SOLUTION MANUAL

Unit 6
DELINQUENT SUBSCRIPTIONS
Exercise 6 1 Review Questions
1. A stock subscription is considered delinquent when a subscriber fails to pay his obligations after the corporation has sent several notices to him.
2. If a subscription is declared delinquent, the corporation can
a. Sue the delinquent subscriber , or
b. Sell the delinquent subscription in a public auction
3. The account Receivable from Highest Bidder is used to record related costs paid by the corporation in relation to the public sale.
4. The highest bidder is the one who is willing to pay the unpaid subscription plus any expenses incurred in connection with the delinquency sale and is willing to
receive the least number of shares.
5. If the corporation re-acquires the delinquent shares, the account Treasury Share is debited to record this transaction. Such shares are considered treasury
shares. All the delinquent shares will be issued in the name of the corporation.

Exercise 6- 2 True or False

1
2
3
4
5

True
False-entitled to vote
False-highest bidder
False- also include expenses
incurred in the bidding
False-Receivable from Highest
Bidder

6
7
8
9

False-lowest no. of shares

False-only the shares he bided on
True
False- payment is forfeited

10 True

Journal Entries Short Method

A. Exercise 6 -4
1
2
4
6

Subscription receivable
Subscribed Share Capital

20,000
20,000

Cash
Subscription receivable

5,000

Receivable from Highest Bidder

Cash

2,500

5,000
2,500

Cash
Subscription receivable
Receivable from Highest Bidder

17,500

Subscribed Share Capital

Share Capital
Issued the following shares:
Gloria- 2,400 shares
Corazon 7,600 shares

20,000

15,000
2,500
20,000

B. Exercise 6 -4
1
2

Subscription receivable
Subscribed Share Capital
Cash
Subscription receivable

20,000
20,000
5,000
5,000

4
6

Receivable from Highest Bidder

Cash

2,500
2,500

Treasury Shares
Subscription receivable
Receivable from Highest Bidder

17,500

Subscribed Share Capital

Share Capital
Issued the 10,000 shares to the corporation.

20,000

15,000
2,500
20,000

Case analysis
Case 6-1
a. Carlo
b. P9,500
c. 25 shares
d. 75 shares
Case 6 - 2
a. zero
3

b.
c.

200 shares
P6,200