SHE: EXERCISE

13

Jonalyn Tabo ACT20

1
The capital structure of Red
Ribbon Corporation on December
31, 2019 follows:
12% Preference share capital, P 200 P6,000,00
par, 30,000 shares issued and 0
outstanding
Ordinary share capital, P 50 par,
5,000,00
100,000 shares issued and outstanding
0
Share Premium- 1,800,00
Preference 0
Share Premium- 1,500,00
Ordinary 0
Retained 2,200,00
Earnings 0
 d Amount of total dividends declared
during the year

REQUIRE
D

a No. of preference shares issued

and outstanding

b No. of ordinary shares issued and outstanding

c Cost of remaining treasury shares (acquired

by purchase) e Total shareholder's
equity
 TRANSACTIO
NS
Purchased and retired 4,000 preference shares at P 280 per share

Purchased 8,000 shares of its own ordinary share at P 80 per share

A 2-for-1 share split on the ordinary share was approved by the shareholders,
thereby reducing the par value to P 25

Reissued 6 , 000 treasury shares at P 45 each

Shareholder’s donated 4 , 000 ordinary shares when the market price was P
46 per share.

Two thousand of the donated shares were issued for P 48 per share

Declared the annual dividends on the preference share and P 1 per

share dividend on ordinary share

The profit for 2020 was P 2,000 ,000

The capital structure of Red
Ribbon Corporation on December
31, 2019 follows:
12% Preference share capital, P 200 P6,000,00
par, 30,000 shares issued and 0
outstanding
Ordinary share capital, P 50 par,
5,000,00
100,000 shares issued and outstanding
0
Share Premium- 1,800,00
Preference 0
Share Premium- 1,500,00
Ordinary 0
Retained 2,200,000
Earnings
P16,500,00
BALANCE
 TRANSACTION
1

Purchased and retired 4 , 000 preference shares at P 280 per

share
Ave. Preference Share Premium per share = Share Premium-Preference / Issued Shares

Ave. Preference Share Premium per share = 1,800,000 / 30,000 = 60

Original Issue Price = Par Value + Ave. PS Premium

Original Issue Price = P 200 + P60
Original Issue Price = P 260
Purchased and retired 4 , 000 preference shares at P 280 per
share
Retirement Price > Original Issue Price

Preference Share Capital 800,000

Share Premium-Preference 240,000
Retained Earnings 80,000

Cash 1,120,000

P260-200 = 60 * 4000 = 240,000

280 – 260 = 20 * 4000 = 80,000
280 * 4000 = 1,120,000
200 * 4000 = 800,000
Purchased and retired 4 , 000 preference shares at P 280 per
share

No. of Preference Share Retained Total

Preference Share Capital, premium- Shareholder’s
Earnings
Shares P200 par Preference Equity

Unadjusted 30,000 6,000,000 1,800,000 2,200,000 16,500,000

balances

Adjustment (4,000) (800,000) (240,000) (80,000) (1,120,000)

Adjusted 26,000 5,200,000 1,560,000 2,120,000 15,380,000

balances
A. NUMBER OF PREFERENCE SHARES ISSUED
AND OUTSTANDING

26,00
0
 TRANSACTION
2
Purchased 8,000 shares of its own
ordinary share at P 80 per share

JOURNAL
ENTRY
TREASURY 640 ,00
SHARES 0

CAS 640 ,00

H 0
 TRANSACTION
2
Purchased 8,000 shares of its own
ordinary share at P 80 per share

Shareholder’s Equity No. ofTreasury Treasury

Shares Share

-
UNADJUSTED 15,380,000

ADJUSTMENT (640,000) 8,000 640,000

BALANCE P 14,740,000 8,000 640,000

 TRANSACTION
3
A 2-for-1 share split on the ordinary
share was approved by the
shareholders, thereby reducing the par
value to P 25

Shar Share Value

e Capital
Ordinar 200,00 5,000,000 P
y 0 25
Treasur 16,00 640,00 P4
y 0 0 0
 Ordinary Share Treasury Share

Beg. balance 100,000 8,000

100,000 8,000
Adjustment

Balance 200,000 16,000

B. NUMBER OF ORDINARY SHARES
ISSUED
200 ,00
0
 TRANSACTION 4

Reissued 6,000 treasury shares at P 45

each

journal
entry:
Cas 270,00
h 0
Treasury Share 240,000
Share Premium - Treasury 30,000
6,000 * 45 Shares
6,000 * 40
6,000 * 5
 TRANSACTION 4

Reissued 6,000 treasury shares at P 45 each

Treasury Share Share Premium –

No. of Treasury
Treasury Shares Total SHE
Shares (Dr) (Cr)

Balance 16,000 640,000 - 14,740,000

Adjustment (6,000) (240,000) 30,000 270,000

Adjusted balance 10,000 400,000 30,000 15,010,000

 C. COST OF REMAINING TREASURY SHARES
(ACQUIRED BY PURCHASE)
P
10,000 * P 40 400,000
 Transaction 5

Shareholder’s donated 4,000 ordinary

shares when the market price was P 46 per
share. No. of Treasury Shares

Balance 10,00
0
Adjustmen 4,00
t 0
Adjusted balance 14,00
0
Shareholder’s donated 4,000 ordinary
shares when the market price was P 46 per
share.
journal
entry:
Treasury shares 184,00
0
Donated Capital 184,00
0
 TRANSACTION
6
Two thousand of the donated shares
were issued for P 48 per share.

Cash 96,000
Treasury Share 92,000
Donated Capital 4,000
2,000 * 48
2,000 * 46 or 184,000 * 2/4
2,000 * 2
 TRANSACTION
6
Two thousand of the donated shares were
issued for P 48 per share.

No. of Treasury Treasury Shares Donated Capital

Total SHE
Shares (Dr) (Cr)
Balances 14,000 584,000 184,000 15,010,000

Adjustment (2,000) (92,000) 4,000 96,000

Adjusted balances 12,000 492,000 188,000 15,106,000

 B. NUMBER OF ORDINARY
SHARES OUTSTANDING

188,00
200,000 – 12,000
0
TRANSACTION
7
Declared the annual dividends on
the preference share and P 1 per
share dividend on ordinary share

DIVIDENDS Dividends declared

12 % of P 200 par value * 26,000
Preference 624,000
issued and outstanding shares
P 1 per ordinary share * 188,000
Ordinary 188,000
outstanding share
Total 812,000
TRANSACTION
7
Declared the annual dividends on
the preference share and P 1 per
share dividend on ordinary share

Journal Entry

Retained Earnings (or Dividends) 812,000

Cash Dividends Payable 812,000
Declared the annual dividends on the preference share and P 1
per share dividend on ordinary share

Retained Earnings Total SHE

Balances 2,120,000 15,106,000

Adjustment (812,000) (812,000)

Adjusted balances 1,308,000 14,294,000

D. TOTAL DIVIDENDS DECLARED DURING THE
YEAR

P
812,000
The profit for 2020 was P
2,000,000
Profit or Loss Summary 2,000,000

Retained earnings 2,000 ,00

0
The profit for 2020 was P 2,000,000

Retained Earnings Total SHE

Balances 1,308,000 14,294,000
Adjustment 2,000,000 2,000,000
Adjusted balances 3,308,000 16,294,000
 Shareholder's
Equity:
12% Preference Share Capital, P 200 par,
5,200,000
26,000 shares issued and outstanding
Ordinary Share Capital, P 25 par, 200,000 5,000,000
shares issued and 188,000 shares outstanding
Donated Capital 188,000
Additional paid - in capital :
Preference 1,560,000
Ordinary 1,500,000
Treasury 30,000 3,090,000
Retained earnings 3,308,000
Treasury Shares (492,000)

TOTAL SHAREHOLDER'S EQUITY P16,294,000

E. TOTAL SHAREHOLDER'S
EQUITY
P
16,294,000
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