,000 375,000 – [(12,000 x 3) + 5,000] = 334,000 20,000 x = 180,000; 180,000/2 = 90,000 x 1/2 = 45,000 600,000 x = 3,000,000 1,000,000 + (10,000 x 20) – (2,000 x 20) = 1,160,000 7,000,000 + (35,000 x 70) = 9,450,000 2,000 x = 16,000 70 – (70/2) = 35 (5,000 x 80) – (5,000 x 40) = 200,000 600 x 10 x 60% = 3,600; 6,000 – 3600 = 2,400 Interest expense for 2009 = 100,000 x 10% x 9/12 = 7,500 2,120,000 – (2,000 bonds x 1,040) = 40,000 945,000/ 70 = 13,500; 13,500/90,000 = 15% 80,000 + (2,000,000 x 8%) = 240,000; 300,000 – 240,000 = 60,000 (3,000,000 x 5% x years) – 100,000 = 200,000 arrears, end (110,000 + 10,000) x = 220,000 issued; 220,000 – (4,000 x 2) = 212,000 24,000+48,000=72,000; 108,000-72,000-24,000 = 12,000 72,000 + (12,000 x 4/6) = 80,000; 24,000 + (12,000 x 2/6) =28,000 80,000/4,000 = 20; 28,000/20,000 = 1.40 8,000,000 – (10,000 x 70) – 1,200,000 = 6,100,000 36 Chapter – Shareholders’ Equity MC45 MC46 A B MC47 C MC48 MC49 MC50 MC51 MC52 C D A C B MC53 MC54 MC55 MC56 MC57 MC58 B D B B B B MC59 C MC60 D (15 x 2)/5 = 6.00 25,000 x 40 = 1,000,000; 10% x 2,500,000 = 150,000 1,000,000 + 250,000 = 1,250,000 (40,000x 105) – (600 x 110) + (400 x 95) + 830,000 – 200,000 = 4,802,000 5,520,000 – 25,000 – 170,000 + 40,000 + 900,000 = 6,265,000 (2,000 x 85) – (800 x 42.50) = 136,000 [3,000 x (30-20)] / years = 10,000 4,500,000 x 95% = 4,275,000; 4,275,000/3 = 1,425,000 4,500,000 x 94% x 2/3 = 2,820,000; 2,820,000 – 1,425,000=1,395,000 (4 x 200 x 300) x ½ = 120,000 (90% x x 200 x 300) – 120,000 = 258,000 360,000 – 70,000 = 290,000; 290,000/5,000 = 58 3,150,000/ 50,000 = 63 3,150,000 – (5,000 x 120) = 2,550,000; 2,550,000/50,000 = 51 RE = 1,000,000; cumulative dividends in arrears = 5,000,000 x 8% x years = 1,200,000, but dividends are limited to the extent of RE balance of P1,000,000; Thus, equity of ordinary share is 13,500,000 – 5,000,000 – 1,000,000 = 7,500,000; 7,500,000/ 750,000 shares = P10 13,500,000 – (50,000 x 106) – 1,000,000 = 7,200,000 ; 7,200,000/750,000 shares = 9.60 (200,000 x 2) + (200,000 x 5) – 950,000 = 450,000 37 ... MC20 MC21 MC 22 A C C A D B D C D C C Problems MC 23 MC24 MC25 MC26 MC27 MC28 MC29 MC30 MC31 MC 32 MC 33 MC34 MC35 MC36 MC37 MC38 MC39 MC40 MC41 MC 42 C B D D D A A C B A B C B B D C B D D B MC 43. .. P 33. 33 180,000 Ordinary P 22 5,000 886,667 P1,066,667 P 53. 33 P 180,000 1,108 ,33 3 P1 ,33 3 ,33 3 P 5 .33 Ordinary P 22 5,000 2 ,30 8,889 P2,488,889 P 124 .44 3- 20 (Mama Mia Company) Retained Earnings Share Dividends... x 22 0) Share Options Outstanding (1,000 x 32 ) Ordinary share (1,000 x 20 0 Share Premium - ordinary 22 0,000 32 ,000 12 /31 /10 20 13 27 1 82, 400 186,667 1 82, 400 174, 933 2, 8000,000 728 ,000 20 0,000 52, 000