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Exercises On SHE PDF

This document contains 3 problems regarding exercises on shareholders' equity (SHE). Problem 1 has 5 sub-questions about equity transactions for LEILA Corporation involving preference and ordinary shares. Problem 2 has 2 sub-questions calculating book value per share for a company with one or two classes of shares. Problem 3 has 2 sub-questions calculating book value per ordinary share for Katherine Company over 3 years of operations.

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36 views3 pages

Exercises On SHE PDF

This document contains 3 problems regarding exercises on shareholders' equity (SHE). Problem 1 has 5 sub-questions about equity transactions for LEILA Corporation involving preference and ordinary shares. Problem 2 has 2 sub-questions calculating book value per share for a company with one or two classes of shares. Problem 3 has 2 sub-questions calculating book value per ordinary share for Katherine Company over 3 years of operations.

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MA Maravillas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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3/14/23, 9:11 AM Exercises on SHE

This assignment does not count toward the final grade.

Exercises on SHE
  Published  Edit 

PROBLEM 1

The LEILA Corporation has two classes of share capital outstanding:  9%, P20 par Preference and
P70 par Ordinary. During the fiscal year ending December 31, 2021, the company had the following
equity transactions in chronological order:

                                                                              No. of shares       Price per share

Issue of preference share                                       10,000                      P28

Issue of ordinary share                                              35,000                        70

Reacquisition and retirement of preference         2,000                        30

Purchase of treasury ordinary share                       5,000                          80

Share split                                                               2-for-1

Reissue of treasury ordinary share                          5,000                         52

Balances of the accounts in the shareholders’ equity section of the December 31, 2020 statement of
financial position were:

Preference Share Capital, 50,000 shares                                     P 1,000,000

Ordinary Share Capital, 100,000 shares                                           7,000,000

Share Premium – Preference                                                                          400,000

Share Premium – Ordinary                                                                         1,200,000

Retained Earnings                                                                                        550,000

Dividends were paid at the end of the fiscal year on the ordinary share at P1.20 per share and on
the preference at the preference rate. Profit for the year was P 850,000.

1. How much should be the amount of Preference Share Capital to be shown on the December 31,
2021 statement of financial position?
2. How much should be the amount of Ordinary Share Capital to be shown on the December 31,
2021 statement of financial position?

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3/14/23, 9:11 AM Exercises on SHE

3. The retirement of the 2,000 preference shares would decrease Share Premium – Preference by
4. After the split, the par value per share of the ordinary share capital
5. What is the total cost of the remaining treasury shares?

PROBLEM 2

The Hannah Corporation’s statement of financial position shows total shareholders’ equity of P3,
150,000 as of December 31, 2021.

1. What is the book value per share, assuming that the company has only one class of share
capital outstanding consisting of 50,000, P10 par ordinary shares?
2. What is the book value per ordinary share assuming that the company has two classes of share
capital outstanding consisting the following: 5,000, P100 par value preference shares with a
liquidation value of P120 per share and 50,000, P10 par value ordinary shares?

PROBLEM 3

The Katherine Company began operations in January 2021 and reported the following results for
each of its three years of operations. 2021- P520, 000 loss; 2022- P80, 000 loss; 2023- P1, 600,000
profit; At December 31, 2023, Katherine Company’s capital accounts were as follows:

8% Cumulative Preference Share Capital,


    P100 par; 50, 000 shares authorized,
    issued and outstanding                                                                      P5,000,000
Ordinary Share Capital, P10 par;
    1,000,000 shares authorized;
     750,000 shares and outstanding                                                       P7,500,000

Katherine Company has never paid a cash or bonus issue and there has been no change in its
capital accounts since it began operations in 2021. The corporation law permits dividends only from
retained earnings. 

1. What is the book value of the ordinary share at December 31, 2023?
2. What is the book value of the ordinary share at December 31, 2023 assuming that the
preference share has a liquidating value of P106 per share?

Points 0
Submitting Nothing

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3/14/23, 9:11 AM Exercises on SHE

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