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ACCOUNTING 4 Retained Earnings

1. The document contains 3 accounting problems involving retained earnings, stock dividends, and a quasi-reorganization. It provides transaction details for several companies and requires calculating ending balances and journal entries. 2. Problem 1 involves calculating dividend amounts paid based on prior periods. Problem 2 requires determining the effect of several stock transactions on equity accounts. Problem 3 addresses a quasi-reorganization that reduces asset and equity balances. 3. The problems calculate amounts for retained earnings, dividends, additional paid-in capital, and deficits based on the given transactions and equity restructuring.

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0% found this document useful (0 votes)
335 views2 pages

ACCOUNTING 4 Retained Earnings

1. The document contains 3 accounting problems involving retained earnings, stock dividends, and a quasi-reorganization. It provides transaction details for several companies and requires calculating ending balances and journal entries. 2. Problem 1 involves calculating dividend amounts paid based on prior periods. Problem 2 requires determining the effect of several stock transactions on equity accounts. Problem 3 addresses a quasi-reorganization that reduces asset and equity balances. 3. The problems calculate amounts for retained earnings, dividends, additional paid-in capital, and deficits based on the given transactions and equity restructuring.

Uploaded by

Joy Consigene
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCOUNTING 4 Retained Earnings

PROBLEM 1: ETC Co. has been paying regular semi-annual dividends to its shareholders. The following are the
company's equity transactions:

1.1 The company has 1,800,000 shares issued and outstanding; total shares authorized is 3,000,000 shares;
the par is P2 per share.

4.15 Issued 100,000 new shares at P5 per share.

5.20 Reacquired 200,000 shares at P8 per share.

6.30 Paid dividend of P2,550,000.

10.13 P2 M of P1,000 bonds were converted into ordinary share at the rate of 50 shares of stock per P1,000
bond.

11.11 Reissued 100,000 shares from the treasury at P6 per share.

12.16 Issued an 11% share dividend.

12.31 Paid semi-annual dividends. The dividend per share is the same as that paid in the first semi-annual
period.

1. The dividend per share paid on June 30 _________

2. The amount of dividend to be paid in the December 31, in order to pay the same dividend rate as that paid in the
previous semi-annual period _________________

PROBLEM 2: JKL Corp. reported the following amounts in the shareholders' equity section of its December 31, 2015,
statement of financial position:

Preference shares, P10 par (100,000 shares authorized,


40,000 shares issued) P400,000
Ordinary shares, P5 par (50,000 shares authorized, 20,000 shares issued) 100,000
Share premium – Ordinary shares 192,000
Accumulated profits 1,200,000

The following transactions occurred during 2016:

a. At the beginning of 2016, the company paid the annual 2015 P1 per share dividend
on preference shares and PO.50 per share dividend on ordinary shares. These dividends had been declared on
December 1, 2015.Further investigations revealed that no entry has been made to account for the declaration of the
said dividends.
b. On February 13, the company purchased 4,000 shares of its own outstanding ordinary shares for P80,000.
c. On March 30, the company declared and issued ordinary shares split-up (1 is to 2).
d. On June 19, the company reissued 2,800 treasury shares for an equipment with a fair value at P50,000.
e. On August 1, the company issued 10,000 shares of preference shares at P15 per share.
f. On September 30, the company declared a 10% stock dividend on the outstanding ordinary shares when the stock is
selling for P6 per share. The share dividends were subsequently issued on October 11.
g. December 1, the company declared the annual 2016 P1 dividend on preference shares and the PO.25 per share
dividend on ordinary shares. These dividends are payable at the beginning of 2017.
h. The company registered a net income for 2016 at P940,000.

Requirements:

1. What is the effect to stockholders' equity as a result of the share split in item c?
2. What is the amount debited to accumulated profits as a result of the declaration of the 10% stock dividend
in item f?
3. What is the amount debited to accumulated profits as a result of the 2016 cash dividend declaration?
4. What is the correct balance of the accumulated profits-unappropriated account as of December 31, 2016?
5. Assuming that the share dividends declared in item f was 20%, what is the amount debited to retained earnings as a
result of the declaration of stock dividends?

PROBLEM 3: Logan Corp. has incurred losses from operations for many years. At the recommendation of the newly
hired president, the board of directors noted to implement a quasi-reorganization, subject to the stockholders' and
creditors' approval. Immediately, prior to the quasi-reorganization, on June 30, 2016, Logan's balance sheet was as
follows:

Assets

Current assets P1,375,000


Property, plant and equipment 3,375,000
Other noncurrent assets 500,000
Total assets P5,250,000

Liabilities and Stockholders' Equity


Total liabilities P1,500,000
Ordinary shares, P10 par value 4,000,000
Additional paid-in capital 750,000
Deficit (1,000,000)
Total liabilities and stockholders' equity P5,250,000

The stockholders and creditors approved the quasi-reorganization effective July 1, 2016, to be accomplished by a
reduction in property, plant, and equipment (net) P875,000, a reduction in other noncurrent assets of P375,000, and a
reduction in par value from P10 to P5.

1. Logan's July 1 balance sheet after the quasi-reorganization should show total assets of _________

2. The balance in the Additional paid-in capital after the quasi-reorganization on July 1, is ____________

3. Logan's deficit after the quasi-reorganization on July 1, 2016, should be ________________

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