Minimum Subscription

25% of authorized shares = subscribed

25% of subscribed shares = paid
Paid-in capital (issued shares) not less than P 5000

Ex. Authorized shares of P60,000.
Subscribed (60,000x25%) = 15,000
Paid (15,000x25%) = 3,750 (wrong)
REMEMBER: paid not less than 5,000. So Paid-in capital is 5,000.

Component of Shareholders Equity (Ballada)

Journal Entry Method Memorandum Entry Method
Paid-in (Contributed) Capital:
Authorized Shares xx
Unissued shares (xx) xx
Subscribed share
capital xx
subscription receiv. (xx) xx
Share Premium xx xx

Earned capital:
Retained earnings
- appropriated xx
Retained Earnings
- unappropriated xx xx

Treasury Shares xx

Total Shareholders Equity XX

Paid-in (Contributed) Capital:
Preference Shares xx
Ordinary Shares xx
Subscribed share
capital xx
subscription receiv. (xx) xx
Share Premium xx xx

Earned capital:
Retained earnings
- appropriated xx
Retained Earnings
- unappropriated xx xx

Treasury Shares xx

Total Shareholders Equity XX

Terms
Term Definition Valuation
Authorized share
capital
Maximum number of
share the corp can
issue
Par or stated value
(for no-par)
Issued share capital Sold and paid in full Par or stated value
(for no-par)
Subscribed share
capital
Portion of authorized
capital subscribed
but not yet paid in full
Par or stated value
(for no-par)
Subscription
receivable
Amount yet to be
paid from subscribed
share capital
Consideration given
Share premium Excess of
consideration over
par
Consideration less
par (or stated value)
Treasury share Issued shares
acquired by corp.
Cost
Outstanding stock Issued shares in the
hand of shareholder

Delinquent Shares Subscribed shares
not yet paid on due
date and subscriber
defaulted


Issuance of shares
A. Cash
@ par or
stated value
Cash xx
Share Capital xx
Above par or
SV
Cash xx
Share Capital xx
Share Premium xx
Below par or
SV
Cash xx
Discount on share capital xx
Share Capital xx

Note: The corporation code prohibits issuance at a
discount. Discount on share capital is liability of
shareholder (not loss of corp). IT IS DEDUCTION
FROM SHAREHOLDERS EQUITY.


B. Noncash Asset
Proceeds recorded at order of priority: (1) fair value of consideration
received, (2) fair value of shares issued, (3) par value of shares

Ex. Issued 100 shares, par P1, for equipment with fair value of P500.
Shares have fair value of P2 at that time.

(1) Equipment 500
Share Capital 100
Share Premium 400
(2) Equipment 200
Share Capital 100
Share Premium 100
(3) Equipment 100
Share Capital 100

C. Services/Liability
Value of Services: Market value of services
Liability: Amount of liability

Stock subscription
Record subscription Subscription Receivable
Subscribed share capital
Share Premium (if there is excess)
Installment
Payment/Full Payment
Cash
Subscription Receivable
Issuance Subscribed share capital
Share Capital
Note: Subscribed share capital always at par (or stated value).
Shares are issued only if fully paid.

Delinquent shares
Highest bidder willing to pay the offer price for smallest number of
shares
Ex. Roman subscribed 100 shares, P2 par. He made payment of P100.
He defaulted. At public auction, 3 bidders were: Romeo 90 shares,
Roda 80 shares, Romolo 88 shares. Offer price is P150, including
expenses of 50.
Note: expenses incurred in public auction is charged to Receivable
from highest bidder.

Treasury Share
Valued at cost (cost method)
Not an asset. Reported as deduction from shareholders equity
Reduces outstanding shares
Purchase of Treasury
share
Treasury shares
Cash
Reissuance at cost Cash
Treasury shares
Reissuance above cost Cash
Treasury shares
Share premium treasury shares
Reissuance below cost Cash
Share Premium TS/Retained Earnings
Treasury shares

Note: loss is debited first to share
premium-TS, second to Retained earnings.
If share premium-TS is exhausted, then
debit R/E.
Retirement with gain Share Capital
Share Premium-retirement
Treasury Stock
Retirement with loss Share Capital
Share Premium
Treasury stock

Note: loss is debited in order of priority: (1)
share premium of original issuance, (2)
share premium TS, (3) Retained earnings

Donated Capital
If immaterial: credited to Share Premium
If material: credited to Donated Capital

Item Entry Valuation
Donated Asset Asset
Donated Capital
Consideration
received
Donated shares Received:
Memorandum entry: Received
xx shares as donation

Note: donated shares reduce
outstanding shares

Reissued:
Cash
Donated Capital







Value of issued
shares