POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance

Accountancy Department

SET A

Audit of Shareholders' Equity

Problem

Problem 1. The following data were compiled prior to preparing the statement of financial position of
the PAGSINTA Corporation:

Authorized share capital, P100 par value P4,000,000

Unissued share capital 800,000
Subscribed share capital 480,000
Subscription receivable 120,000
Premium on share capital 320,000
Premium on bonds payable 240,000
Gain on sale of treasury shares 80,000
Donated capital 800,000
Share warrants outstanding 200,000
Reserve for bond sinking fund 400,000
Reserve for depreciation 600,000
Treasury shares, at cost 144,000
Retained earnings, unappropriated 720,000
Cash dividends payable 160,000
Revaluation increment on property 800,000
Net unrealized loss on available for sale securities 96,000

Compute for the following:

1. Total share premium

2. Contributed capital

3. Appropriated retained earnings

4. Total equity

Problem 2. An entity grants to an employee the right to choose either 1,000 phantom shares, ie a right
to a cash payment equal to the value of 1,000 shares, or 1,200 shares. The grant is conditional upon the
completion of three years’ service. If the employee chooses the share alternative, the shares must be
held for three years after the vesting date.
At the grant dare, the entity’s share price is P50 per share. At the end of years 1, 2 and 3, the share price
is P52, P55 and P60 respectively. The entity does not expect to pay dividends in the next three years.
After taking into account the effects of the post-vesting transfer restrictions, the entity estimates that
the grant date fair value of the share alternative is P48 per share.

5. Compute for the expense, equity and liability in year 1 to 3 at the end of year 3 the company uses (a)
cash alternative and (b) equity alternative.

2nd Semester, S.Y. 2018-2019

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 SET A

Problem 3. FOREVERMORE Co. was organized at the beginning of the current year. The following
shareholders’ equity accounts are included in the entry’s year-end trial balance.
Preference share capital, P100 par, authorized 100,000 shares,
Issued and outstanding, 66,000 shares P 6,600,000
Preference share capital subscribed, 6,000 shares 600,000
Share premium - preference 240,000
Subscriptions receivable - preference 360,000
Ordinary share capital, P10 par value, authorized 200,000 shares
Issued and outstanding, 72,000 shares 720,000
Ordinary share capital subscribed, 72,000 shares 720,000
Share-premium ordinary 2,850,000
Subscription receivable - ordinary 1,080,000
The following current year transactions relate to FOREVERMORE Co.’s shareholders’ equity:
· Immediately after FOREVERMORE Co. was organized, it received subscriptions to 60,000 preference
shares. Subscriptions to ordinary shares were also received on the same date.
· During the year, subscriptions were received for an additional 12,000 preference shares at a price of
P120 per share.
· Cash payments were received from subscribers at frequent intervals for several months after
subscription. The company’s policy is to issue share certificates only upon full payment of the share
subscription. Subscription receivables are due currently.
· Also during the current year, FOREVERMORE Co. issued 24,000 ordinary shares in exchange for a
tract of land with a fair value of P 690,000.

6. Subscription price of Preference Shares originally issued

7. Total Additional Paid-in Capital

8. Total Shareholders’ Equity

2nd Semester, S.Y. 2018-2019

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