On January 1, 2020, Susan Company disclosed the following shareholder's equity: Share capital, P100 par, 100,000 shares authorized, 50,000 shares issued 5,000,000 Share premium 400,000 Retained earnings 1,500,000 During the current year, the entity had the following transactions: In February, the entity reacquired 6,000 shares for P90 per share. In June, the entity sold 3,000 shares of its treasury for P120 per share. In September each shareholder was issued for each share held one stock right to purchase two additional shares for P140 per share. The rights expire on December 31, 2020. In October, 10,000 stock rights were exercised when the market value was P150 per share. On December 15, 2020, the entity declared teh first cash dividend to shareholders of P20 per share, payable on January 10, 2021, to shareholders of record on December 31, 2020. On December 21, 2020, the entity formally retired 2,000 treasury shares. Net income for the current year was P540,000. Appropriated retained earnings equal to the cost of treasury shares. Required: Prepare journal entries to record the transactions. Prepare a statement of changes in equity for the year ended December 31, 2020. Present the shareholder's equity on December 31, 2020.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 81PSA

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Question

On January 1, 2020, Susan Company disclosed the following shareholder's equity:

Share capital, P100 par, 100,000 shares

authorized, 50,000 shares issued 5,000,000

Share premium 400,000

Retained earnings 1,500,000

During the current year, the entity had the following transactions:

In February, the entity reacquired 6,000 shares for P90 per share.
In June, the entity sold 3,000 shares of its treasury for P120 per share.
In September each shareholder was issued for each share held one stock right to purchase two additional shares for P140 per share. The rights expire on December 31, 2020.
In October, 10,000 stock rights were exercised when the market value was P150 per share.
On December 15, 2020, the entity declared teh first cash dividend to shareholders of P20 per share, payable on January 10, 2021, to shareholders of record on December 31, 2020.
On December 21, 2020, the entity formally retired 2,000 treasury shares.
Net income for the current year was P540,000.
Appropriated retained earnings equal to the cost of treasury shares.

Required:

Prepare journal entries to record the transactions.
Prepare a statement of changes in equity for the year ended December 31, 2020.
Present the shareholder's equity on December 31, 2020.

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