Olivia Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of P10 par value common stock and 100,000 shares of 8%, P25 par value, cumulative and nonparticipating preferred stock. Olivia Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Olivia Company. Common Stock: Prior to the 2019–2020 fiscal year, Olivia Company had 110,000 shares of outstanding common stock issued as follows. 1. 95,000 shares were issued for cash on July 1, 2017, at P31 per share. 2. On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller P70,000 in 2011 and had an estimated fair value of P220,000 on July 24, 2017. 3. 10,000 shares were issued on March 1, 2019, for P42 per share. During the 2019–2020 fiscal year, the following transactions regarding common stock took place. November 30, 2019 Olivia purchased 2,000 shares of its own stock on the open market at P39 per share. Olivia uses the cost method for treasury stock. December 15, 2019 Olivia declared a 5% stock dividend for stockholders of record on January 15, 2020, to be issued on January 31, 2020. Olivia was having a liquidity problem and could not afford a cash dividend at the time. Olivia’s common stock was selling at P52 per share on December 15, 2019. June 20, 2020 Olivia sold 500 shares of its own common stock that it had purchased on November 30, 2019, for P21,000. Preferred Stock: Olivia issued 100,000 shares of preferred stock at P44 per share on July 1, 2018. Cash Dividends: Olivia has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2020, are shown below. Declaration Date Common Stock Preferred Stock 12/15/18 P0.30 per share P0.50 per share 6/15/19 P0.30 per share P0.50 per share 12/15/19 - P0.50 per share No cash dividends were declared during June 2020 due to the company’s liquidity problems. Retained Earnings: As of June 30, 2019, Olivia retained earnings account had a balance of P550,000. For the fiscal year ending June 30, 2020, Olivia reported net income of P120,000. Instructions Prepare the stockholders’ equity section of the balance sheet for Olivia Company as of June 30, 2020 using the template below. Olivia Company Stockholder’s Equity June 30, 2020 Capital stock 4% preferred stock, P25 par value, cumulative and nonparticipating, 100,000 shares authorized, 100,000 shares issued and outstanding Common stock, P10 par value, 500,000 shares authorized, 115,400 shares issued, with 1,500 shares held in the treasury Additional paid-in capital On preferred stock On common stock On treasury stock _________ _________ Total paid-in capital Retained earnings _________ Total paid-in capital and retained earnings Less: Treasury stock, 1,500 shares at cost _________ Total stockholders’ equity _________
Olivia Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of P10 par value common stock and 100,000 shares of 8%, P25 par value, cumulative and nonparticipating preferred stock. Olivia Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Olivia Company. Common Stock: Prior to the 2019–2020 fiscal year, Olivia Company had 110,000 shares of outstanding common stock issued as follows. 1. 95,000 shares were issued for cash on July 1, 2017, at P31 per share. 2. On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller P70,000 in 2011 and had an estimated fair value of P220,000 on July 24, 2017. 3. 10,000 shares were issued on March 1, 2019, for P42 per share. During the 2019–2020 fiscal year, the following transactions regarding common stock took place. November 30, 2019 Olivia purchased 2,000 shares of its own stock on the open market at P39 per share. Olivia uses the cost method for treasury stock. December 15, 2019 Olivia declared a 5% stock dividend for stockholders of record on January 15, 2020, to be issued on January 31, 2020. Olivia was having a liquidity problem and could not afford a cash dividend at the time. Olivia’s common stock was selling at P52 per share on December 15, 2019. June 20, 2020 Olivia sold 500 shares of its own common stock that it had purchased on November 30, 2019, for P21,000. Preferred Stock: Olivia issued 100,000 shares of preferred stock at P44 per share on July 1, 2018. Cash Dividends: Olivia has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2020, are shown below. Declaration Date Common Stock Preferred Stock 12/15/18 P0.30 per share P0.50 per share 6/15/19 P0.30 per share P0.50 per share 12/15/19 - P0.50 per share No cash dividends were declared during June 2020 due to the company’s liquidity problems. Retained Earnings: As of June 30, 2019, Olivia retained earnings account had a balance of P550,000. For the fiscal year ending June 30, 2020, Olivia reported net income of P120,000. Instructions Prepare the stockholders’ equity section of the balance sheet for Olivia Company as of June 30, 2020 using the template below. Olivia Company Stockholder’s Equity June 30, 2020 Capital stock 4% preferred stock, P25 par value, cumulative and nonparticipating, 100,000 shares authorized, 100,000 shares issued and outstanding Common stock, P10 par value, 500,000 shares authorized, 115,400 shares issued, with 1,500 shares held in the treasury Additional paid-in capital On preferred stock On common stock On treasury stock _________ _________ Total paid-in capital Retained earnings _________ Total paid-in capital and retained earnings Less: Treasury stock, 1,500 shares at cost _________ Total stockholders’ equity _________
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Olivia Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of P10 par value common stock and 100,000 shares of 8%, P25 par value, cumulative and nonparticipating preferred stock . Olivia Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Olivia Company.
Common Stock: Prior to the 2019–2020 fiscal year, Olivia Company had 110,000 shares of outstanding common stock issued as follows.
1. 95,000 shares were issued for cash on July 1, 2017, at P31 per share.
2. On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller P70,000 in 2011 and had an estimated fair value of P220,000 on July 24, 2017.
3. 10,000 shares were issued on March 1, 2019, for P42 per share.
During the 2019–2020 fiscal year, the following transactions regarding common stock took place.
November 30, 2019 Olivia purchased 2,000 shares of its own stock on the open market at P39 per share. Olivia uses the cost method for treasury stock .
December 15, 2019 Olivia declared a 5% stock dividend for stockholders of record on January 15, 2020, to be issued on January 31, 2020. Olivia was having a liquidity problem and could not afford a cash dividend at the time. Olivia’s common stock was selling at P52 per share on December 15, 2019.
June 20, 2020 Olivia sold 500 shares of its own common stock that it had purchased on November 30, 2019, for P21,000.
Preferred Stock: Olivia issued 100,000 shares of preferred stock at P44 per share on July 1, 2018.
Cash Dividends: Olivia has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2020, are shown below.
Declaration Date Common Stock Preferred Stock
12/15/18 P0.30 per share P0.50 per share
6/15/19 P0.30 per share P0.50 per share
12/15/19 - P0.50 per share
No cash dividends were declared during June 2020 due to the company’s liquidity problems.
Retained Earnings : As of June 30, 2019, Olivia retained earnings account had a balance of P550,000. For the fiscal year ending June 30, 2020, Olivia reported net income of P120,000.
Instructions
Prepare the stockholders’ equity section of the balance sheet for Olivia Company as of June 30, 2020 using the template below.
Olivia Company
Stockholder’s Equity
June 30, 2020
Capital stock
4% preferred stock, P25 par value, cumulative and nonparticipating, 100,000
shares authorized, 100,000 shares issued and outstanding
Common stock, P10 par value, 500,000 shares authorized, 115,400 shares
issued, with 1,500 shares held in the treasury
Additional paid-in capital
On preferred stock
On common stock
On treasury stock _________ _________
Total paid-in capital
Retained earnings _________
Total paid-in capital and retained earnings
Less: Treasury stock, 1,500 shares at cost _________
Total stockholders’ equity _________
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