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Pcubsa Assignment 1 Lesson 14

Accounting (Philippine Christian University)

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Alimparos, Alliyah Geneya D. January 7,

2021
BSA-1B Prof. Jesus
Ranola
Exercises
1. The following are selected accounts coming from the adjusted trial balance at the end of 2019.
Sales Revenues ₱1,600,000,
Rent Income ₱150,000,
Cost of Sales ₱800,000,
Selling Expenses ₱190,000,
Administrative Expenses ₱130,000 and
Interest expense ₱25,000.
a) First entry: close the above nominal accounts to the title Income summary.
Date Particulars Debit Credit
A revenue P 950,000
Income Summary P 950,000
To close revenue accounts
Income Summary 345,000
Selling expense 190,000
Administrative Expense 130,000
Interest Expense 25,000
To close expense accounts

Second entry: set up tax liability if the net income is taxable at 30% based on the kind of business
described below: Case A, Case B, Case C.
Case A The business is owned by a sole proprietor, Artuz Prior to making the closing entries. Artuz
Capital reflected a credit balance of ₱500,000 and Artuz, Drawings a credit balance of ₱48,000. This
is a jewelry store.
Case A
Income tax expense 181,500
Cash 181,500
To record tax liability

Case B The business is owned by Artuz and Cruz, both CPA’s. Prior to making the closing entries,
the equity accounts reflected the following: Artuz, Capital, ₱600,000 credit balance: Cruz, Capital
₱400,000 credit balance: Artuz, Drawings, ₱150,000 debit balance: Cruz, Drawings, ₱90,000 debit
balance. Capital accounts are fixed and used as basis for dividing profits and losses.
Case B
Income tax expense 181,500
Cash 181,500
To record tax liability

Case C The business is a corporation. Prior to the closing entries, the shareholder’s equity accounts
showed the following: Shane, Capital, ₱1,500,000 and Retained Earnings ₱175,000 (where net
income or net loss is accumulated).
Case C

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Income tax expense 181,500

Cash 181,500
To record tax liability
Third Entry: close the profit to the equity accounts also depends on Case A, B, C.
Case A
Artuz, Capital 48,000
Artuz, drawing 48,000
To close Drawing account

Case b
Artuz, Capital 150,000
Cruz, capital 90,000
Artuz, drawing 150,000
Cruz, Drawing 90,000
To close Drawing account

Case c
Income Summary 181,500
Retained earnings 181,500
To close income summary to
retained earnings

b) Using Case, A, B, and C show the equity section of the Statement of Financial Position
Shareholders’ Equity
As of December 31, 2019
Share capital P 288,000
Retained Earnings (181,500)
Total Shareholders’ Capital P 106,500

2. Hawaiian Corporation issued 15,000 ordinary shares for cash of ₱800,000. Prepare the journal entry to
record this event if the stock has:
a. neither par not stated value
b. a ₱50 par value
c. a ₱40 stated value. Use paid in Excess of Stated Value for the excess payment
Debit Credit
A. Cash P 800,000
Ordinary Share, Capital P 800,000
To record issuance for
cash 15,000 shares

B. Cash 800,000
Ordinary Share Capital 600,000
Share Premium 200,000
To record issuance for cash
15,000 shares at par
C. Cash 800,000
Ordinary Share Capital 600,000
Paid-in Excess of Stated 200,000
Value (800,000 cash – 600,000
par)

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To record the issuance of

15,000 shares of stock for
cash.

3. The following are selected transactions which you are required to journalize:
a. On March 1, ABS Co. received ₱2,750,000 cash from various shareholders in exchange for the
maximum number of ordinary shares at a par value of ₱50.
b. On April 1, GMA Co. issued no-par 8,000 ordinary shares with a ₱50 stated value in exchange for
₱500,000 cash. Use paid in Excess of Stated Value for excess payment.
c. On April 16, TV 5 issued 5,600 ordinary shares with a ₱50 par value in exchange for the following:
₱350,000 of inventory which market value is lesser by ₱50,000.
d. On May 2, CNN received from shareholder electronic equipment worth ₱255,000 with an attached
₱100,000 mortgage note to be assumed by the corporation. Shares with a par value of ₱100 were
issued accordingly.
Debit Credit
A Unissued Share Capital P 2,750,000
Authorized Share Capital P 2,750,000
To record the authorization
B Cash 500,000
Unissued Share Capital 400,000
Paid in excess of par 100,000
Issued for cash 8,000 at a
premium

C Inventory 300,000
Unissued Share Capital 280,000
Paid in excess of par 20,000
Issued 5,600 shares in
exchange for inventory
D Equipment 255,000
Unissued Share Capital 255,000

Refer to a and b. how many shares were issued?

- ABS Co. issued 55,000 shares while CNN issued 2,550 shares.
4. The following are selected transactions of Total Quality Unlimited with a ₱20 par share:
a. Sold for cash 20,000 shares of stocks at ₱25 per share
b. Land with an appraised value of ₱1,250,000 was received from a shareholder. The corporation credited a
premium for ₱50,000.
c. The corporate lawyer hired by Total Quality Unlimited billed the firm ₱120,000 for legal services
rendered. He was given the corresponding shares of stocks.
Direction:
a. Prepare the entries using the memorandum entry method.
Date Particulars Debit Credit
A Cash P 500,000
Share Capital P 400,000
Share Premium 100,000
Received cash for 20,000 shares issued
B Land 1,250,000

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Share Capital 1,200,000

Share Premium 50,000
To record received land in exchange for
1,200,000 shares
C Organizational Expense 120,000
Share Capital 120,000
To record issued certificate for legal
services

b. Give the total number of shares issued, paid in capital at par, additional paid in capital.
Total number of shares issued: P86,000

Paid in Capital
Share Capital P 1,720,000
Additional paid in capital
Share premium 150,000
Total contributed capital P 1,820,000

5. Prepare the journal entries to record each of the following transactions under the memorandum entry
method and present the shareholder’s equity section:
Feb 1 Best Securities Corporation was granted by the SEC to issue 1,000,000 shares of stocks at a
par value of ₱10 after it submitted its articles of incorporation providing among others a
required down payment of at least 30% with the balance to be paid within three months. The
articles mentioned four incorporators who subscribed 75,000 shares each par. A and B gave
a down payment of 20% while C and D gave 50%.
14 Best Securities Corporation sold for cash 160,000 ordinary shares at ₱12 per share to various
shareholders.
Mar. 14 Gonzalo Enterprises received 320,000 ordinary shares from Best Securities Corporation in
exchange for land with a cost of ₱1,750,000 but with an appraised value which was twice the
cost.
Apr. 28 Isko Pangilinan, a lawyer, received 4,500 common shares from Best Securities for legal
services rendered amounting to ₱50,000.
30 The balance of the subscription of A and B were collected.
Incorporators Shares Total Amount paid balances
subscribed at Amount
par
A P 75,000 p 750,000 P 150,000 P 600,000
B 75,000 750,000 150,000 600,000
C 75,000 750,000 375,000 375,000
D 75,000 750,000 375,000 375,000
P 3,000,000 P 1,050,000 P 1,950,000

Journal Entry
Date Particulars Debit Credit
Authorized to Issue 1,000,000
shares at P 10 per shares
Feb 1 Subscription Receivable P 3,000,000

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Subscribed Share Capital P 3,000,000

To record the subscription
Cash 1,050,000
Subscription Receivable 1,050,000
To record the down payment of
incorporators
1 Cash 1,920,000
4 Share Capital 1,600,000
Share premium 320,000
Received cash for 320,000
shares issued
March 1 Land 3,500,000
4 Share Capital 3,200,000
Share premium 300,000
To record received land in
exchange for 320,000 shares
April 2 Organization Expense 50,000
8 Share Capital 45,000
Share premium 5,000
issued certificate for legal
services
3 Cash 1,200,000
0 Subscription receivable 1,200,000
Subscription from a and b
Subscribe share capital 1,500,000
Share capital 1,500,000
Issued certificates to a and b

Best Securities Corporation

As of April 30
Shareholders’ Equity
Share capital P 6,345,000
Subscribed Share Capital 1,500,000
Paid in capital 7,845,000
Share Premium 625,000
Total Contributed Capital 8,470,000
Retained Earnings (50,000)
Total Shareholders’ Capital P 8,420,000

6. Refer to No. 5 answer the same requirements but use the journal entry method.
Journal Entry
Date Particulars Debit Credit
Feb 1 Unissued Share Capital P 10,000,000
Authorized Share Capital P 10,000,000
To record authorization
Subscription Receivable 3,000,000
Subscribed Share Capital 3,000,000
To record the down
payment of incorporators
Cash 1,050,000
Subscription receivable 1,050,000
To record the down

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payment of incorporators
14 Cash 1,920,000
Unissued Shared Capital 1,600,000
Paid in excess of par 320,000
Received cash for 320,000
shares issued
March 14 Land 3,500,000
Unissued Shared Capital 3,200,000
Paid in excess of par 300,000
To record received land in
exchange for 320,000 shares
April 28 Organization Expense 45,000
Unissued Shared Capital 45,000
issued certificate for legal
services
30 Cash 1,200,000
Subscription receivable 1,200,000
Received balance due from
a and b
Subscribe share capital 1,500,000
Share capital 1,500,000
Issued certificates to a and
b

7. The following accounts were picked up from the general ledger of Forever Corporation after its first
month of incorporation:
Debit Credit
Cash ₱ 700,000
Subscription Receivable 240,000 ₱ 160,000
Subscribed Share Capital 150,000 200,000
Share Capital 650,000
Share Premium 80,000
Total ₱1,090,000 ₱1,090,000
Direction: Reconstruct the entries made for the following:
a) Subscription at a premium of ₱40,000.
b) Collection of subscription.
c) Issuance of stock certificate for subscribed shares fully paid.
d) Cash received for additional shares sold at a premium.
Journal Entry
Date Particulars Debit Credit
Subscription receivable 240,000
Subscribe Share capital 200,000
A
Share premium 40,000
To record Subscription at a premium
Cash 240,000
Subscription Receivable 240,000
B
To record the collection of
subscription
Subscribed share capital 200,000
C share capital 200,000
Issued
d Cash 460,000

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Share Capital 450,000

Share Premium 10,000
Received

Alimparos, Alliyah Geneya Desiongco

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