SHARE CAPITAL TRANSACTION Practice problem 1. If shares are issued below par or issued value, the deficiency of the consideration received is recorded as "discount on share capital". The discount is presented in the statement of financial position as a. A receivable from the shareholder concerned b. A deduction in shareholders' equity C. An addition in shareholders' equity d. A and B 2. Legal capital is the portion of contributed capital that cannot be distributed to the owners during the lifetime of the corporation unless the corporation is dissolved and all of its liabilities are settled first. For no-par value shares, legal capital is a. The aggregate par value of shares issued and subscribed b. The total consideration received or receivable from the shares or issued or subscribed c. The aggregate stated value of shares issued and subscribed d. The aggregate market value of shares issued and subscribed How should the excess of the subscription price over the par value of the ordinary subscribed be recorded? a. As share premium when the subscription is received b. As share premium when the subscription is collected C. As retained earnings when the subscription is received d. As share premium when the capital stock is issued 4. Share issuance costs are recognized directly in equity. If the related share premium is insufficient to offset any share issuance costs, the issuance costs are a. Recognized as expense in profit or loss b. Charged directly to retained earnings C. Charged directly to share capital d. A or B 5. Treasury shares are accounted for at a. Cost b. Par value C. Fair value d. Market value 6. The entry to record the reissuance of treasury shares above their original acquisition costs includes a. A credit to share premium b. A debit to share premium c. A debit to retained earnings d. B and C 7. Ten thousand shares of P20 par value common stock were initially issued of P25 per share. Subsequently, two thousands of these shares were purchased as treasury stock at P30 per share. What is the effect of the purchase of the treasury stock on the amount reported in the balance sheet for each of the following?a. Share premium-No effect, Retained Earnings-No effect b. Share premium-No effect, Retained Earnings-Decrease C. Share premium- Decrease, Retained Earnings-No effect d. Share premium- Decrease, Retained Earnings-Decrease 8. The entry to record the retirement of shares at below their original acquisition costs includes a. A debit to share premium arising from the original issuance b. A debit to any share premium arising from the treasury shares c. A debit to retained earnings d. All of these including (c) when (a) and (b) are insufficient to offset any difference between the original issuance price and the retirement price 9. In 20x1, Fogg, Inc., issued $10 par value ordinary share for $25 per share. No other share transactions occurred until March 31, 20x1, when Fogg acquired some of the issued shares for P20 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement? a. 20x1 profit is decreased b. 20x1 profit is increased c. Share premium is decreased d. Retained Earnings is increased 10. Redeemable preference shares are classified by the issuer as a. Financial liability b. Own equity, presented in shareholders' equity C. Aor B d. Reduction of share capital in shareholders' equity 11. Which of the following is a characteristic of corporation? a. Not a separate economic unit b. Unlimited liability of owners c. Separate legal entity d. Dissolved when the ownership changes 12. On the entity's statement of financial position, which of the following would not be listed as contributed capital? a. Ordinary share capital b. Preference capital C. Retained earnings d. Share premium 13. Redeemable preference shares issued a. Must be measured at fair value at the end of each reporting period b. Are reported after liabilities but before the equity section of the statement of financial position C. Are reported as liability measured at amortized cost d. Are reported in the shareholders' equity section of the statement of financial position14. All of the fol lowing are components of shareholders' equity except 15. a. For vaiue b. Dividends paid c. Retained earnings d. Share premium Shareholders' equity is a. The financial obligations of the company 0. The lights of the assets of the business once the liabilities have been met c. Assets plus liability d. All of these answers 16. inc 0035 adjusted trial balance at December 31. 20:1. includes the toilowing account balances: 1?. 18. Ordinary shares. 3 par $600,000 Share premium P300.000 Treasury stock. at cost - P50.000 Accumulated other comprehensive income {debit} $20,000 Retained Earnings appropriated for uninsured earthquake losses - $150,000 Retained Earnings unappropriated - $200,000 What is the amount should the Zinc report as total stockholders' equity in its December 31. 201.1 baiance sheet? a. 1.600.000 b. 1.220.000 c. 1.280.000 d. 1.820.000 On April 1. 201:9. Hyde Corp.. a newiy tanned company. had the ioliowing stock issued and outstanding: - Ordinary shares. 51 par value. 20.000 shares originally issued for $30 per share. I Preference shares. 510 par value. 6.000 shares originally issued for $50 per share. - Hyde's April 1. 2026 statement of sharehoiders' equity shouid report: Ordinary shares. preference Shares and Share premium respectively. a. 520.000 560.000 5320.000 b. 520.000 5300.000 5500.000 c. 5600.000 5300.000 50 it. $600,000 550.000 5240.000 011 march 1. 2031 Eye Corp. issued 1.000 shares oi its $20 par value ordinary shares and 2.000 of its 520 par value convertible preterence shares for total oi 580.000. At this date. Rya's oridinary share was selling for $36 per share and the convertible preference share was selling for 527' per share. What amount of the proceeds shouid be allocated to Eva's convertible preference share]' a. 50.000 b. 54.000 c. 40.000 d. 44.000 19. The stockholders' equity section of Peter Corporation's balance sheet at December 31, 20x1, was as follows: Common stock ($10 par value, authorized 1,000,000 shares, issued and outstanding 900,000 shares) $ 9,000,000 Share Premium 2,700,000 Retained earnings (RE) 1,300,000 Total stockholders' equity $13,000,000 On January 2, 20x3, Peter purchased and retired 100,000 shares of its stock for $1,800,000. Immediately after retirement of these 100,000 shares, the balances in the Share Premium and retained earnings accounts should be: Share premium and retained earnings respectively. a. $900,000 $1,300,000 b. $1,400,000 $800,000 c. $1,900,000 $1,300,000 d. $2,400,000 $$800,000 20. Asp Co. was organized on January 2, 20x1 with 30,000 authorized shares of $10 par ordinary shares. During the 20x1 the corporation had the following capital transactions. January 5 - issued 20,000 shares at $15 per share. July 14 - purchased 5,000 shares at $17 per share. December 27 - reissued the 5,000 shares held in treasury at $20 per share. Asp used the par value method to record the purchase and re-issuance of the treasury shares. In its December 31, 20X1, balance sheet, what amount should Asp report as additional paid-in capital in excess of par? $100,000 b. $125,000 c. $140,000 d. $150,000 21. In 20x0, Newt Corp acquired 6,000 shares of its own $1 par value ordinary $18 per share. In 20x1, Newt issued 3,000 of these shares at $25 per share. Newt uses the cost method to account for its treasury stock transactions. What accounts and amounts should Newt credit in 20x1 to record the issuance of the 3,000 shares? Treasury Shares, Share Premium, Retained Earnings and Ordinary shares respectively a. $54,000 $0 $21,000 $0 b. $54,000 $21,000 $0 $0 c. $0 $51,000 $ 21,000 $3,000 d. $0 $72,000 $0 $3,00022. 23. 24. 25. On December 1, 20:1, Line Corp. received a donation of 2,000 shares of its 55 par value ordinary shares from a shatehoider. On that date. the stock's market value was $35 per share. The stock was originally issued for $25 per shase. By what amount would this donation cause total stockholders' equity to decrease?| a. $0.000 h. 550.0130 c. $20,000 d. 50 On July 1, 2011, Vail Com issued rights to stockholders to subscribe to additional shares of its common stock. One right was issued for each share owned. A stodcholder could purchase one additional shave for 10 rights plus $15 cash. The lights excised on September 30. 2011. On July 1. 2011, the rnarltet price of a share with the sight attached was 540. while the market price oi one right alone was $2. Vail's stockholders equity on June 30, 20:1, comprised the following: Common stock, 525 car value, 4,000 shares issued and outstanding: $100,000 Additional paidin capitalfShare premium: 60.000 Retained earnings: BULK] By what amount should Vail's retained comings decrease as a result of issuance otthe stock rights onJuly 1.20:1? a. 50 b. $5.000 c. 53.000 d. 510.000 On January 1, 20x1, RISIBLE FUNNY Co. issued 1.000 shares with par value of $400 for $400 per share. Issuance costs incurred that are directly attributable to the equity transaction amounted to $20 per share. How much is the net credit to share premium? a. 80,000 b. 20,000 c. 60,000 d. 0 An entity issues with par value of $400 for $320, the entsy to record the transaction includes a a. Credit to share capital for $320,000 b. Debit to share capital for $30,000 c. Credit to discount on share capital for $30,000 d. Debit to discount on share capital for $30,000