Rosetan Department Store was formed on May 1, 2012. There were two transactions involving issuance of shares of preferred stock: (1) 4,000 shares were issued in exchange for equipment, and (2) the balance was issued for cash. Selected general ledger accounts for Rosetan Department Store showed the following activities:

Cash

Debit

P1,560,000

Preference Share(P500 Par Value)

Credit

P2, 000,000

P500,000

Organization Cost

Debit

P108,000

Preference Share Premium

Credit

P1,000,000

P200,000

Equipment

Debit

P3,000,000

Ordinary Share (P50 Par Value)

Credit

P1,200,000

P80,000

Ordinary Share Premium

P360,000

P28,000

Direction: Reconstruct the journal entries made for the aforementioned stock transactions:

a. Preference shares in exchange for equipment

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b. Preference shares in exchange for cash

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c. Ordinary shares in exchange for cash

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d. Ordinary shares in exchange for legal services

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B. Jake and Bob operated a sports equipment company. Their profit and loss ratio was 3:2 respectively. Because the business was growing, they decided to incorporate and invited Mel, Paz and Winnie to join them. The JB Inc. was authorized to issue 25,000 shares of P100 par value common stock with Jake and Bob investing their business except for the accounts receivable. Merchandise is to be written down to P825,000 and the furniture and equipment to P250,000. The partners will be issued shares of stock at par. The financial position of the partnership showed the following:

Assets

Cash. P535,000

Accounts Receivable P65,000

Merchandise. P850,000

Furniture & Equipment P300,000

Liabilities & Partner's Equity

Accounts Payable. P75,000

Jake, Capital. P950,000

Bob, Capital P725,000

Required: As accountant you are required to determine the amount and number of shares each partner will receive and to make the investment entry in the books of JB Inc.

a. write down the assets and decrease capital:

Merchandise P___________

Equipment. ___________

Total. P___________

Jake Capital decrease by. P___________

Bob, Capital decrease by. ___________

b. divide adjusted capital of each partner by the par value to get the number of shares

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c. investment entry:

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