Blazing Red Corporation Shareholders’ Equity Contributed Capital 10% Preference Share, cumulative and non-participating, P100 par Ordinary Share, P10 par, 100,000 shares authorized, 30
Trang 1PROBLEMS 3-1 (Budomo Company)
3-2.
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
Trang 2e Land 5,000,000
3-3 (Blazing Red Corporation)
Shareholders’ Equity
Contributed Capital
10% Preference Share, cumulative and non-participating, P100 par
Ordinary Share, P10 par, 100,000 shares authorized, 30,000 shares
Retained Earnings
Appropriated for Treasury Share P 15,000
Unappropriated 195,000 210,000
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 preference shares in exchange of equipment 1,475,000 Subscriptions for 4,500 ordinary shares at 16 72,000
3-4. (Millennium Company)
(a)
Paid in Capital from Treasury Share 4,000
(b) Total shareholders’ equity, December 31, 2008 P2,200,000
Trang 3(1) Purchase of treasury share (10,000 x 14) (140,000)
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
3-5. (Consuelo Enterprises, Inc.)
Share Premium – Preference (4,000 x 1.60) 6,400
Share Premium – Preference (4,000 x 1.60) 6,400
Share Premium – Preference (4,000 x 1.60) 6,400
Average preference share premium per share
160,000 / 100,000 shares = 1.60 3-6. (Concepcion Enterprises, Inc.)
Share Premium – Preference (3,000 x 1.60) 4,800
Share Premium – Preference (3,000 x 1.60) 4,800
3-7 (Red Heart Corporation)
09/30/09 Retained Earnings (80,000 x 5% x 110) 440,000
Share Dividends Distributable (4,000 x
Trang 411/10/09 Share Dividends Distributable 400,000
08/10/10 Issued 82,500 rights to shareholders
entitling holders to purchase 2 additional shares for P125 per share.
Share Premium – Ordinary (1,000 x 10)* 10,000
*Share premium per share 300,000/30,000 = 10
3-8 (Red Carpet Company)
(a) Total lump sum price is P147,000 (1,500 x 98), allocated as follows:
Trang 53-9 (Red Hot Company)
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
(40,000 x 80) 4 years
01/01/11 Memo: 8,000 share options were cancelled.
Total accrued compensation expense (32,000 x 80)=2,560,000
x 3/4 1,920,000 Less: previously accrued 1,600,000
(32,000 x 80) / 4
Share Options Outstanding (32,000 x 80) 2,560,000
3-11 (Red Fox Corporation)
(a)
2009 200 – 10 – 15 = 175 employees x 100 options=17,500
2010 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
2011 200-10-12-8=170 employees x 100 options=17,000
Trang 601/01/09 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.
Share Options Outstanding (14,000 x 32) 448,000
Share Options Outstanding (1,000 x 32) 32,000
Share option outstanding (20 x 100 x 32) 64,000 Paid in capital from Forfeited share
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.
(10,000 x 20) / 3 years
(10,000 x 20) - 66,667
(b)
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 2010.
Trang 712/31/09 Compensation Expense 66,667
(10,000 x 20) / 3 years
Share Options Outstanding (80% x 200,000) 160,000
Share Options Outstanding (20% x 200,000) 40,000
(c) 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 share options, however, will be cancelled at the end of 2012, as the options already expire
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.
400 x 80 x 22 = 704,000 704,000/2 = 352,000
(b) The full amount of P704,000 is recognized as
compensation expense since the options vests already in 2007.
3-14 (Paul Company)
(a)
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.
Trang 8Share Options Outstanding 100,000 10,000 sh x 30 x 1/3
15,000 sh x 30 x 2/3 300,000 Less: previously accrued 100,000 Compensation expense 200,000
18,000 sh x 30 x 3/3 540,000 Less: previously accrued 300,000 Compensation expense 240,000 (b) Assuming that the chief executive officer resigned in 2010.
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)
10,000 x (140 -120) x 1/3
10,000 x (150 - 120) x 2/3 = 200,000 200,000 – 66,667 = 133,333
10,000 x (165 - 120) = 450,000 450,000 –200,000 = 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 450,000
(b) (2) Assuming that the rights were exercised on December 31, 2012, when the
market price is P172.
12/31/12 Share Appreciation Rights Payable 450,000
Trang 9Cash 10,000 x (172-120) 520,000 3-16 (Red Bull Corporation)
10,000 x 26.80 x 1/3
10,000 x 31.20 x 2/3 = 208,000 208,000 – 83,333 = 118,667
10,000 x 39.40 = 394,000 394,000 –200,000 = 194,000
3-17 (Emerald Company)
(a) Fair value of the equity alternative
Fair value of debt component
2010: 3,600 x 165 x 2/3 = 396,000
2011: 3,600 x 168 = 604,800
(c)
01/01/09 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
Trang 10Share Appreciation Rights Payable 204,000
Share Appreciation Rights Payable 151,200
31,200 / 4 = 7,800 604,800 / 4 =151,200
Share Appreciation Rights Payable 472,500
7,800 x 3 = 23,400 151,200 x 3 = 453,600 + 18,900 3-18 (Red Stone Company)
(a) Retained Earnings ( 10,000 shares x P20) 200,000
(b) Retained Earnings (30,000 x 10)
Share Dividends Distributable 300,000 300,000
(c) Memo: Effected a 2 for 1 stock split on 100,000 shares P100 par
previously issued and outstanding
3-19 (Buenviaje Corporation)
Capital structure:
Preference Ordinary
(a) Preference share is non-cumulative and non-participating
Trang 11Dividend per share P9.00 P8.88
(b) Preference share is cumulative and non-participating.
(c) Preference share is cumulative and fully participating
Current dividends:
Excess:
Current dividends:
Excess:
Current dividends:
Excess:
Trang 123-20 (Mama Mia Company)
50% x 100,000 x 10 = 500,000
PIC from Unexercised Fractional Share Warrants 20,000 3.21 (Kenneth Corporation)
October 31, 2009
10,000 shares x (15 – 14)
December 31, 2009
10,000 shares x (17 – 15)
February 28, 2010
3-22 (Buenas Aires Corporation)
Total SHE
Preference Shares Issued
Ordinary Shares Issued
Treasury Share
2009 transactions:
*P600,000 x 6,000/16,000 = 225,000
Trang 13(a) Total shareholders’ equity P17,146,000
(b) Number of preference shares issued and outstanding 26,000
Number of ordinary shares outstanding(200,000 – 12,000) 188,000
3-23 (La Vida Company)
Retained earnings balance as of December 31, 2009
3,900,000 – 600,000 – 240,000 P 3,060,000
Total shareholders’ equity as of December 31, 2009
6,000,000 + 8,000,000 + 3,060,000 P17,060,000
Dividends in arrears (6,000,000 x 9% x 3 yrs.) 1,620,000
Divide by the number of shares outstanding 60,000 800,000
Liquidation value (60,000 shares x P105) P6,300,000
Dividends in arrears (P6,000,000 x 9% x 3 yrs.) 1,620,000
Divide by the number of shares outstanding 60,000 800,000
3-24 (Los Angeles Company)
Accumulated Depreciation ( 925,000)
3-25 (Las Vegas, Inc.)
Trang 14Accum Depreciation – Buildings 875,000 Accum Depreciation – Machinery & Equipment 150,000
MULTIPLE CHOICE PROBLEMS Theory
Problems
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
1,000,000 + 250,000 = 1,250,000
Trang 15MC47 C (40,000x 105) – (600 x 110) + (400 x 95) + 830,000 – 200,000 = 4,802,000
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
shares = 9.60