Tiêu đề Chapter 9 - Audit of Stockholders Equity.pdf ✅

3 Problem 2 The shareholder’s equity of the Amongan Lumber Co. on June 30, 2004, was as follows: Contributed capital: 5% preference share, P50 par, cumulative, 30,000 shares issued, dividends 5 years in arrears P1,500,000 Ordinary share, P30 par, 100,000 shares issued 3,000,000 P4,500,000 Deficit from operations (600,000) Total shareholder’s equity P3,900,000 On July 1, the following actions were taken: a. Ordinary shareholders turned in their old Ordinary share and received in exchange new ordinary share, 1 share of the new share being exchanged for every 4 shares of the old. New ordinary share was given a stated value of P60 per share. b. One-half share of the new ordinary share was issued on each share of preference share outstanding in liquidation of dividends in arrears on preference share. c. The deficit from operations was applied against the paid-in capital arising from the ordinary share restatement. Transactions for the remainder of 2004 affecting the shareholders’ equity were as follows: Oct. 1 10,000 shares of preference share were called at P55 plus dividends for 3 months at 5%. Share was formally retired. Nov. 10 60,000 shares of new ordinary share were sold at P65. Dec. 31 Net income for the 6 months ended on this date was P400,000. (Assume that revenues and expenses were closed to a temporary account, Income summary. Use this account to complete the closing process.) The semiannual dividend was declared on preference shares, and a P0.75 dividend on ordinary shares, dividends being payable January 20, 2003. Questions Based on the information above, answer the following questions: 1. The balance of 5% Preference Share at December 31, 2004 is: a. P 1,500,000 b. P 1,000,000 c. P 500,000 d. P 0 2. The balance of Ordinary Share at December 31, 2004 is: a. P 3,000,000 b. P 4,000,000 c. P 4,500,000 d. P 6,000,000 3. The balance of Additional paid in capital at December 31, 2004 is: a. P 0 b. P 300,000 c. P 1,500,000 d. P 1,800,000 4. The balance of Retained Earnings at December 31, 2004 is: a. P 0 b. P (600,000) c. P 243,750 d. P 293,750 Solution July 1 Ordinary share, P30 par 3,000,000 Ordinary share, P60 stated value 1,500,000 Exchanged 100,000 shares of old ordinary share with a par value of P30 for 25,000 shares of new ordinary share with a stated value of P60.