Required: Journal Entries for these transactions

Preference Shares

The company issued two types of preference shares:

1. 12% Cumulative Preference Shares, P100 par, 50,000 shares authorized. Each share is convertible into two ordinary shares.

2. 10% Redeemable Preference Shares, P100 par, 50,000 shares authorized.

30,000 of the 12% Cumulative Preference Shares were issued on August 1, 2019 at P105. An additional 10,000 shares were issued on April 1, 2020 at P110. On November 1, 2020, 2,000 of the shares issued on August 1, 2019 were reacquired at P102 per share. 3,000 shares from August 1, 2019 issue were donated to the company by the shareholders on December 31, 2020. At the end of each year, the company declared cash dividends on these shares payable on January 20 for shareholders as of December 31.

The 10% Redeemable Preference Shares have a mandatory redemption date of December 31, 2024. All authorized shares were issued on January 1, 2020 together with 20,000 ordinary shares for a total issue price of P8,000,000. The market value of the Redeemable Preference Shares is P5,401,500 while the market price of the Ordinary Shares is P110 per share.

The journal entry made by the company to record the issuance of the 10% Redeemable Preference Shares on January 1, 2020 is debit Cash, P8,000,000, credit to Redeemable Preference Shares for P5,000,000, credit to Ordinary Shares for P2,000,000 and credit to Share Premium for P1,000,000.

Journal entries to record declaration of dividends on these preference shares are as follows:

Particulars Dr Cr Date 2019 Dec 31 150,000 Retained Earnings Dividends Payable - 12% Preference Shares To record declaration of dividends. 150,000 Particulars Dr Cr Date 2020 Dec 31 390,000 Retained Earnings Dividends Payable - 12% Preference Shares To record declaration of dividends. 390,000 Particulars Dr Cr Date 2020 Dec 31 500,000 Retained Earnings Dividends Payable - 10% Redeemable Preference Shares To record declaration of dividends. 500,000