Reference no: EM133000952
Problem 1 - Radon Company provided the following data at current yearend:
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Preference share capital, P100 par, 50,000 shares
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P5,000,000
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Share premium - preference share
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500,000
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Ordinary share capital, P50 par, 100,000 shares
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5,000,000
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Share premium - ordinary share
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1,000,000
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Retained earnings
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2,000,000
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Required -
a) Prepare journal entry assuming 5,000 preference shares are converted:
i. Preference shares are convertible into ordinary shares on a share-for-share basis.
ii. Each preference share is convertible into 4 ordinary shares.
b) Prepare journal entry assuming 5,000 preference shares are callable and called in for payment at:
i. 120
ii. 80
Problem 2 - On January 1, 2020, Aluminum Company issued mandatorily redeemable preference shares in exchange equal to the total par value of the shares of P5,000,000. No dividends are to be paid on these shares, but the shares must be redeemed on January 1, 2022 for P5,050,000. The implicit interest rate is 10% which is compounded annually.
Required - Prepare journal entries for 2020, 2021 and 2022 to record the issuance of preference shares, interest expense and redemption of shares.
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