Reference no: EM133189966
Problem 1 - At the beginning of current year, Kahel Company had 125,000 shares issued which included 25,000 shares held as treasury.
January 1 through October 31 - 13,000 treasury shares were distributed to officers as part of a share compensation plan.
November 1 - A 3-for-1 share split took effect
December 1 - the entity purchased 5,000 of its own shares to discourage an unfriendly takeover. These shares were not retired.
Required -
1. Prepare journal entries.
2. How many shares were issued at year-end?
3. How many shares were outstanding at year-end?
Problem 2 - Lilac Company reported the following shareholders' equity at the beginning of current year:
Preference share capital, 30,000 shares, P100 par 3,000,000
Ordinary share capital, 100,000 shares, P10 par 1,000,000
Share premium - Preference 1,200,000
Share premium - Ordinary 4,000,000
Retained earnings 5,000,000
Total shareholders' equity 14,200,000
During the current year, the following transactions were completed in chronological order:
Issue of 5,000 preference shares at P140 per share
Issue of 20,000 ordinary shares at P70 per share
Retirement of 1,000 preference shares at P150 per share
Purchase of 5,000 ordinary shares of treasury at P80 per share
Share split, ordinary share 2 for 1
Reissue of 5,000 shares of treasury at P50 per share
Net income for the year, P3,000,000
Payment of dividend on ordinary shares at P10 per share
Payment of dividend on preference shares at the preference rate
Required -
1. Prepare journal entries
2. What amount should be reported as additional paid in capital at year-end?
a. 6,610,000
b. 6,650,000
c. 6,600,000
d. 6,500,000
3. What amount should be reported as retained earnings at year-end?
a. 5,300,000
b. 5,260,000
c. 5,310,000
d. 5,650,000
Problem 3 - Proof Company reported the following shareholders' equity at year-end:
Share capital, par P25, authorized 150,000 shares,
55,000 shares issued of which 5,000 shares are treasury 1,375,000
Retained earnings 2,000,000
Treasury shares, at cost 150,000
A 100% share dividend was declared and all of the treasury shares were issued as share dividend and the balance from the unissued shares. The share has a market value of P40.
Required - What amount of retained earnings should be capitalized?