PROBLEM 1 and 4
PROBLEM 1 (ZAPORRO COMPANY): In your audit of Zaporm Company for the calendar year ended December 31, 2022, you discovered the breakdown of the company's Retained Earnings account Balance, January 1 7,400,000 Unrealized holding loss on financial assets held at fair value through (300,090) other comprehensive income Inventory fire 1085 (250,000) Impairment loss on machinery 650,000) 25% stock dividends (declared on 100,000 shares outstanding at market (2.800,000) value of P1 12 per share) Loss on sale of equipment (200.000) Prior period error correction 1,000,000 Loss on retirement of ordinary shares as treasury 1,050,000) Gain on sale of ordinary shares at excess over par 950 000 Gain on pre-mature retirement of bonds payable 400.000 Unrealized holding gain on financial assets held at fair value through 800.000 profit or loss Proceeds from sale of donated shares (originally issued at P500,000) ADD.OOO Net income for the year ,100,000 Appropriation for treasury shares (at cost) (450.000) Audit notes: 1. The 25%% stock dividends on ordinary shares with par value of P100 were declared on November 1, 2022 distributed to stockholders on January 15,2023 of record on December 1, 2022. Za porro's stocks were selling at P10S on November 1, Pi10 on December 1, and P112 on December 31. 2. The company's Share Premium from Treasury Stock Transaction amounted to P750,000. 3. The company's management decided to change its inventory costing method from the weighted average (WAVE) to the first-in, first-out (FIFO) method during the current year. The inventory balances under two methods are as follows. Ending Inventory, 2021 Ending Inventory, 2022 WAVE 1500,000 1,900,000 FIFO 2.600,000 2.200,000 The company has yet to reflect the said changes in its current year financial statements. PROBLEM 4 (MWE COMPANY): The shareholders' equity section of MWE Company's statement of financial position as of December 31, 2022, is as follows: Ordinary share capital, P10 par value (authorized 2,000,090 P4,000,000 shares, issued and outstanding 400,00 shares) 20%%, non-cumulative preferred share capital, PS par value 1,000.000 (authorized 1,000,000 shares, issued 200,000) Share premium - Ordinary 1,800.000 Share premium - Preferred 500,000 Unrealized holding gain (Loss) on FVTOCI investments 400,0003 Retained earnings 000.000 TOTAL P13,000,000 The following transactions occurred during 2023: Jan. 5 The company issued for P2,350,000, 100,000 ordinary shares and 50,000 preferred shares. The company incurred share issue cost at P150,000. The ordinary shares were currently selling at P15 per share while the preferred shares at P10. Feb 16 50,000 previously unissued preferred shares were subscribed at P12 per share. Mar. 25 20,000 previously unissued ordinary shares were issued in exchange for an equipment with a fair market value of P500,000. The company incurred share ssue costs at 120,090. Apr. 20 Reacquired 40,000 ordinary shares as treasury shares at P18 per share. May The company declared a 3-for-2 stock split on ordinary shares. Jun. 30 The company declared and paid cash dividends to preferred shares based on the stated dividend rate and PO.50 cash dividends to ordinary shareholders. Jul. 3 Reissued half of the treasury shares at P16 per share. Aug 30 A 10% ordinary stock dividend was declared and issued to ordinary shareholders at a time when the market value is at P17 per share. Sep. 16 Collected full payments on 80% of the preferred shares subscribed on February 16 on the due date. The remainder of the subscribers on the preferred shares defaulted. Dec. 15 The company declared and paid PO.70 cash dividends to ordinary shareholders. Dec. 31 The company's investment in equity securities (originally acquired at a total cost of P1,300,000) had a total fair value of P1,500,000 at year-end There were no acquisitions or disposals of investments during the year
