MAKE T-ACCOUNT for the following:Ordinary shares Preference shares Share premium- Ordinary shares Share premium- Preference shares Share premium- Treasury shares Total additional paid-in capital Total contributed capital Total stockholders’ equity PROBLEM 1: You were assigned to audit the shareholders' equity of Glory Inc. for the year endedDecember31, 2019. Glory Corp. was incorporated in early 2018 when it was authorized by SEC to issue500,000 ordinary shares (P10 par) and 100,000 convertible preference shares (P20 par). The followingschedule reflects the company's capital balances as of December 31, 2018:Ordinary shares, 100,000 shares issued during the company'sincorporation in exchange of a land with a fair value of P1.4 M.Preference shares, 50,000 shares issued during the company'sincorporation at PS0 per share. Each preference share is convertibleto four ordinary sharesRetained earnings, which is the company's net income in 2018P1,400,0002,500,000540,000Total shareholders' equityP3.440.000 Glory Inc.Journal EntriesDateAccounts TitleDebitCreditJan 15Treasury Shares440,000Cash440,000(To record purchase of treasury shares)Feb 11Cash112,000Share Premium - Treasury24,000Treasury Shares88,000(To record reissuance of treasury shares)Mar 5Cash114,000Share Premium - TreasuryTreasury Shares18,000132,000(To record reissuance of treasury shares)Apr 1 Ordinary Shares50,000Share Premium - TreasuryRetained EarningsTreasury Shares6,00054,000110,000(To record retirement of shares)May 12 Preference Shares400,000Ordinary SharesShare Premium - Ordinary Shares100,000300,000(To record conversion of preference into ordinary shares)Jun 9Cash175,000Ordinary SharesShare Premium - Ordinary Shares150,00025,000(To record shares subscribed)Jul 4No EntryJul 4Cash24,000Retained EarningsTreasury Shares(To record reissuance of treasury stock)42,00066,000i.Cash44,000Ordinary SharesShare Premium - Ordinary Shares(To record issuance of ordinary shares)40,0004,000j.Income Summary830,000Retained Earnings830,000(To record profit transferred to retained earnings)

Stockholder's Equity - Stockholder's Equity includes the amount contributed by shareholders issued…

MAKE T-ACCOUNT for the following: Ordinary shares Preference shares Share premium- Ordinary shares Share premium- Preference shares Share premium- Treasury shares Total additional paid-in capital Total contributed capital Total stockholders’ equity

MAKE T-ACCOUNT for the following: Ordinary shares Preference shares Share premium- Ordinary shares Share premium- Preference shares Share premium- Treasury shares Total additional paid-in capital Total contributed capital Total stockholders’ equity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

MAKE T-ACCOUNT for the following:

Ordinary shares
Preference shares
Share premium- Ordinary shares
Share premium- Preference shares
Share premium- Treasury shares
Total additional paid-in capital
Total contributed capital
Total stockholders’ equity

PROBLEM 1: You were assigned to audit the shareholders' equity of Glory Inc. for the year ended
December31, 2019. Glory Corp. was incorporated in early 2018 when it was authorized by SEC to issue
500,000 ordinary shares (P10 par) and 100,000 convertible preference shares (P20 par). The following
schedule reflects the company's capital balances as of December 31, 2018:
Ordinary shares, 100,000 shares issued during the company's
incorporation in exchange of a land with a fair value of P1.4 M.
Preference shares, 50,000 shares issued during the company's
incorporation at PS0 per share. Each preference share is convertible
to four ordinary shares
Retained earnings, which is the company's net income in 2018
P1,400,000
2,500,000
540,000
Total shareholders' equity
P3.440.000

Glory Inc.
Journal Entries
Date
Accounts Title
Debit
Credit
Jan 15
Treasury Shares
440,000
Cash
440,000
(To record purchase of treasury shares)
Feb 11
Cash
112,000
Share Premium - Treasury
24,000
Treasury Shares
88,000
(To record reissuance of treasury shares)
Mar 5
Cash
114,000
Share Premium - Treasury
Treasury Shares
18,000
132,000
(To record reissuance of treasury shares)
Apr 1 Ordinary Shares
50,000
Share Premium - Treasury
Retained Earnings
Treasury Shares
6,000
54,000
110,000
(To record retirement of shares)
May 12 Preference Shares
400,000
Ordinary Shares
Share Premium - Ordinary Shares
100,000
300,000
(To record conversion of preference into ordinary shares)
Jun 9
Cash
175,000
Ordinary Shares
Share Premium - Ordinary Shares
150,000
25,000
(To record shares subscribed)
Jul 4
No Entry
Jul 4
Cash
24,000
Retained Earnings
Treasury Shares
(To record reissuance of treasury stock)
42,000
66,000
i.
Cash
44,000
Ordinary Shares
Share Premium - Ordinary Shares
(To record issuance of ordinary shares)
40,000
4,000
j.
Income Summary
830,000
Retained Earnings
830,000
(To record profit transferred to retained earnings)

Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.

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