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SHAREHOLDER'S EQUITY Problems Problem 1 AA Company reported the following equity accounts: Preference share capital, par valueP15 2,550,000 Share premium, preference share150,000 Ordinary share capital,

SHAREHOLDER'S EQUITY Problems

Problem 1

AA Company reported the following equity accounts:

Preference share capital, par valueP15 2,550,000

Share premium, preference share150,000

Ordinary share capital, no par, P50 stated value3,000,000

What is number of issued and outstanding shares for each class?

OrdinaryPreferenceOrdinaryPreference

a.60,000170,000c.63,000170,000

b.60,000180,000d.63,000180,000

Problem 2

East Company issued 1,000 shares with P5 par to Howe as compensation for 1,000 hours of legal services performed. Howe usually bills P160 per hour for legal services. On the date of issuance the share was trading on a public exchange at P140. By what amount should the share premium account increase as a result of the transaction?

a. 135,000b. 140,000c. 155,000d. 160,000

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