AUDITING PROBLEMS: ROQUE

The shareholders' equity Hanabi Company on January 1, 2019 showed the following:

Ordinary shares, P50 par, auth. 100,000 shares, 50,000 shares issued P2,500,000

Preference shares, P100 par, authorized 50,000 shares, 20,000 shares

issued. Each preference share is convertible to 3 ordinary shares. 2,000,000

Share premium - Ordinary 600,000

Share premium - Preference 1,200,000

Retained earnings 2,750,000

The following transactions occurred during the year:

a. Reacquired 15,000 ordinary shares on February 1 at P90 per share and placed them in the

treasury.

b. Reissued 8,000 treasury shares at P122 per share on June 4.

c. Reissued 5,000 treasury shares at P75 per share on August 3.

d. Issued stock rights on ordinary shares on September 30. Five stock right entitles the

stockholder to purchase an additional share for P80 per share. The rights shall expire on

December 31.

e. On October 1, 5,000 of the preference shares were converted to ordinary shares.

f. All but 3,000 share rights were exercised when the market value of the shares was at P80 per

share on October 11The shareholders' equity Hanabi Company on January 1, 2019 showed the following:

Ordinary shares, P50 par, auth. 100,000 shares, 50,000 shares issued P2,500,000

Preference shares, P100 par, authorized 50,000 shares, 20,000 shares

issued. Each preference share is convertible to 3 ordinary shares. 2,000,000

Share premium - Ordinary 600,000

Share premium - Preference 1,200,000

Retained earnings 2,750,000

The following transactions occurred during the year:

a. Reacquired 15,000 ordinary shares on February 1 at P90 per share and placed them in the

treasury.

b. Reissued 8,000 treasury shares at P122 per share on June 4.

c. Reissued 5,000 treasury shares at P75 per share on August 3.

d. Issued stock rights on ordinary shares on September 30. Five stock right entitles the

stockholder to purchase an additional share for P80 per share. The rights shall expire on

December 31.

e. On October 1, 5,000 of the preference shares were converted to ordinary shares.

f. All but 3,000 share rights were exercised when the market value of the shares was at P80 per

share on October 11g. Declared P3 per share cash dividends on ordinary shares and P6 per share on preference

shares on December 15, to stockholders as of December 31 payable on January 15, 2020.

h. Reported an adjusted net income of P540,000.

Requirements:

40. The entry to record the reissuance of treasury shares in item c shall involve a:

a. Credit to share premium at P75,000.

b. Credit to treasury shares at P375,000.

c. Debit to retained earnings at P75,000.

d. Debit to share premium at P75,000.

41. The entry to record the conversion of preference share to ordinary shares in item e shall involve a:

a. Debit to share premium at P50,000

b. Credit to share premium at P50,000

c. Debit to retained earnings at P300,000

d. Credit to retained earnings at P300,000

42. The entry to record the exercise of stock rights in item f shall involve a:

a. Credit to ordinary shares at P475,000

b. Credit to share premium at P250,000

c. Credit to ordinary shares at P460,000

d. Credit to share premium at P270,000

43. The cash dividend declaration in item g shall involve a debit to retained at:

44. What is the total additional paid in capital as of December 31, 2019?