3. a. Exercise: Based on the following information, prepare a retained earnings statement for the Mann Company for the year ended December 31. 19X2. (1) The balances of the Unappropriated Retained Earnings account was P200,000 and appropriation for contingencies was P130,000 as of January 1, 19X2. Four quarterly dividends of P 10,000 each have been declared. The Mann Company earned a net profit of P 52,000 for the year. Other affected accounts appear below. (2) (3) (4) Appropriation for Contingencies Appropriation for Bonder Indebtedness Dec. 31 30,000 Jan. 1 Bal. 130,000 Jan. 1 Bal. 110,000 The following accounts are taken from the ledger of Kookie Kola Corporation: 10% Preferred Stock, - P20 par value; 10,000 shares authorized; 4,000 shares issued P 80,000 3 Common Stock - P50 par value; 5,000 shares authorized; 2,000 shares issued Retained Earnings 100,000 50,000 The board of directors declared a cash dividend of P20,000 for the year. No dividend was declared last year. Compute the distribution of the cash dividend to preferred and common stock under each of the following independent assumptions: a) Preferred stock is non-cumulative and non-participating b) Preferred stock is cumulative and non-participating c) Preferred stock is non-cumulative but fully participating d) Preferred stock is cumulative and fully participating. Compute the book values per share under assumptions a and d above III. Problems: 1. Sunny Corporation is formed by the incorporation of MP Partnership On June 30, 19X2, the date of corporate formation, the trial balance of MP Partnership shows: Debit Credit Cash P 30,000 Accounts Receivable 90,000 Allowance for bad debts P 7,000 80,000 Merchandise Inventory Furniture and Equipment Accumulated Depreciation 50,000 10,000 4 Accounts Payable Mel, Capital Pearl, Capital 33,000 95,000 105,000 P 250,000 P 250,000 ========= ======== To reflect the fair market value of certain assets, the partners agreed to the following adjustments: 1. Allowance for doubtful accounts is to be increased to 10% of accounts receivable. 2. Inventory is to adjusted to its current market value of P 96,000. The profit and loss sharing ratio between the two partners is 3:2 for Mel and Pearl, respectively. The partners is to receive common shares of the corporation equivalent to the value of the net assets transferred, and in return the same are to be distributed to Mel and Pearl in payment of their shares in the partnership. INSTRUCTIONS: Give the journal entries to record the above transactions in the books of the partnership and the corporation. 2. May 1 - The Scheezo Corporation was authorized to issue 2,000 shares of common stock with a par value of P100 per share. 2 Received the following subscriptions from five incorporators: Garcia 100 shares 5 Sanchez 100 shares Tuazon 100 shares Villanueva 100 shares Lopez 100 shares 5 - 10 - 13 - 15 Lopez and Villanueva paid the subscriptions in full, and stock certificates were issued to them. The three other incorporators paid one half of their subscriptions. Tuazon and Sanchez paid their balances in full, and stock certificates were issued to them. After all lawful calls and notices, Garcia defaulted. His stocks were declared delinquent and were offered for sale in a public auction. Advertising expenses paid by the corporation amounted to P 700. At the public auction, Santos was the highest bidder for 70 shares. He paid the balance of the subscription plus advertising costs. The stock certificates were issued. 16 - 20 21 - REQUIRED: a) Entries in the books of the corporation to record the above transactions. b) Assuming that nobody bidded and the corporation made a bid on the unpaid subscriptions, give the necessary entries in the books of the corporation to record the transactions from May 15 to 21. 3. Prepare the journal entries required for the following transactions: March 1 : Rowland Corporation received 5,000 shares of donated common stock from its stockholders. (Note: The company had issued 15,000 shares at par value of P20) May 1 : Sold 3,000 shares of donated stock at P 25 per share. July 1 Sold the remaining donated shares at P 18. : 6 4. From the information in Test #3, prepare the stockholders' equity section of the balance sheet as of (a) March 31, (b) May 31, and (c) July 31 5. Suppose that in Tests #3 and 4 the 5,000 shares of treasury stock had been purchased for P 110,000 instead of being donated. a) What entries would be required to record the transactions? b) Prepare the stockholders' equity section as of March 31, May 31, and July 31. 6. Presented below is the stockholders' equity of the balance sheet as of April 30. Paid-in Capital Preferred Stock, 12%, P100 par (20,000 shares authorized, 15,000 shares issued) Premium on Preferred Stock P 1,500,000 40,000 P 1,540,000 Common Stock, P 50 par (100,000 shares authorized, 60,000 shares issued) 3,000,000 Premium on Common Stock 100,000 3,100,000 Total Paid-in Capital Retained Earnings 4,640,000 500.000 Total Stockholders' Equity P 5,140,000 EEEEEEEEE During the next eight months, selected transactions are: 7 May 10: Received subscriptions to 5,000 shares of preferred stock at P 102, Collecting half of the subscription price. July 15 : Purchased 10,000 shares of treasury common for P600,000. Sept. 10 : Received 25% of the subscription price of the preferred stock. Oct. 25 : Sold 6,000 shares of treasury common for P 420,000 Dec. 10 : Received the balance due on preferred stock subscribed and issued the Shares. Dec. 20 : Sold 3,000 shares of treasury common for P 150,000. Dec.29 : Retired the remaining 1,000 shares of treasury common. INSTRUCTIONS: Prepare all entries necessary to record the above information